Kolyada S.V. «On estimate of prospects of developments of production and consumption of construction materials in the Russian Federation until 2020»

Let me share my vision of the state of affairs with
regards to issues of production of basic kinds of construction
materials and certainly their consumption
(demand), as a basic stimulus for perfection of quality
of products and quantitative growth of manufacture.

What was the event background for the changes
that took place in the industry which provides capital
construction, repair and operational needs and the
trading network with construction materials, articles
and structures?

In my opinion, nowadays this question can be answered
unequivocally — the industry of construction
materials does not exist as a branch.

After introduction of the Russian classifier of kinds
of economic activities (OKVED) instead of ОКОNH
(branch classifier of industries of the national economy),
according to which the structure of the industry
of construction materials comprised 15 sub-branches
which incorporated, according to the Russian Statistics
Department (Rosstat), about 9.4 thousand operating
enterprises with the total number of workers of
approximately 624 thousand persons), it is nowadays
practically complicated to estimate financial and economic
parameters not only by sub-branches, but even
by manufacture of construction materials as a whole.

Specific parameters are published by Rosstat, but
they should not be counted upon for the purpose of serious
analysis.

(Enterprises manufacturing construction materials,
articles and structures, include production facilities
in section C — «non-renewal exploitation» (nonrenewal
exploitation — code 14, regarding natural raw
material for manufacture of construction materials)
and section D — «Processing facilities» (Manufacture of other nonmetallic mineral products — code 26, regarding
manufacture of glass, ceramic tile, products
of building ceramics, bricks, cement lime, plaster, concrete,
plaster and cement products, natural stone products,
heat — and sound-proof mineral-cotton materials
and products).

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Issues of production and consumption of construction
materials, articles and structures are nowadays in
the competence of the Ministry of Regional Development
of Russia, but in fact only 2-3 specialists in the office of
the Ministry deal with them. With significant difference
of production processes of various kinds of construction
materials, wide nomenclature of products and various
spheres of their application, these labour forces at the
federal level are obviously not sufficient.

Something may be reformed in the Ministry of Regional
Development of Russia after publication of an
ordinance concerning activity of the Ministry (no. 405
dated May 29, 2008).

The situation is similar in construction complexes
of subjects of the Russian Federation. Only 1-2 specialists
in governmental regional bodies are assigned
to deal with questions of production and consumption
of construction materials, articles and structures. And
these functions are very often not their basic ones.

Research and development institutes of construction
materials are far from having their best days and
the destiny of many of them is not clear yet.

At the same time, enterprises of construction materials
constantly increase production volumes.

I would like to draw your attention to the fact that
fuel and power resources, on which in many respects
production of construction materials depends in many
respects, grow at absolutely different rates ( Table 2).

It is time for enterprises to think seriously about
transition to power-saving technologies.

Almost every day, we all get to know alarming forecasts
provided in mass-media by experts, businessmen
and heads of regions of the country on possible deficit
of some basic kinds of construction materials.

Gosstroy of Russia (Russian Federation Construction
Committee) also tried to bring this alarm to the notice
of general public when it prepared and submitted
for discussion in 2002-2003 the guidelines of development
of the industry of construction materials for the
period until 2010.

This document should become a recommendation
for organizations and establishments of the construction
complex, businessmen and potential investors with regard
to priorities in innovation and investment spheres
of the industry of construction materials, transfer of best
practices, introduction of new technologies, upgrade of
equipment, production of new modern materials.

However, the document, which was practically
ready to be signed, was not adopted due to resignation
of the Government of Russia in February 2004.

Despite this fact, demand in the market of construction
materials for the last years has continued to stimulate keen interest of commercial entities to production
of construction materials, articles and structures.

Table 2 Fuel and power resources

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Of great importance for solution of problems of
development of production of construction materials
was attention paid in 2006-2007 by the Presidium of the
President Council of the Russian Federation to realization
of priority national projects and demographic policy
and by the Government of the Russian Federation.

In these latter days, management of the Ministry
of the regional development of Russia showed interest
to problems of production and consumption of construction
materials, articles and structures.

In December 2007, a work group was set up at the
Department of regulation of town planning activity, to
prepare a project of the long-term strategy of development
of production of construction materials, articles and
structures for the period until 2020 (the Strategy).

Some variants of the Strategy were examined.

Brief description of basic provisions of the Strategy project

First of all, I shall point out that Strategy is intended:

• to determine priority directions of development
of production of basic kinds of construction materials
and ways of their realization;

• to be a conceptual basis for state-private partnership
with relation to development of production,
satisfaction of requirements of capital
construction, repair and operational needs and
trading networks;

• to ensure coordination of actions of executive
and legislative bodies of various levels, commercial
entities involved in the industry and natural
monopolies when solving problems of development
of production of construction materials;

• to form a basis for decision-making at the national
level on development of target programmes of
development of the construction complex as a
whole and production of construction materials
in particular.

The Strategy considers only basic construction
materials and articles on presence of which depends
the opportunity to increase the volumes of construction,
including housing construction, and which are
widely used for further production of other construction
components and structures of higher level of processing.

For development of the Strategy, one has used
Methodical recommendations of the Ministry of Economic
Development of Russia on development of the
strategy of development of specific industries.

The outlined disbalance between growing volumes
of consumption of construction materials and volumes
of their production is accepted as a system-based problem
of production and consumption of construction materials
in the Russian Federation.

Manifestations of the system-based problem are
caused by a number of the following factors:

• Lag-behind in development of necessary townplanning
documentation and long-term plans of
social and economic development of regions and
the Russian Federation as a whole;

• High level of depreciation of fixed assets, with
low technical level of instrumentation of production
processes and low labour productivity
at many enterprises;

• Low innovative activity of enterprises manufacturing
construction materials;

• Significant degree of dependence on the prices
for production and services of natural monopolies
(Russian Joint-Stock Company «Unified Energy
System of Russia» and Russian Joint-Stock
Company «Gazprom», and also default of sufficient
of a specialized rolling stock (Joint-Stock
Company «Russian Railways»), especially during
the period of seasonal increase in demand of
construction materials;

• Long procedures of approval of technical specifications;

• Default of sufficient volumes of own funds of
enterprises manufacturing construction materials
and access to borrowed sources of financing;

• Lag-behind in geological exploration works for
increase and renewal of explored reserves of
natural raw materials;

• Potential investor’s default in guarantees of
acquisition of the right to using the land plot
necessary for development of bowels under the
purchased license;

• Low degree of self-sufficiency of construction
complexes of constituents of the Russian Federation
with regard to the wide nomenclature of
construction materials;

• Inefficiency of the existing normative legal base
for creation of conditions for use of technogenic
wastes of related branches of the industry as
raw materials for production of construction
materials;

• Lack of uniform state scientific and technical
policy in the sphere of production of construction
materials, and also long-term regional programmes
for its development;

• Shortage of engineering and technical personnel
and workers of the average level.

The Strategy accepts parameters of investment
activity from the project of the Concept of long-term
social and economic development of the Russian Federation
for the period until 2020 developed by the Ministry
of economic development of Russia as scenario
conditions for calculations to determine the need for
basic kinds of construction materials. For this purpose,
they use the analysis of volumes of fixed asset formation
and definition of their interrelation with volumes
of consumption of basic kinds of construction materials
(«specific consumption» of construction materials per
unit of investments or «saturation» of investments with
construction materials).

It is conventionally accepted in calculations that in
the general demand for construction materials, needs
of repair and maintenance works and trade within the
forecasted period will grow at the same rate as in capital
construction.

Thus, all parameters are examined in three variants
of scenario conditions of development of the economy
of the Russian Federation: innovative, power and
raw materials and inertial.

The most complicated, rigid innovative scenario is
accepted as the basic one in final calculations. In the
same way, the demand for basic kinds of construction
materials is determined and proposals regarding necessary
gain of capacities in 2008-2020 for production
of basic construction materials in the section of federal
districts are prepared.

The regional structure of consumption of construction
materials for the perspective and also volumes of
fixed asset formation require a more detailed study
and realization of a separate programme study case in
federal districts and, especially, in constituents of the
Russian Federation.

When developing such programmes, it is necessary
to pay special attention to:

• Infrastructural support of arrangement of enterprises;

• Coordination of regional programmes and investment
projects with programmes of development of generating capacities and networks of
natural monopolies;

• Regulation of prices for products and services
of natural monopolies by means of tariff agreements
when creating new production capacities
of construction materials;

• Restriction of profitability of monopolies when
establishing tariffs for gas, electric power and
services of railway transport delivered to enterprises
manufacturing construction materials;

• Effective use of land resources and stimulation
of geological explorations with a goal to increase
volumes of reproduction of raw-material base
of enterprises of the industry of construction
materials;

• Creation of federal and regional programmes for
exploration and development of new and use of
existing mineral deposits for production of the
industry of construction materials with provision
of necessary infrastructure (construction of
railways, additional manufacture of rolling stock,
special motor transport, etc.);

• Spatial location of production capacities of basic
kinds of construction materials and major
investment projects which are of inter-regional
importance;

• Provision of personnel for enterprises manufacturing
construction materials.

Criteria for solution of the system problem are determined
as follows:

I. No deficit in the market of basic construction
materials.

II. Increase of technological and technical level of
domestic enterprises and their products.

According to the first criterion, the following parameters
are accepted as indicators:

• Increase of consumption of basic kinds of construction
materials to the design volumes. In
particular, they make provisions to achieve the
production level by 2020:
–– Cement — 194 million tons;
–– Walling materials — 62 billion pieces;
–– Prefabricated reinforced concrete structures
and articles — 104 million m 3;
–– Nonmetallic construction materials — 1383
million m3 etc.;

• For this purpose, within the period of 2008-2020
it is necessary to commission additional production
capacities of construction materials:
–– Cement — 143 mln. tons;
–– Walling materials — 49 bln. pieces;
–– Prefabricated reinforced concrete structures
and articles — 79 million m 3;
–– Nonmetallic construction materials — 1223
million m3 etc.;

• By 2020, preservation of the share of domestic
production of cement, precast concrete,
nonmetallic materials, building brick in the
structure of their consumption in the domestic
market at the rate of 98-99% and growth of
the share of domestic soft roofing materials, fibrous
heat-insulation materials and sheet glass
up to 95-97%;

• By 2020, increase of manufacture of some major
kinds of products — per capita to:

–– Cement — 1.36 tons per person;
–– Walling materials — 435 pieces per person;
–– Prefabricated reinforced concrete structures
and articles — 0.73 m 3 per person;
–– Nonmetallic construction materials — 9.71 m3
per person; etc.

According to the second criterion, the following
parameters are accepted as indicators:

• Decrease of depreciation rate of fixed capital to
25% by 2020;

• Bringing the specific charge of fuel and power
resources for manufacture of cement to the
world and European level:

–– Fuel — to 120 kg conv.t./t. of clinker
–– Electric power — to 103 kWh/t. of cement;

• Increase of utilization capacity of recoverable
resources and bulk wastes of related branches
of the industry for production of construction
materials.

To achieve the specified purpose, the Strategy
makes provisions to solve the following tasks:

Task 1. Upgrade and modernization of operating
production facilities and also creation of new power
and resource saving, economically efficient and environmentally
safe production facilities.

Depreciation rate of fixed capital (25% for 2020)
and coefficient of renewal of fixed capital are accepted
as target parameters for solution of the task.

Task 2. Increase of efficiency of research and
development and innovative activity of enterprises
manufacturing construction materials.

Growth of volume of manufactured innovation
products to the total amount of manufactured products
from 2% in 2006 to 30% in 2020 (in %) is accepted as
target parameters for solution of the task.

Task 3. Ensurance of reproduction of mineralraw-
material base for the industry of construction materials.

Gain of reserves of natural raw materials for manufacture
(according to plans of the ministry of natural
resources of Russia and Rosnedra (subsurface resources
of Russia)) and growth of the share of utilization of recoverable
resources for production of cement to 25 % are
accepted as target parameters for solution of the task.

Task 4. Organizational and structural development
of the industry of construction materials.

As a target parameter for solution of the task, it is
planned to update not less than 600 national standards
on construction materials.

It is stipulated to carry out realization of the Strategy
in three stages: stage 1 — 2008-2010, stage 2 —
2011-2015 and stage 3 — 2016-2020.

The expected result of realization of the Strategy is
full satisfaction of demand of the country for basic kinds
of construction materials of the corresponding quality
level, which are necessary for development of volumes
of investments determined under the innovative scenario
of development of the project of the Concept of longterm social and economic development of the Russian
Federation for the period until 2020, and also for realization
of tasks contained in priority national projects.

Taking into account the fact that solution of development
issues of the industry of construction materials
has not been covered in any of operating federal
target programmes, the Strategy makes provisions to
realize a complex of priority support actions, in the following
directions:

• legal and economic state support of creation of
new and upgrade of operating enterprises of
the industry of construction materials (including
preparation of proposals on amendments to
the Federal Law «On subsurface resources», the
Land Code of the Russian Federation, the Civil
Code of the Russian Federation, the Tax Code
of the Russian Federation and other regulatory
legal acts with regard to increase of efficiency
of reproduction of mineral raw material base, to
Federal laws «On production and consumption
wastes», «On subsurface resources», «On environmental
protection», the Code of the Russian
Federation on administrative offences and other
regulatory legal acts aimed at reinforcement
of administrative measures for non-use and accumulation
of technogenic wastes, perfection
of tax and budgetary legislation, preparation of
a regulation of the Government of the Russian
Federation «On urgent measures for development
of production of construction materials,
articles and structures in regions of the Russian
Federation for the period until 2015», etc.);

• creation of mechanisms of state-private partnership
when organizing new and upgrading operating
enterprises of the industry of construction
materials (including those aimed at the state coinvestment
of socially and economically significant
investment projects for the regions, development
of concession principles of partnership with
commercial organizations, creation of federal and
regional programmes for the state support of geological
surveys, explorations and development of
mineral deposits, coordination of programmes of
development of production of construction materials
with investment programmes of development
of capacities of natural monopolies, etc.);

• state support of research and development
works for creation of new highly efficient technologies
(with development of state support
measures for development of the potential of
the branch research and developmental base of
the construction industry);

• support of development of the domestic mechanical
engineering industry for the branch
of construction materials (including preparation
of a regulation of the government of the
Russian Federation on measures for creation
of domestic mechanical engineering industry
at the level of advanced world analogues
of equipment for manufacture of construction
materials, articles and structures for the period
until 2015);

• formation of the education system of specialists
of all levels for enterprises of the construction
materials industry.

The Strategy takes into account work experience
of the Commission on development of the market of affordable accommodation of the Council of the President
of the Russian Federation with regard to realization
of priority national projects and demographic
policy.

Analysis of the course of work on realization of pilot
projects supervised by the Commission, shows that one
of the basic deterrents for creation of new production
capacities of construction materials, articles and structures
is inconsistency of provisions of the Land Code
of the Russian Federation and the Law of the Russian
Federation «On subsurface resources» regarding issues
of granting of land plots for production needs.

Clause 11 of the Law of the Russian Federation
«On subsurface resources» stipulates that a license for
mining operations is issued only if the owner of the
land agrees to grant the land for purposes of subsurface
use.

However, during auctions held by regional or federal
bodies of the government for the right of subsurface
use between investors willing to organize mining
operations of natural raw materials, situations take
place when after summation of results of auctions for
the right to subsurface use, owners of a land plot above
a mineral deposit reject their preliminary consent to
grant (cede) lands for purposes of subsurface use or request
overestimated price for them, which makes further
development of the project of the mineral deposit
obviously inefficient.

It often happens that when a potential investor
who has plans for construction of a new enterprise in
the region, participates in an auction, pays the license
for subsurface use, but has no guarantees of land allocation
in future.

It is possible to bring lots of examples regarding
this issue.

Similar problems also arise in the course of upgrade
of enterprises when it is necessary to obtain allocation
of land plots to provide them with additional
utilities (gas, electric power, railway transport), and
also allocation of new mountain plots in developed deposits
of natural raw materials.

In order to create favorable conditions for further
development of manufacture of construction
materials and articles, the Commission developed a
number of proposals on amendments to the legislation
and regulatory legal acts of the Russian Federation
regarding allocation of land plots for construction
(development) of production capacities and regarding
ensurance of transparency of procedures of access to
mineral deposits for enterprises manufacturing construction
materials.

The course of work under pilot projects of creation
of production capacities with proposals on solution of
problematic issues of development of construction materials
production was reported by the Commission
at the session of the Presidium of the Council of the
President of the Russian Federation on realization of
priority national projects and demographic policy on
October 30, 2007.

Along with deterrents relating to subsurface
use, basic problems also include issues of provision of enterprises under construction with utilities (facilities
of gas supply, electric power supply, municipal
sphere, motor and railway transport, including availability
and delivery of specialized rolling stock to
consumers.

Basic problems of development of enterprises
manufacturing construction materials, revealed by the
Commission, can be united into two groups.

The first group includes issues of macro-regulation,
namely:

• legislative problems of acquisition of rights to
land plots;

• customs regulation of import of equipment for
enterprises manufacturing construction materials,
for creation of modern capacities for
production of domestic equipment and also for
direct regulation of import of construction materials;

• opportunities of attraction of resources of the
Investment Fund of the Russian Federation and
the Bank of Development.

The second group includes issues of coordination of
procedures of reception of permits (specifications) for:

• Connection to electric networks;

• Connection to gas distribution networks;

• Connection to objects of municipal infrastructure;

• Joints to public railway lines.

Suffice it to say that total expenses on connection to
utilities and development of transport under the examined
pilot projects make 13 % of the amount of their estimate
cost.

This issue causes alarm, especially in connection
with the adopted large-scale documents, such as the
General scheme of location of power facilities until 2020,
the Strategy of transport development in the long-term
perspective, etc.

Solution of these problems will depend in many respects
on readiness of enterprises manufacturing construction
materials, articles and structures to ensure manufacture
of required quantity and quality of products.

There are more than 40 unions, associations,
partnerships in the branch of construction and manufacture
of construction materials, articles and structures.

Their activity should also be aimed at development
and promotion in bodies of executive power
of necessary proposals on development of manufacture
of construction materials, articles and structures.


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