Cement: Will domestic shipments fall below 40 million tons?… Growing sense of 'crisis' sets in.
This year, there is growing concern that domestic cement shipments could fall below 40 million tons (t). The situation surrounding the cement industry is worsening, driven by the ongoing slump in the housing market, financial difficulties faced by small and medium-sized construction companies, and the overall domestic economic downturn. A "below 40 million tons annually" scenario would mean that domestic shipments would return to the level seen in 1990. According to the Korea Cement Association on the 3rd, last year's domestic cement shipments amounted to 43.595 million tons, a decrease of over 10% compared to the previous year's 50.237 million tons. Since the 1990s, domestic cement shipments have exceeded 60 million tons in 1996 and 1997. Although shipments have declined somewhat, they remained above 50 million tons from 2015 to 2018. An industry insider commented, "With mid-sized construction companies like Shin Dong-A Construction filing for corporate rehabilitation and the growing crisis among small and medium-sized construction firms, the mood in the construction industry, which is the main customer for cement, is significantly depressed. This could lead to a sharp drop in overall cement demand, which is the biggest concern." The insider added, "Furthermore, environmental regulations are becoming increasingly strict, requiring cement companies to invest more in eco-friendly initiatives, making this year’s business conditions very challenging." Jeon Geun-sik, who was appointed as the 31st President of the Korea Cement Association at the beginning of this year as the CEO of Hanil Cement, expressed concerns in his inauguration speech, stating, "This year, due to the downturn in the upstream industries, domestic cement shipments are likely to hit their lowest level in 35 years, since the early 1990s." He added, "With increasingly strict environmental regulations and rising manufacturing costs, the cement industry is facing a crisis like never before." In reality, the housing market, which is the most representative upstream industry for cement, is in a situation where high expectations for this year are difficult to hold. According to the "2025 Housing Market Outlook" report released earlier by the Housing Industry Research Institute, the number of housing units completed this year is expected to be 332,000, a significant decrease from last year's estimated 440,000 units. The average from 2017 to 2021 was 523,000 units. The expected number of housing starts this year is 300,000, which is slightly higher than last year's 260,000 units. However, this is still a substantial decline compared to the average of 521,000 units from 2017 to 2021. In the "Construction Trends Briefing" released last month, the Korea Construction Industry Research Institute stated, "The likelihood of a sharp interest rate cut is low, and real estate regulations remain in place, meaning the housing market will need more time to recover." It also forecasted, "This year's budget for SOC (social overhead capital) has been set at 25.5 trillion won, a 3.6% decrease from last year, which will further shrink the public construction market, leading to a deepening shortage of construction projects." According to the Cement Association, its member companies invested a total of 607.6 billion won in facility investments for environmental improvements last year. This investment has gradually increased from 342.9 billion won in 2020 to 422.6 billion won in 2021, 446.9 billion won in 2022, and 568.3 billion won in 2023. However, if cement companies are required to install additional nitrogen oxide reduction equipment (SCR) to effectively reduce exhaust gases, the investment costs will rise further, deepening their concerns. The worry is growing, as the management conditions are already difficult, and the increasing investment costs are adding to the burden. On a somewhat positive note, the price of bituminous coal (based on 5750 kcal/kg in Northeast Asia), which accounts for the largest portion of cement production costs, has dropped from its peak of $295 per ton in March 2022 to $99 per ton by the end of January. However, this benefit is somewhat offset by the depreciation of the Korean won (rise in the value of the dollar). An industry insider expressed concern, saying, "The total production capacity of major cement companies exceeds 60 million tons annually. However, if domestic shipments fall below 40 million tons, no matter how much production is reduced, inventory will inevitably pile up. This could lead to a series of negative effects, such as falling cement prices and worsening business conditions." The insider further noted that exporting the excess volume and competing with low-cost Chinese cement is not an easy task. Last year, the total cement export volume was only 598,000 tons, which accounts for just 1.4% of domestic shipments. ChatGPT를 사용하여 번역한 기사입니다.
