Will Chinese Cement Come to Russia?

05.06.2008 (18:18)

Recently Federal Antimonopoly Service (FAS) of Russia proposed introducing export duties on cement. According to Expert Council of FAS, this measure will allow to decrease the cost of this product.

To remind: last year the price for this building material increased by 80%. Nowadays a ton of cement costs 4,500-5,000 (about $200). Participants of the building market beware that price of cement will increase to 9,000-10,000 rubles because of the lack of this material (it makes 8-10 mln tons).

Russian businessmen have turned to China searching cheaper cement. This country is the leader in cement production. The price of this product is $50-60 per ton there.

According to the company InfoLine, in 2007, 1.5 million tons of cement were transported from China to Russia (+50% year-on-year). 7 thousand tons of cement at the cost of about $320,000 (+1,233% year-on-year) were supplied via check point Suifenhe (province Heilongjiang, Northeastern China) in the first quarter of 2008. However, many experts consider that the imported cargo will not help. Why?

Ultimate price of the goods is pegged to transportation costs which erase difference between cheap import cargoes and expensive Russian goods. It is advantageous to supply Chinese cement for Far Eastern enterprises, but import cargo is unprofitable for Central, Southern and Northwestern regions of Russia where half of all houses is being built. Besides, slow delivery can result in deterioration of cement quality. For example, cement М500, can turn into М400 if it isn’t delivered to Moscow in time. And it will become useless after 60 days of storing.

Lack of development of logistic infrastructure is a serious obstacle for import growth. According to experts, the railway and ports can transport in Russia only 1.5 million tons a year, i.e. resources are already depleted. There is a lack of railway terminals for cement shipment and rolling stock in Russia. 5-10 million tons of cement was not carried from Russian plants because of the lack of wagons in 2007.

Cargo owners use gondola cars, because concrete of wet consistency is transported in big bags only. And this kind of rolling stock is in demand. Besides, transportation in bags is inconvenient. 60-70 pieces can be placed in one gondola car. There is a risk of big bags rupture. As a result, complex losses arise to 5-10%.

Russian ports can’t carry out cement bulk loading because of lack of special terminals, i.e. it is impossible to carry cargo in cement bulk truck. “Big investment is necessary to build special infrastructure in ports”, Director for development of Arivist Group Kirill Aleksandrov says. “There are many companies which want to purchase foreign cement, but nobody wants to invest into infrastructure. Situation will change when a big importer agrees to build a terminal”.

It is necessary to provide handling of large-capacity ships. Approach channels should be constructed. Besides, current export-import capacities of port complexes are loaded with more advantageous cargo. The enterprises don’t like work with cement. “For example, terminals of port St.-Petersburg can charge a double price on cement shipment even if the size of vessel is required”, General Director of Arivist Group Arivist Logistics Overseas GmbH (Hamburg) Dmitry Vasilyev explains. “The standard rate on big bag cargoes transshipment makes €6.5 but rate for cement is €14-15”.

As a result it is not profitable to import cement from China. And abolition of customs duties on cement import will hardly solve these problems.

by Olga Skripkina
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