South Korea's cement industry has adopted "retrenchment" as the key management word for next year and initiated aggressive cost-cutting measures. Recently, as the soaring exchange rate has pushed up coal prices, while the downstream construction industry is still in a long-term downturn, the Korean cement industry is under great pressure. In addition, rising industrial electricity prices (about 30% of production costs) and stricter environmental regulations have made the cement industry worse, and companies must strengthen cost management. Some companies are even seeking to diversify their revenue by strengthening new businesses that have nothing to do with construction.
It is reported that major cement manufacturers in South Korea have developed business plans for next year in line with the emergency management agreement. Ssangyong Cement forecasts that domestic demand will fall below 42 million tons next year and plans to reduce costs by increasing the use of alternative fuels. Chengxin Cement is more pessimistic about demand, predicting that domestic cement demand will fall below 40 million tons next year. The push by
big cement companies to use alternative fuels is closely linked to the recent surge in the exchange rate. Limestone, as the main raw material for cement production, has to withstand the high temperature of 1450 ℃ to 2000 ℃ in order to exert its bonding properties. In this process, fossil fuels such as bituminous coal or alternative fuels such as waste plastics and ethylene are used. Because South Korea relies heavily on imports of coal, fuel costs are highly sensitive to currency fluctuations. The relevant alternative fuels, although less affected by exchange rate changes, require an upfront investment in specialized facilities, which incurs additional costs.
Sampyo Cement's parent company, Sampyo Group, is actively seeking to diversify across industries. With a long-term slowdown in construction growth, the company is diversifying its revenue by developing new businesses unrelated to construction. Sampyo Group expands its robotic parking business through its subsidiaries. In addition, the group is exploring plans to develop a mixed-use real estate complex using the site of its ready-mix concrete plant at Holy Water Cave. The representative of the group said, "The cement industry is heavily dependent on domestic demand, so it is essential to enter new industries.". Next year, we plan to actively expand our real estate development and robotic parking business. In the
third quarter of this year, the performance of major cement companies in South Korea declined at the same time. According to the financial report, the sales of Hanyi Cement in the third quarter dropped to 389.4 billion won, a year-on-year decrease of about 8.3%; the sales of Asia Cement and Sanbao Cement dropped to 246 billion won and 172.3 billion won respectively, a year-on-year decrease of 14.7% and 5.3% respectively. Although the sales of Chengxin Cement increased slightly, its operating profit also declined. These changes are mainly due to the sluggish downstream demand and the sharp increase in industrial electricity prices. "Even in the traditional peak season of the third quarter, cement shipments have fallen sharply, which may lead to the lowest level of cement shipments in the past decade,"
the Korea Cement Association said. In addition, policy variables such as stricter environmental regulations also cast a shadow on the prospects of the cement industry next year.
