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Road Building As A Key Demand Driver For Road Building Equipment

Road Building As A Key Demand Driver For Road Building Equipment

24/10/2013

For road-building equipment producers this year appeared to be not the best. The global market for the last years shows small growth (CAGR +2.6%). Compared to general environment, Ukrainian market seems to reflect global trend, rather than is a reason to national abasement.

Road building is a key demand driver for road-building equipment. The road building volumes primarily depends on implementation of the state programme, which seems to have the most ambitious plans since independance. According to Cabinet of Ministers of Ukraine (CMU), the Enactment # 696 dated July 11, 2013, provides financing of 214 bln UAH (incl.: 134 bln UAH - state budget moneys, 18 bln UAH - international finance moneys, 42 bln UAH - credit moneys, 20 bln UAH - private investment funds moneys) within the next 5 years for purpose of road building and reconstruction.

As you know, Ukraine is one of biggest countries in Europe and is spread over 604 sq.km. The length of Ukrainian roads is 169k km, with 10% of the category I and II. In the mean time, 80% of the traffic load relates to these categories. 

Each of us drives Ukrainian roads and knows their conditions: over 50% of the roads does not follow flatness requirements, and 90% require current and capital repair. To prevent the negative tendency and to give a start to further development of the road infrustructure, the CMU by Enactment #696 as of July 11, 2013 adopted State program for general use roads development up to 2018, whereby 1,5k km planned for building and reconstruction, plus 24k km planned for repair.

The main road-building directions are western direction - way to European countries (Rivne - Brody - Lviv - Krakovets), southern direction (Odesa - Reni) and way to Russia (Simferopol - Melitopol - Kharkiv - Scherbakivka; and Kyiv - Kipti - Bachivsk).

The program has specific figures for building, reconstruction, current and capital repair. According to Enactment of the CMU #710 as of August 03, 2005, there were built and reconstructed over 1.6k km of roads from 2007 up to 2012 year period. According to last Enactment, within following 5 years it is planned to build and reconstruct 1.5k km of roads, and to make current and capital repairs of 24k km of roads, primarily in direction of big cities and international transport corridors.

This is a bunch of work. The program will push several adjacent economy sectors and may give a gulp of fresh air to a hundred of construction material producers. The need for granit brokenstone will be at least 120 mln.cub.m. To build one road unit (1 km * 1 m), 700 cub.m. of granite brokenstone is required, and 400 cub.m. to make reconstruction. If one knows category and width of the road, the local quarry may identify the need for granite brokenstone for this or another part of the road themselves and may supply the material to road-building companies within profitable "delivery shoulder".

The road-building intensity impacts directly on to road-building equipment volume. 1212 units of the new equipment ammounted at $160 mln. plus 1169 units of the second hand equipment ammounted at $40 mln. were imported to Ukraine in the 2012. For the moment, the whole sector is awaiting for the launch of the state program, showing slight growth.

To identify market dynamics, we compared the first half 2013 with the same period 2012. The majority of equipment (front loaders, telescopic loaders, BHL, excavators on tracks, excavators on wheels, bulldozers, graders, asphalt layers) show slight but positive dynamics. The number of imported units compared to 2011 is almost the same (545 units - first half 2012, 552 units - first half 2013), but the customs value reduced 17% ($82 mln. - first half 2012, $68 mln - first half 2013). The selected segments of telescopic loaders, BHL, excavators on wheels, bull dozers and graders show positive dynamics. At the same time, front loaders, excavators on tracks, road rollers and asphalt layers decreased.

The given analysis shows, Ukrainian market stadily needs up-to-date road-building equipment. The need of the country is hardly satisfied for the half. The domestic market is waiting for launch of the State road-building program. To provide business viability, the equipment suppliers shift to low- and average-price segments by the account of profit. In the meantime, all market players rely on the launch of the State road-building program, which is the key demand driver for road-building equipment and materials.  

Feel free to approach MARCOM managers to get the detailed Annual Report for Road-Building Equipment Import.