Challenges and prospects of the construction industry in Ukraine – discussion of the study on the readiness of the construction materials market for the recovery of Ukraine

12/ 08/ 2024

Listen to online Stop   Before the war, the construction materials market was valued at $16 billion, with over 130,000 employees. The market grew by 10% annually, and Ukraine not only met its own needs but also exported 5% of its production. The full-scale invasion significantly impacted the industry, particularly due to decreased demand in frontline regions and difficulties in relocating production facilities. However, 90% of the construction materials needed for reconstruction can be produced in Ukraine. To achieve this, Ukraine needs to focus on attracting investments in the construction materials sector. This was discussed during a comprehensive presentation of the Ukrainian construction materials market research. The presentation and discussion of the research findings took place on August 8, organized by the Kyiv School of Economics (KSE) at the initiative and with the support of the European Business Associations Committee on Ukraines Recovery. The research findings and the presentation of its main results can be viewed via the link. The primary purpose of the meeting was to discuss the state of the Ukrainian construction materials market, particularly in the context of the challenges related to rebuilding infrastructure after the extensive destruction caused by the war. You can watch the video of the meeting below. The research revealed that during the hostilities, 138 million square meters of buildings were destroyed, and 26,000 square kilometers of roads were damaged, leading to a surge in demand for construction materials. As a result, the cost of construction materials has significantly increased, in some cases by up to 60%, due to the devaluation of the hryvnia, rising energy tariffs, and logistical challenges. Undoubtedly, the shortage of certain materials, such as cement, concrete, PVC profiles, mineral wool, as well as electrical equipment and sheet glass, could pose significant challenges for reconstruction. However, this also represents a crucial potential for investment and business development, albeit with a long-term perspective. Such studies confirm that, with the right steps, we can generate added value from the production of construction materials within Ukraine – creating around 180,000 jobs, more than before the full-scale invasion. This was highlighted by Maksym Nefyodov, Director of Innovative Solutions at KSE Institute. At the same time, the recovery should be based on the principles of Build Back Better, which means creating conditions for reconstruction using modern technologies and environmentally friendly materials. Investment in new production capacities, attracting international partners for reconstruction, and state support, particularly in product certification, access to natural resources, and harmonization of standards with European ones, play a crucial role in this process. The Head of the Committee of the Verkhovna Rada of Ukraine on the Organization of the State Power, Local Self-Government, Regional Development and Urban Planning, Olena Shuliak, noted that most of Ukraines existing construction industry capacities have the potential to restore destroyed facilities and build new ones. Despite the war disrupting plans to implement Regulation (EU) No 305/2011, which has complicated the export of construction materials from Ukraine and their production, it is necessary to develop laboratories that could participate in the production of certified products to ensure compliance with the Regulation. Additionally, it is estimated that more than 100 million tons of demolition waste, including hazardous materials, have accumulated. Developing an action plan for recycling this waste, including incentivizing businesses to utilize and recycle it, should become an important part of Ukraines recovery process. Currently, foreign and Ukrainian investments in the development of the construction materials sector, despite the war, are estimated at over $730 million. Together with Oleh Tsymerynov, Senior Project Manager of the Reform Support Office at the Ministry of Economy, we discussed the current production capacities of cement plants, which amount to 13 million tons of cement and 10 million tons of clinker. Mr. Tsymerynov noted that restoring destroyed facilities will take a long time, and it is necessary to consider the projected population decline, which will affect citizens purchasing power. Therefore, to encourage investment in the production of construction materials, particularly in creating new capacities and improving the efficiency of existing ones, state support for businesses is needed. On behalf of the European Business Association, we thank the speakers for discussing the state of the construction materials market and for understanding the importance of coordinating efforts between business, government, and international partners to ensure effective reconstruction of Ukraine. We especially thank the Kyiv School of Economics for conducting the construction materials market research. https://youtu.be/qCfSHl6mkoA

Before the war, the construction materials market was valued at $16 billion, with over 130,000 employees. The market grew by 10% annually, and Ukraine not only met its own needs but also exported 5% of its production. The full-scale invasion significantly impacted the industry, particularly due to decreased demand in frontline regions and difficulties in relocating production facilities. However, 90% of the construction materials needed for reconstruction can be produced in Ukraine. To achieve this, Ukraine needs to focus on attracting investments in the construction materials sector. This was discussed during a comprehensive presentation of the Ukrainian construction materials market research. The presentation and discussion of the research findings took place on August 8, organized by the Kyiv School of Economics (KSE) at the initiative and with the support of the European Business Association’s Committee on Ukraine’s Recovery.

The research findings and the presentation of its main results can be viewed via the link.

The primary purpose of the meeting was to discuss the state of the Ukrainian construction materials market, particularly in the context of the challenges related to rebuilding infrastructure after the extensive destruction caused by the war. You can watch the video of the meeting below.

The research revealed that during the hostilities, 138 million square meters of buildings were destroyed, and 26,000 square kilometers of roads were damaged, leading to a surge in demand for construction materials. As a result, the cost of construction materials has significantly increased, in some cases by up to 60%, due to the devaluation of the hryvnia, rising energy tariffs, and logistical challenges. Undoubtedly, the shortage of certain materials, such as cement, concrete, PVC profiles, mineral wool, as well as electrical equipment and sheet glass, could pose significant challenges for reconstruction. However, this also represents a crucial potential for investment and business development, albeit with a long-term perspective.

Such studies confirm that, with the right steps, we can generate added value from the production of construction materials within Ukraine – creating around 180,000 jobs, more than before the full-scale invasion. This was highlighted by Maksym Nefyodov, Director of Innovative Solutions at KSE Institute.

At the same time, the recovery should be based on the principles of “Build Back Better,” which means creating conditions for reconstruction using modern technologies and environmentally friendly materials. Investment in new production capacities, attracting international partners for reconstruction, and state support, particularly in product certification, access to natural resources, and harmonization of standards with European ones, play a crucial role in this process.

The Head of the Committee of the Verkhovna Rada of Ukraine on the Organization of the State Power, Local Self-Government, Regional Development and Urban Planning, Olena Shuliak, noted that most of Ukraine’s existing construction industry capacities have the potential to restore destroyed facilities and build new ones. Despite the war disrupting plans to implement Regulation (EU) No 305/2011, which has complicated the export of construction materials from Ukraine and their production, it is necessary to develop laboratories that could participate in the production of certified products to ensure compliance with the Regulation. Additionally, it is estimated that more than 100 million tons of demolition waste, including hazardous materials, have accumulated. Developing an action plan for recycling this waste, including incentivizing businesses to utilize and recycle it, should become an important part of Ukraine’s recovery process.

Currently, foreign and Ukrainian investments in the development of the construction materials sector, despite the war, are estimated at over $730 million.

Together with Oleh Tsymerynov, Senior Project Manager of the Reform Support Office at the Ministry of Economy, we discussed the current production capacities of cement plants, which amount to 13 million tons of cement and 10 million tons of clinker. Mr. Tsymerynov noted that restoring destroyed facilities will take a long time, and it is necessary to consider the projected population decline, which will affect citizens’ purchasing power. Therefore, to encourage investment in the production of construction materials, particularly in creating new capacities and improving the efficiency of existing ones, state support for businesses is needed.

On behalf of the European Business Association, we thank the speakers for discussing the state of the construction materials market and for understanding the importance of coordinating efforts between business, government, and international partners to ensure effective reconstruction of Ukraine. We especially thank the Kyiv School of Economics for conducting the construction materials market research.