Construction

Brief market overview. Construction services market in Uzbekistan was UZS29.3trn ($9bn) in 2016 and is estimated to reach UZS32.6trn in 2017. The construction industry has been among the major drivers of the country’s economic growth over the past ten years. Between 2006 and 2015, the country’s construction output surged in real terms by 16.3 % on average every year. Growing economy has led to a rise in construction projects in residential, commercial and industrial sectors.  Over the last few years the industry was fuelled mostly by civil engineering construction generated by state-funded construction projects.

Cement production. Strong growth in the construction industry in Uzbekistan has provided decisive support for domestic production of building materials, particularly in terms of cement. Cement production in the country reached 8.3mn tons in 2015, a steady increase from 3.28mn tons in 2000. In 2016, cement production is estimated to have grown by 4% and the upward trend in the cement industry in Uzbekistan is likely to continue.

Recent expansion. Between 2010 and 2016 six new cement production facilities were built. The United Cement Group built a cement grinding station with 1mn tons capacity in 2010, whereas the Almalyk Mining-Metallurgical Complex built a new cement plant in the Djizzakh province in March 2014 for $120m (1st phase). It includes 760,000 tons per annum Portland cement production unit and 360,000 tons of white cement. The second phase worth $36mn was completed in 2016 and expanded the plant’s Portland cement production capacity to 1mn tons.  There were two more plants put into operation in 2014, in the Fergana and Andijan provinces, with less significant capacity.

Planned projects. Uzbek authorities expect that the country’s cement production capacity to reach 16-17mn tons by 2020. The modernization of Qizilqumsement will cost $40mn and another $150mn will be invested in the construction of the fourth production line (capacity - 1.6mn tons), to be completed in 2018. Almalyk Mining-Metallurgical Complex plans to invest $225mn in the construction of a new plant with a 1.5mn tons capacity in the Surkhandarya province, which is due to be completed by 2019. New plant with annual capacity of 1.2mn tons in Andijan Province will be built for $204mn by 2019. Russia’s Eurocement will build 2.4mn tons cement plant by 2020.

Building materials. State policy of supporting local production through financial, infrastructure and legal incentives to investors willing to set up new plants to produce materials previously not manufactured in the country has had positive effect in the growth of the industry. In recent years, significant number of new production units for  building materials not previously manufactured in Uzbekistan have been initiated. These include dry-building mixtures, plasterboard, bitumen membrane and ceramic sanitary ware. Two extensive investment projects are being implemented by Knauf. The company opened a 20mn capacity plasterboard plant in the Bukhara Province in 2011, with capacity expanded to 25mn by 2015. According to an investment memorandum signed by Knauf with the government in early 2015, the company will invest $53mn in the construction of a dry-building mixture plant (60,000 tons/year) and the expansion of plasterboard production capacity by 8mn million/year in the near future.

We believe that the state’s determination to increase the country’s housing stock, particularly in rural areas, will continue to support a solid upward trend in the construction sector.  Construction sector will be also boosted by the increasing activity after foreign investment inflow will result in initiation of new large scale projects in the country.