The recent acquisition of Daehan by South Korea 's Ssangyong Cement looks like a deep shake-up in the Korean cement industry, but in fact both companies are owned by Hahn & & Company, so we can say that this is more like an adjustment of the internal structure of the enterprise. However, this adjustment did take place after a series of mergers in the Korean cement industry, Hanil Cement acquired Hyundai Cement (Hyundai) in the first half of 2017, and Lafarge Holcim's Halla Cement (Halla) was acquired by a Korean investment company in 2016. Tongyang Cement was acquired by Sampyo Group in 2015.
The acquisition of Shuanglong Cement was interpreted by the local media as further consolidating and strengthening its dominant position in the market. Before the acquisition of Hyundai Cement, Shuanglong Cement was the leader in the local market, with a total cement production capacity of 15 million tons per year, accounting for about 20% of the market share. Since then, Hanil Cement has acquired Hyundai Cement, which has increased its cement production capacity from 7 million tons per year to more than 15 million tons per year. However, after the completion of the transaction between Ssangyong Cement and Korea Cement, Ssangyong Cement will once again achieve the leading position in the market.
In the local cement industry in Korea, the number of grinding stations is larger than that of integrated cement plants. According to the statistics of Korea Cement Association, there were 23 grinding stations and 12 integrated cement plants in Korea in 2015. This proportion of grinding stations and integrated cement plants is similar to that of some developed countries, such as Australia and Chile, which also have a large number of grinding stations and fewer integrated cement plants. South Korea's steel industry has been hovering at 7 million tons per year since 2014, ranking tenth in the world. About 13.9 million tons of blast furnace slag were produced in 2015, most of which was used as cement supplement material to grind cement or mix concrete, Sunghee Han of POSCO said at the 2016 Global Standard Chartered Conference. The size of the slag market also highlights the value of Korea Cement, as it is a major producer of slag cement in Korea. Another prominent feature of Korean cement industry is that there are a few super-large-scale clinker production plants in Korea, and their single production capacity has exceeded 7 million tons per year.
In addition, South Korea imports very little clinker. Compared to clinker, South Korea is the fifth largest importer of limestone in the world. This is due to the scarcity of limestone in South Korea, with a production value of 34 million US dollars. At present, its limestone mainly comes from the United Arab Emirates, Japan, India, Malaysia, and Vietnam. In addition, South Korea has the world's largest single conveyor, which is 12 kilometers long, connecting a limestone mine of Ssangyong Cement and its Donghae Cement Plant.
Figure 1: Cement production and consumption in Korea, 2010-2016
Data source: Korea Cement Association, China Cement Research Institute
Acquisitions in the Korean market in recent weeks are different from those in the European market, and the changes in the structure of the Korean cement market do not seem to have promoted large-scale mergers and reorganizations in the Korean cement industry. As shown in fig. 1. Cement production and consumption in South Korea began to decline in 2010, but rebounded again since 2013. South Korea's economy has slowed since 2010, and market regulations have been relaxed, but this has led to mergers and acquisitions. In early 2016, the KFTC fined six of South Korea's seven major cement producers $168 million for alleged joint price-fixing. Large-scale merger and reorganization may lead to market manipulation, which may be the main reason why there is no large-scale merger and reorganization in Korean cement industry at present.
But for private equity firms, it is widely expected that they will exit after short-term profits, so the cement market in Korea is expected to change greatly in the next few years. There is no doubt that South Korea's market regulators will closely monitor these actions to see how the market evolves.
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