KSE researches Ukraine’s construction industry and needs for reconstruction

27 June 2024

The Kyiv School of Economics, at the initiative of the European Business Association, is conducting a study “Structural Changes and Challenges in the Construction Industry of Ukraine: Analysis and Forecasts”. The analysts assess the pre-war state of the construction industry and the impact of a full-scale invasion on it, including the level of previous destruction of Ukrainian infrastructure and the materials needed for reconstruction. 

According to the World Bank, the total cost of reconstruction and recovery in Ukraine is $486 billion. However, Olena Shuliak, chair of the Verkhovna Rada Committee on Organisation of State Power, Local Self-Government, Regional Development and Urban Planning, stated that approximately $65 billion is necessary for construction materials alone to rebuild the infrastructure mentioned in the World Bank reports.

At the same time, the vast majority of the necessary construction materials can be produced in Ukraine: it will cost the national economy less than imports, create additional jobs, and increase taxes on the state budget. The share of domestic construction materials in total consumption in Ukraine exceeds 90%, and this figure can at least be maintained as the need for construction materials grows. Among the most important materials for reconstruction are cement, concrete, metal structures, bricks, glass, thermal insulation materials, etc. 

“Current investments are crucial, but additional billions are needed to rebuild Ukraine’s infrastructure and economy. It should be noted that investments will contribute to developing domestic production capacities, creating new jobs, and supporting the economy,” said Maksym Nefyodov, Senior Director of KSE Institute, Innovative Reform Solution. 

Preparing domestic facilities for the production volumes required for recovery will take time and considerable investment. For example, to meet the demand for cement, clinker kilns must be built, which may take 2-3 years. 

“The war initiated by Russia against our country has led to the destruction of more than 200,000 residential buildings, hundreds of schools, healthcare facilities, tens of thousands of kilometers of roads, bridges, and other infrastructure objects. All of this needs to be rebuilt, and the role of high-quality building materials in this process cannot be overstated,” comments Viktoria Kulykova, head of the EBA Committees Department.

Experts at the Kyiv School of Economics note that several large international companies have already announced investment projects in Ukraine.

CRH, one of the largest construction materials producers, owns three cement plants in Ukraine under the CEMARK brand and has already invested $80 million in Ukraine since the full-scale invasion. In 2023, the company signed a mandate letter with the EBRD to acquire the assets of Italian Buzzi in Ukraine jointly. The deal is estimated at $100 million and is currently being reviewed by the Antimonopoly Committee of Ukraine (AMCU).

Kingspan, another Irish building materials company, intends to invest $300 million in the “Сірша” (Irish for “Freedom”) project. They expect a manufacturing campus to be operational in western Ukraine by 2026. 

Ukrainian businesses are also investing in the construction industry. In 2022, the development company City One Development began construction of a glass plant in Kyiv region, as the only similar facility in Ukraine was destroyed in 2014. The declared cost of the project is €100 million, and it should take several years to complete. The company later announced its intention to build another similar plant by 2025.

As part of the study, Kyiv School of Economics cooperated with the NGO “Technologies of Progress” to use data from BRP.org.ua to assess existing reconstruction projects and the corresponding needs for building materials. The results are scheduled to be published in July 2024.