July 2009

Current status of Ukraine building

materials market
The Ukrainian economy is second only to Russia among the CIS countries
in terms of size. After Ukraine left the Soviet Union in 1991, its economy
recovered strongly in a very short period of time, with average annual GDP
growth of almost 7% between 2000 and 2008. This clearly indicated that
Ukraine had effectively carved a new identity for itself in the global order
– one capable of creating a niche for its raw materials and finished goods on
the international market – by opting for a “free market” system rather than the
planned economy of the Soviet era. This, in turn, explains the country’s joining
of the WTO in February 2008, which made it one of the first CIS nations to be
closely integrated with the global economy.

PMR
 In the wake of the ongoing recessionary conditions
on the global markets, the buoyancy of the Ukrainian
economy has started to show signs of cooling. According
to the Ministry of Economic Affairs, in H1 2008 the
country’s real GDP grew by only 6.5% and, subsequently,
in H2 2008 the effect of the global meltdown become
more pronounced as many of the core industries in
Ukraine, including construction and building materials,
began to shrink. Furthermore, the Ministry believes that
the country entered the slowdown cycle only in early
November 2008, and that it is not, therefore, possible to
estimate the degree and duration of any recovery.
The Ukrainian building materials industry accounted,
on average, for 4.6% of national GDP.
 Ministry of Economic Affairs statistics suggest that
between 2002 and 2007 on the basis of current
prices, the building materials industry grew at an
average annual rate of 28.7%
 However, in the wake of the ongoing financial
crisis, according to a study by Korrespondent
the building materials industry in Ukraine shrank
by 20.6% in 2008, reflecting an estimated loss
of $2.7bn. This also explains the 40% year-on-
year reduction in the sales of building materials
between May and August 2008 alone in
comparison with the corresponding period of
the preceding year – according to the Ukrainian
business resource portal www.bizukraine.com.
In accordance with the Ukrainian classification, the
building materials industry consists broadly of the
following eight subdivisions:
 cement
 roofing materials (soft and corrugated asbestos
slates)
 granite
 wall materials
 paints and varnishes
 ceramic tile
 bricks (baked/ lime-sand)
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 other building materials (including prefabricated
reinforced concrete, metal structures, construction
joinery goods, gypsum, ceramic tiles and glass).
Ukraine is almost a net importer of building materials,
primarily because of high energy costs and old
manufacturing equipment, accompanied by outmoded
technology, which create substantial opportunities for
international companies.
Because of this, the import market for building
materials in Ukraine is dominated by high quality and
competitively priced products from countries such as
Germany, Italy, Austria, Spain, France, Norway, Sweden
and Finland. In the recent past, manufacturers from the US
have also been aggressively trying to exploit the market
– although their share is still low because of the fierce
competition from their established European peers.
The estimated size of the building materials industry
in Ukraine increased from $4.0bn in 2002 to $10.2bn
in 2008, reflecting a CAGR of 17.1%. In the wake of the
current economic crisis the industry suffered a serious
year-on-year decline of 20.6% in 2008.
Estimated size of building material industry
in Ukraine ($ bn), 2002-2008
10.9 12.0 12.0
9.3 10.2
4.0 4.8
2002 2003 2004 2005 2006 2007 2008e
e - estimate
Source: Ukrainian Ministry of Economic Affairs,
Ukrainian State Statistics Committee, PMR Publications, 2009
The major factors which have, so far, been driving the
building materials industry in Ukraine include:
 accelerated demand for commercial property
because of the increase in the number of domestic
and overseas firms operating in the larger/
industrialised cities in Ukraine
 an affluent class consisting of Ukrainian and
Western business people putting pressure on
 demand for state-of-the-art residential and office The building materials industry in Ukraine is
premises – indicative of the lifestyles of the rich characterised by the following:
and famous in the West  the domination of the domestic landscape by the
 an increasing trend among the Ukrainian public private sector
toward renovating apartments and summer  a monopoly by the larger conglomerates – i.e. one
homes particular group/combine wielding greater control
 accelerated demand for residential housing, and of the production facilities of a variety of building
affordable housing in particular, as a result of materials: e.g. Ukrbudmaterialy, which alone
increases in the disposable income of the middle comprises about 150 enterprises manufacturing
class in the country a host of building materials such as wall materials,
granite, dry building mixtures, glass and sanitary
 increased government spending on the
ware. Similarly, UkrCement has 12 leading cement
development of infrastructure facilities and the
manufacturing firms in the country under its wing
implementation of a range of major domestic
construction projects.  the fact that imports almost outweigh domestic
production and considerably exceed exports, thus
clearly prompting a shortage of building materials
In terms of the competitive landscape, according to
in the country
the US Department of Commerce, the key players in the
various subdivisions of the building materials industry in
Russia include: Leading international manufacturers
 cement: UkrCement, Amrosivsky, Balaklevsky, of building materials in Ukraine
Dniprodzerzhynsky, Ivano-Frankivsk, Kamyanets-
Major
Podilsky, Kramatorsk, Kryvorizhsky, Mykolaiv, Manufacturers/ Producers
Categories
Germany
Yenakyivo and Zdolbynovsky Knauf, Moller, Knipping, Plus Plan,
Plastic and Plus THC, Wahl GmbH, Alfa-Lacke,
 roofing materials: Hipron, Finprofil and Rautaruukki metal panels Wolfcraft, OWA, Weidner, Atex, Hufgard,
(based in Finland) Dollken, Volta, Decosa and Alucobond
Metal
 granite: Ukrbudmaterialy, Khust Stone Processing, structures and Raynaers, Plus THC, Knipping, Heroal,
providers of Neher and Plus Plan
Minselkhozprod, Hoskomzhylkomunkhoz and technologies
Hoskomgeology Paints
Meffert AG, Paul Mittermayer Gmbh,
Jobi, Dezowag, Lacufa and Lober
 wall materials: Vinisin, UkrBudMaterialy and Insulated
Veka, Schuco International, Gealan and
windows and
DneproMain Raumplus
doors
Windows,
 varnishes and paints: Dnipropetrovsk doors, and
Sanha, Siegenia, Hafele, DOM, HP Plus,
FSB, GEZE, WinkHaus, Wahl GmbH and
furniture
Lakokrasochniy Zavod, Symykhimprom, Lakma, fittings
Teckentrup
Nifar, Elaks, Raduga and Spektr Roofing
Creaton
materials
 ceramic tiles: the Kharkiv Ceramic Tile Plant, the Italy
Doors and Albertini, TRE-P, Garofoli, Dierre,
Lviv Ceramic Plant, the Kiev Keramik Plant, Keram windows Olibari, Valli&Valli, Fusital and Came
Perlit and the Agromat Production Company. Finland
Roofing
Rautaruukki
products
France
Kiev and its suburbs constitute the most substantial Wall covering,
paints and Alpa, Profitex, Barrisol, Acron and Berry
market for the building material industry in Ukraine, flooring Wood
followed by a number of upcoming centres of industrial materials

excellence: Kharkiv, Dnipropetrovsk, Donetsk, Lviv, Odessa Source: US Department of Commerce, PMR Publications, 2009

and Zaporizhzhya.

www.pmrpublications.com 
 key items being exported from Ukraine including:
cement, granite, wall materials and paint and
varnishes
 key building materials being imported into
Ukraine including: insulated windows and
doors, false ceilings, floor covering, wall covering
and other interior decorating materials, paints,
plasters, cement mixtures, sealants, waterproofing
materials, insulation materials, heating systems,
piping and bathroom accessories
 the entry of many foreign, particularly European,
players, in recent years, with many of them gaining
a strong foothold on the local market in their
respective spheres of activity.
of GDP and a decline in the currency, coupled
with high inflation and extremely tight lending
norms. This does not augur well for construction
and associated industries, as a fall in property
prices will eventually be offset by the high cost of
borrowing.
However, despite the bleak outlook, the current
downturn presents an ideal platform for international
risk-taking players who are in pursuit of inorganic
expansion, particularly in markets such as Russia, Ukraine
and Kazakhstan. These are likely to be replete with
opportunities arising from bankruptcies and M&As.

In addition, building material producers/manufacturers

from Austria, Belgium, Canada, Denmark, the US, the UK,
Holland, Hungary, Ireland, Israel, Portugal, Spain, Slovakia,
Sweden, Switzerland and Turkey have also established a
foothold in Ukraine.
Several overseas companies from Germany, France,
Italy, Finland and Austria have set up joint manufacturing
ventures in the country – a trend which is likely to
continue in terms of market entry strategy.

Outlook
The market for building materials in Ukraine will remain
extremely challenging in 2009 because of the following
factors:
 the majority of international companies
are cancelling their long term investment
programmes for the next few years, in order to
clear stockpiles at their respective warehouses
 industry experts and leading economists firmly
believe that there will be a substantial contraction

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