Cement producers in South Korea have been voicing discontent about local construction firms looking to import low-priced cement from China. The country's domestic cement prices have grown by approximately 50 per cent in the last three years to reach KRW114,147/t (US$84.6/t).
Chinese imports are currently around 15 per cent cheaper (KRW97,280/t) than domestic prices, according to local media. Korea suffers from rising labour costs, escalating energy prices and the need for an industrial transformation in its cement sector, all of which have put pressure on cement prices.
Cement producers have also cited the war between Ukraine and Russia as a major factor in the increased cement prices, because of the higher cost of bituminous coal imports. Moreover, increasing investment in compliance with tougher environmental regulations has made it difficult for some manufacturers to lower cement prices.
Pressure to import is growing
Meetings have been held by construction companies to explore sourcing cement from Shanshui Cement through a Korean broker. The government is also considering supporting the plans to import cement from other countries to lower construction costs and improve cement supply to housing projects. “We are preparing for measures to reduce raw material prices,” said Park Sang-Woo, Land, Infrastructure and Transport Minister.
While the majority of members of the National Assembly recommend Chinese imports, some members oppose the idea. “The import of Chinese cement will trigger a deterioration in Korean companies’ profits, decrease in the R&D investments and reduce their workforces,” said representative, Eom Tae-young, of the ruling People Power Party.
Opposition representative Park Yong-gab also said it was unreasonable to import low-quality cement from China as a cost-saving measure. In addition, importing cement would involve obtaining new certifications, building specialised storage facilities and additional measures which could take up to two years. Imports reached 0.66Mt in 2023 and are forecast to reach 0.68Mt in 2024, according to The Global Cement Report, XV Edition.
Construction pick-up
Despite the current tension over cement prices, the Korean cement industry is expected to grow in value by 3.2 per cent annually to reach US$8.02bn in 2024 with a CAGR of 2.7 per cent during 2024-28, according to Research and Markets (R&M). By 2028 the domestic market is forecast to output US$8.92bn worth of cement, claims R&M. The Global Cement Report, XV Edition puts South Korean cement production at approximately 49.47Mt in 2024.
Construction activity remains high and is set to expand 8.8 per cent in 2024 after falling 0.1 per cent in 2023. The prime driver for the country's cement demand is coming from civil engineering construction, which has surged to 21.4 per cent growth in 2024, building on 5.4 per cent growth in 2023, according to Oxford Economics. Non-residential building is another main demand force and is set to rise 11.5 per cent during 2024. However, the residential building sector has been struggling. It is forecast to see a 4.8 per cent fall in growth in 2024 following a 4.1 per cent drop in 2023, reports Oxford Economics.
Domestic cement demand reached 49.36Mt in 2021 and is still unlikely to exceed the 50Mta mark by the end of 2024, according to The Global Cement Report, XV Edition.
Cement market developments
The market’s transition towards consolidation could add further pressure on domestic supply. Hahn & Co succeeded, in May 2024, in its latest tender offer to raise its controlling stake in SsangYong C&E from 79.9 per cent to 93 per cent. Once the share ownership tops 95 per cent, the largest shareholder in the company can delist from the Korean stock exchange.
Investments in the Korean cement sector are ongoing as it looks to modernise, particularly in the area of alternative fuels. One example of these investments is Halla Cement Corp’s installation of a KHD Humboldt Wedag Pyrorotor® alternative fuel reactor, for Line 2 at its Okke plant.