Eighty to a hundred million euro. That, according to various sources, is the annual potential for sales of semi-ready mixtures for the construction industry (dry construction mixtures in professional parlance) in Bulgaria.
Despite the lack of processed market data, currently there are two indicators which, taken as a whole, show pretty clearly what is going to happen in the building sector. First, the total production capacity in Bulgaria (again according to unofficial data) is around 300,000 tonnes a year (calculated at prices of between 80 to 100 euro per tonne, this adds up to 30 mln euro in revenue at best). Second, that type of plants are most efficient for sales within areas of up to 100 km in radius. The trend of development is not hard to forecast: very soon the production facilities in Bulgaria will increase severalfold.
Small, Big, Bigger
So far dry construction mixtures have been largely produced by local companies, but the situation started to change in the past 12 months. Big international companies began erecting their own production facilities. A bauMIT plant is scheduled to start production at Elin Pelin by September. bauMIT is part of Austrian Schmid Industrie Holding, whose revenue topped 1.0 bln euro in 2006. bauMIT has invested nearly 10 mln euro in the Elin Pelin plant, whose annual capacity will be 200,000 tonnes.
Also Austrian Roefix opened its own plant at Septemvri in 2006. The company invested 2.0 mln euro in it and will produce 30,000 tonnes a year; an enlargement of the facility has been planned.
Ceresit, part of German-based multinational concern Henkel, is currently building its facility at the Mirovyane village; initially, it has invested 6.0 mln euro; the plant will produce various types of glue.
A month ago Maxit, a subsidiary of Swedish-based Maxit Group, started building a 10 mln euro plant at Plovdiv’s industrial zone. Maxit Group is part of HeidelbergCement Group. The company plans to complete the plant by the end of 2007.
Thus, in only a few months the Bulgarian capacity to produce cunstruction mixtures will rise more than two times. According to unofficial Information, two further international companies had plans to enter the Bulgarian market; but so far there has been no confirmation about any concrete projects.
The logic that all those investors use is basically the same - to optimise their costs vis-a-vis the ones they have incurred by imports (the bulk of their products have so far been present in the Bulgarian market, but they were produced abroad). "The transportation costs are a considerable item in our calculations," says Nikolai Bachvarov, manager of bauMIT, "our calculations have shown that a plant for dry construction mixtures is most efficient when the output is shipped no further than 100 km. This has prompted interest in building production facilities on-site." He expects that as a result of the direct entry of big-time international players in Bulgaria the local plants will largely be crowded out of the market.
The End of a Legend
It is too early to say if the massive construction of building material plants in Bulgaria will lead to serious crowding-out of the local producers. What is certain to happen, however, are three things: first, redistribution of market shares; second, reduction in prices and the transformation of what until very recently was high-end products into mainstream merchandise, and third, the entry of new products. According to Pavel Pavlov, manager Business Development at Maxit Bulgaria, more and more construction mixtures which have so far been concocted at the construction sites will be delivered from outside and will only be dissolved on-site. "The entry of more and more foreign companies is yet to take place in Bulgaria, and their practices include the use of ready-made mixtures," says Pavlov. This practice helps reduce a construction company's workforce costs.
21-27/07/07, P46
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