War affects more than just economies—it disrupts lives, infrastructure, and entire industries.
As industry professionals, our goal is to highlight how conflicts, like those in Ukraine and Gaza, impact the cement industry, a backbone of rebuilding efforts.
Cement isn’t just a building material; it’s a key to restoring homes, roads, and hope in regions torn apart by conflict.
By understanding these effects, we aim to offer a clear picture of the industry's challenges today and what it will take to rebuild once peace is restored.
Cement Industry Overview
Cement production is not just a local matter but an international industry that fuels economic growth and urban development. As of last year (2023), China, India, and the United States dominate global cement production.
China alone produces over 2.4 billion metric tons of cement each year, accounting for 55% of global output, followed by India (6.2%).
The U.S., Australia, and Ghana are among the top importers when it comes to demand. Their reliance on external supplies to meet domestic needs underscores the global nature of the cement industry.
The cement market, valued at $340 billion in 2022, is projected to hit $460 billion by 2028. Large-scale infrastructure projects, housing developments, and reconstruction efforts in conflict-stricken regions drive this surge.
Impact of Wars on the Cement Industry
Wars, like the ones between Ukraine and Russia or the Israel-Palestine conflict, have deeply disrupted the cement industry’s complex network of supply chains and trade routes.
For example, Ukraine was a key exporter of clinker and other raw materials, mainly to neighboring European countries. With the war, these exports have plummeted, crashing its GDP by 29% during the war year.
Moreover, the Israel-Palestine Conflict is centered around a highly volatile region that has disrupted shipping lanes like the Suez Canal and the Red Sea.
As a result, transportation costs for bulk goods—including cement—have jumped, impacting supply routes from Europe and Asia. A single route diversion can add up to 12 days of travel time and significantly inflate overall shipping costs.
In this piece, we’ll discuss the impact of the Ukraine-Russia War and the Israel-Palestine Conflict on the cement industry. With this, we aim to navigate the roads ahead for global traders in the cement industry and how to chart through these testing times.
In all ways, we condemn the ongoing wars across the globe, where countless lives are lost every day.
The Cement Industry Amidst the Ukraine-Russia War
Before the conflict escalated in February 2022, Ukraine was a key player in the Eastern European cement market. The country produced around 10.6 million tons of cement annually, with a significant portion being exported to neighboring countries like Poland and Romania.
Ukraine’s cement production capacity stood at 14.8 million tons per year, spread across nine major plants operating at full capacity. However, due to the Ukraine-Russia war, cement production fell by 60% during the initial year of the war, and despite a 17% rise in 2023, it still hasn’t returned to pre-war output levels.
In addition to all these, in 2022, cement prices were expected to increase between 6% and 13%—something that was directly impacted by the onset of war.
Impact of War
Below, we explore some of the key global impacts of the Ukraine-Russian war on the cement industry.
Destruction of Infrastructure and Cement Plants
The war has directly affected several Ukrainian cement plants, causing both physical damage and operational disruptions.
The Balakliia plant in Kharkiv Oblast, one of the largest cement plants in the country with a capacity of 4.4 million tons per year, was taken over by Russian forces early in the war but was subsequently liberated in September 2022.
Disruption of Supply Chains and Exports
Cement exports from Ukraine dropped by 60% due to logistical bottlenecks, port closures, and restricted access to major transportation routes. The country’s cement consumption also plummeted by nearly 50% in 2022(https://www.cemnet.com/News/story/176836/cement-consumption-in-ukraine-increased-17-in-2023.html), reaching just 4.5 million tons, down from the pre-war peak of 10.6 million tons in 2021.
Sanctions and Trade Restrictions
Sanctions in Russia have affected its ability to export clinker and other raw materials used in cement production. The European Union has placed restrictions on Russian cement and clinker exports, further isolating Russia from its traditional markets in Europe.
These sanctions have forced major players like Buzzi Unicem and other multinational cement companies to either reconsider their operations in Russia or redirect their business strategies.
Shift in Demand Due to Rebuilding Efforts
While the war has devastated the local market, it has also created a unique demand for cement in reconstruction projects.
As of late 2023, over US$150.5 billion worth of infrastructure in Ukraine has been damaged or destroyed.
Regional Shifts
The conflict has caused ripple effects in neighboring countries. Eastern European nations, which traditionally relied on Ukrainian cement, are facing shortages and higher prices.
For example, Poland’s cement imports from Ukraine have been replaced by Turkish and German cement, pushing up local prices by 20% due to higher logistics and sourcing costs.
The Cement Industry in the Israel-Palestine Conflict
Before the conflict, Israel’s cement market was relatively stable. Demand was consistent, fueled by ongoing infrastructure projects and the steady pace of construction in both residential and commercial sectors.
In 2022, the country consumed around 9.4 million tons of cement, driven by the need for new housing and large-scale infrastructure developments. With continuous growth in urban areas, construction demand has stayed strong, keeping the local cement industry active.
On the other hand, Gaza’s situation couldn’t be more different. Since the blockade started in 2007, getting even the basic materials for construction has been a constant challenge. Cement, which should be readily available for rebuilding, is strictly controlled, leading to chronic shortages. In fact, 80% of Gaza’s population relied on international aid in 2022, largely because these restrictions often stall construction projects.
Impact of War
The conflict has only worsened these conditions.
Let’s break down exactly how the war has hit the cement industry in Israel and Palestine.
Destruction of Buildings and Infrastructure
Targeted attacks on its facilities have crippled Gaza’s cement production.
A prime example is the destruction of 38 concrete factories during the recent escalations. Losing these production sites has paralyzed local output, and coupled with the damage to roads and key infrastructure, there’s now a pressing need for huge amounts of cement to rebuild.
Blockades and Restrictions
The blockade in Gaza means that importing the raw materials needed for cement production is almost impossible. Israel’s strict control over what enters the region makes it difficult for suppliers to meet even the most basic construction needs.
Often, only limited shipments for humanitarian purposes are allowed, which are far from sufficient to support large-scale reconstruction. Because of this, many have turned to the black market or other unofficial channels, driving up costs and complicating already delicate supply chains.
Reconstruction Efforts and Demand Shifts
The widespread destruction has triggered pledges of aid from international agencies and foreign governments. Organizations like the United Nations Relief and Works Agency (UNRWA) have noted that over 150,000 homes must be rebuilt or repaired.
This creates a massive spike in potential demand for cement, but meeting this demand will depend heavily on whether the blockades are eased and imports are allowed to support these projects.
Potential Foreign Aid and Its Impact on Cement Demand:
Foreign aid plays a critical role in shaping cement demand in Gaza. In the past, aid fluctuations have directly impacted the availability of funds for large-scale construction projects.
With current pledges, there is potential for a substantial increase in demand for cement, provided the blockades are eased and imports are allowed to meet the reconstruction needs.
Key Challenges for the Cement Industry in Conflict Zones
Running a cement operation requires more than just producing bags of cement—it’s about keeping supply chains flowing, ensuring there’s enough skilled labor, and having reliable routes to get the material where it needs to go.
But when conflict erupts, all these essentials are disrupted. The ripple effect is felt throughout the industry, making it a struggle to keep things moving.
Let’s look at the main hurdles cement producers face in war-torn regions:
Raw Material Shortages
Cement production relies on a steady supply of raw materials such as limestone, gypsum, and clinker. In conflict zones, these materials become scarce due to either damage to quarries or restrictions on imports.
For example, in Gaza, the cement industry has historically struggled with restricted access to these materials due to the Israeli blockade.
Also, due to the Ukraine-Russia conflict, the eastern regions of Ukraine that once provided significant clinker and limestone reserves are now inaccessible or damaged.
Production Halts
Cement plants in conflict zones are frequently forced to halt operations due to safety concerns or direct attacks. In Ukraine, major plants like the Balakliia and Amwrossijiwka facilities have been caught in conflict zones, resulting in complete shutdowns.
Similarly, in Gaza, around 38 cement factories were either destroyed or severely damaged during the recent escalations, leaving local production almost non-existent.
Logistical Barriers
Transporting cement or its raw materials becomes a significant hurdle in war zones. Damaged roads, railways, ports, and airports cut off entire supply lines.
For instance, the Red Sea and Suez Canal routes, which are critical for cement and construction materials moving from Europe to the Middle East and North Africa, have become volatile. In the first couple of months of 2024, the Suez Canal had 50% less trade compared to past years.
Economic Sanctions
Sanctions complicate the cement trade by limiting where companies can sell their products and where they can source raw materials. The European Union’s sanctions on Russia, for instance, have cut off Russian cement producers from some of their largest markets in Western Europe.
Similarly, sanctions on Syria and Iran have curtailed their ability to import vital machinery and raw materials for cement production, leading to a significant drop in output and forcing them to rely on outdated technologies that further increase costs.
Labor Shortages
War leads to mass displacement and labor shortages as skilled workers are either drafted into the military or flee conflict areas.
In Ukraine, hundreds of thousands of skilled laborers have been displaced. So is Gaza, where the lack of skilled labor is one of the industry's biggest challenges.
Expert Review: Insights from an Industry Specialist
As tension escalates, experts in the cement industry testify to a certain amount of disruption. Below, we’ll see what industry experts have to say about the impact of wars on the cement industry.
The Immediate Impact
Commenting on how the Israel-Iran conflict could influence the Indian stock market, Anshul Jain, Head of Research at Lakshmi Shree Investment and Securities, stated, “The Israel-Iran war is expected to hit some Indian companies of a considerable reputation as they draw a large amount of business from Israel and some other Middle Eastern nations.”
According to Amr Nader, CEO of the A³&Co consultancy and a recognized expert in the Middle East cement market, the cement utilization rates are around 50% in countries like the UAE, Algeria, and Egypt. In comparison, Saudi Arabia’s rate is 60%. In contrast, Morocco has a utilization rate of 80%.
He says, “Everywhere you look in the Middle East, there is oversupply with price constraints, and some sort of price war is taking place,” says Nader.
He further points out that the region can be divided into two distinct markets: oil-rich countries and those with larger populations.
“In oil-rich countries, development is driven by an excess of money for infrastructure, and new megaprojects are being government-funded,” he explains.
For navigating challenges in the cement industry, Harpreet Duggal, CEO of Black Rock Cement, suggests that the cement industry should focus on four key strategies to handle rising oil prices and interest rates:
Energy efficiency with investment in alternative energy to reduce oil dependency.
Supply chain optimization by using local sourcing and better logistics to cut transport costs.
Financial prudence to carefully manage debt and diversify funding.
Market diversification to enter new markets to offset falling demand.
His approach emphasizes strategic planning and efficiency to navigate these economic challenges.
The Role of Reconstruction and Post-War Demand for Cement
When conflicts end, the priority often becomes rebuilding damaged infrastructure—whether it’s residential buildings, bridges, or critical public facilities.
This creates a unique situation for the cement industry, where demand spikes almost immediately, but logistical and economic challenges can hinder production and supply.
Here’s a detailed look at three key factors driving the post-war demand for cement:
Rebuilding After Conflict: The Surge in Demand
War devastates cities and towns, destroying homes, roads, and public infrastructure. As a result, the post-conflict period typically sees a surge in cement demand, primarily for reconstruction.
For instance, in Gaza, over 150,000 homes were reported to have been either partially or completely destroyed in recent conflicts. The estimated cost of rebuilding the region’s infrastructure is around $50 billion over the next few years, a figure that heavily relies on the availability of cement and other construction materials.
Similarly, in Ukraine, the cost of reconstructing damaged infrastructure has been pegged at US$14 billion, and cement producers are gearing up for an increase in demand once conditions stabilize. This spike in demand isn’t limited to housing alone; it extends to roads, commercial facilities, and public buildings, all of which require substantial quantities of cement.
Foreign Investments and Aid: Revitalizing the Cement Industry
Foreign aid and international investments play a crucial role in determining the pace and scale of reconstruction.
In conflict zones like Gaza, international bodies like the United Nations and NGOs have pledged millions for rebuilding efforts. This influx of funds directly translates into increased cement consumption, provided logistical barriers are minimized. Back in 2016, Israel resumed cement shipments to Gaza after a 45-day blockade, significantly impacting the local industry’s ability to restart projects. The same is expected to happen soon once the conflict settles.
In the Ukraine-Russia war scenario, the European Union and World Bank have committed over $5 billion in reconstruction funding, which includes critical support for rebuilding cement plants and production facilities. As these funds start flowing into rebuilding projects across Eastern Europe, the demand for cement is expected to jump by over 20%.
Long-Term Economic Impact: Challenges of Rebuilding Amidst Instability
Reconstruction isn’t just about immediate rebuilding; it’s about restoring economic stability. While the cement industry benefits from increased demand, it often faces operational hurdles due to the lingering instability of conflict zones.
For example, the Middle East has seen extended delays in rebuilding due to supply chain disruptions and price hikes in construction materials caused by regional tensions. In Ukraine, fluctuating energy prices and sanctions on Russian companies have made it difficult for cement producers to operate at total capacity despite the high demand for reconstruction materials.
Moreover, cement prices can skyrocket post-conflict as rebuilding initiatives compete for limited resources. In regions like Syria, cement prices rose by over 100% following the end of major conflicts due to severe shortages and sanctions, making it difficult for reconstruction projects to proceed at scale.
Conclusion
War spares no one—individuals, families, and industries alike. It tears down not just buildings but the very fabric of communities.
For the cement industry, a sector that plays a pivotal role in rebuilding efforts, these conflicts in Ukraine and Gaza have posed severe disruptions. But we want to emphasize that this discussion isn’t about choosing sides. Our goal is to understand and highlight the effects, keeping a neutral stance and hoping for a future where peace prevails.
In times of conflict, cement becomes more than just a building material—it’s a means to restore homes and schools and hope for a better tomorrow. When these regions eventually begin their recovery journey, the industry’s role will be crucial.
If you’re in the cement business and need tailored guidance, feel free to connect with our experts whose insights you can leverage to navigate these challenging times.
