Cement producers call on government to raise import duties

Russian cement producers have urged the government to raise import duties from zero to 20%. They say these measures are essential to protect local cement production, in which investment is flagging. Russia abolished cement import duties in January after t

Foreign producers rushed to the cement-hungry Russian market last year, after the government cut import duties from five percent to zero to stabilise prices. This encouraged international cement exporters to boost their share of the Russian market to 15 percent. Turkey, China and Moldova are among the largest suppliers.

Hit by cheap imports, domestic cement producers are urging the Russian government to introduce import duties at 20 percent. Mikhail Kiselev from the Cement Producers Union, says its needed to ensure that investment into the sector continues. 

“If Russia keeps zero percent import duties it will lead to a further decline of the local cement industry. Investment will stop coming into the sector in necessary quantities  and we will increase our dependence on imported cement of very low quality.”

But six months ago the situation on the Russian cement market was completely different.  The price of cement doubled in 18 months and the federal antimonopoly service responded by launching an investigation . They suspected the Eurocement group – a producer that controls 40 percent of the market – of pushing up domestic prices. Today local cement makers say they can't afford the investment needed to increase output. But Mikhail Ganelin, Analyst at Troika Dialog experts doesn’t see any grounds for that.

“The cement production business is highly profitable; profit margins of up to 50 percent now. The current situation  with rising imports is  unexpected but temporary. We expect an increase in demand next year when large infrastructure projects will be launched. It is very likely we will face a cement deficit and imports won’t cover it.”

A government commission will discuss the cement producers proposals on Wednesday. Market watchers doubt they will agree to such high cement import duties, especially ahead of the massive construction programme for the 2014 Olympics.