South Korea's cement sales fell by 12%, but the price was high and strong
. In the first half of the year, South Korea's cement shipments reached 22.84 million tons, down 12% year-on-year, and its output was 22.74 million tons, down 12.6% year-on-year. As far as the decline is concerned, the decline in demand for cement in Korea is comparable to that in China. South Korea's domestic import and export volume is relatively small, exports do not have any price advantage, shipments are basically equal to the total domestic consumption. Since the beginning of
this year, the domestic construction market in Korea has been in a downturn, and the decline in cement demand in the second quarter is more obvious than that in the first quarter, showing the characteristics of a low peak season. Cement output in the first quarter was 10.49 million tons, down 10.56% year-on-year, and 12.25 million tons in the second quarter, down 14.36% year-on-year. In the first half of the year, South Korea's construction permit area fell 18.7% year-on-year, and construction orders also fell 8.6% year-on-year. According to the forecast of Korea Cement Association, the declining trend of cement demand will continue in the second half of the year, and the annual cement output is expected to drop to 40 million tons.
Figure 1: Korea's quarterly cement production
in the first half of 2023-2024 Source: https://data.ccement.com/
Despite the sharp decline in domestic cement demand in Korea and the decline in the price of bituminous coal, one of the main costs of cement ( From the second half of 2022 to June this year, the total price dropped by 63%), but the Korean cement industry believes that the rise in electricity prices will continue to increase the cost of cement, while labor costs are still at a high level, cement prices in the first half of the year are still difficult to fall, and still maintain a high level of operation. South Korean cement companies have made it clear that they maintain strong prices in order to overcome the decline in efficiency. However, due to the decline in demand, it is difficult for cement enterprises to achieve price increases, and cement prices are expected to remain relatively stable in the second half of the year. At present, the price of Korean cement is maintained around 118000 won/ton (equivalent to 630 yuan/ton). The Building Materials Industry Association has repeatedly asked the cement industry to lower prices, but there is still no final conclusion. Due to shrinking demand, the operating rate of Korean cement enterprises declined sharply in the first half of the year, and some domestic enterprises have considered stopping production in the second half of the year to cope with the pressure of rising inventory and declining demand.
Figure 2: Korean cement price trend
Data source: https://data.ccement.com/
Domestic prices should be restored to a reasonable level The next step is to increase the concentration
of South Korea's cement production capacity, which has been maintained at about 62 million tons for many years. This year, the utilization rate of domestic cement production capacity is less than 65%, and there is also a situation of overcapacity. Compared with South Korea, China's cement capacity utilization rate this year is expected to be only about 52%, which is more severe than South Korea's surplus. In terms of clinker, there are 10 clinker kilns and only 9 enterprises in Korea, with a total clinker production capacity of 61.474 million tons. Sampyo, Ssangyong and Hanil are the top three cement enterprises in Korea, accounting for more than 50% of domestic clinker production capacity. At present, there are more than 1500 clinker kilns in China, with more than 400 kiln enterprises, and the concentration of clinker production capacity of the top three enterprises is less than 40%.
Table 1: Comparison
of production capacity data between China and South Korea Source: https://data.ccement.com/
Compared with South Korea, whether it is C3 or C10 , The concentration of clinker production capacity in China is much lower than that in South Korea, and the number of cement enterprises is more. It is precisely because of the high concentration and the business philosophy of enterprises that the price of cement in Korea is still at a high level. In contrast, in the first half of the year, China's building materials industry (non-metallic mineral products industry) realized a profit of 85.23 billion yuan, with a loss rate of 34%. Compared with the building materials industry, the cement industry lost 1.1 billion yuan, accounting for about 20% of the total assets of the building materials industry, but did not achieve due profits. In the face of the same macroeconomic external pressure environment, the cement industry has seriously dragged down the building materials industry, one of the core reasons is that the concentration is not enough, which is also the root cause of the increasing difficulty of peak staggering. The initiative of one or two leading enterprises to reduce production and inventory has been difficult to reverse the depressed prices, and it must be as effective as the collective reduction of production in some markets, which requires a high degree of mutual trust among enterprises. Since 2018, the domestic CR10 capacity concentration is basically in a stagnant state, which will bring greater internal contradictions in the industry, which is very unfavorable to the future development. Next, the industry should explore various ways to improve the concentration as soon as possible. Through the promotion of concentration and the change of business philosophy, the industry can fundamentally move towards the normal development track.
