[Planning]⑥ The Wounds of the IMF and Cement Awakening to Eco-Friendliness

History of the Cement Industry in Korea

Ssangyong Cement, hit by the IMF crisis, suspended operations of some production facilities at its Donghae and Yeongwol plants due to a sharp decline in demand. The photo shows the Donghae plant of Ssangyong Cement in the late 1990s. Photo by Korea Cement Association

[Asia Economy Reporter Kim Jonghwa]South Korea is the world's 12th largest cement producer with an annual production capacity of over 60 million tons. In terms of cement technology, it has been recognized as an advanced cement country, exporting production technology overseas since the 1980s. However, the public is not fully aware of the status of Korea's cement industry. Although it played a key role as a national infrastructure industry during the economic development period of the 1960s and 70s, it became stigmatized as a polluting industry damaging the environment in the 2000s, causing it to fall out of public interest. Recently, the cement industry is undergoing a transition to an eco-friendly industry. This series of 10 articles reexamines the history of Korea's cement industry, which is transforming from an ugly duckling into a swan.[Editor's note]

As many construction companies went bankrupt, leading to a sharp decline in demand, cement demand in the first half of 1998 was 21.5 million tons domestically and 1.06 million tons in exports, totaling 22.56 million tons, a 25% decrease compared to 29.86 million tons during the same period last year.

This was a period of hardship so severe that it was even more contracted than the previous record largest demand drop of 17% during the second oil shock in 1980. Operating rates fell below 60%, and due to the rising exchange rate, import prices of main and auxiliary raw materials such as bituminous coal increased, significantly raising manufacturing costs and logistics expenses, severely worsening profitability.

The industry took measures to improve its structure and enhance competitiveness through strong restructuring. By reducing organization and personnel, the number of employees in seven domestic cement companies decreased by 18.5% to 8,665 by the end of 1998 compared to the previous year. Wage freezes and bonus cuts were implemented, and efforts were made to strengthen corporate financial structures through real estate and asset sales. Production efficiency was improved by suspending or replacing low-efficiency facilities.

Amid the International Monetary Fund (IMF) foreign exchange crisis, the cement industry, which was hit hard, saw the full-scale inflow of foreign capital begin. Ssangyong Cement introduced $350 million in foreign capital from Japan's Taiheiyo Cement in 2000 to improve its financial structure, escaping liquidity crisis. At that time, as Ssangyong Cement's management rights transferred from former Chairman Kim Seok-won to Taiheiyo Cement, the history of the Ssangyong Group effectively came to an end.

A view of the Lafarge Hanla Cement Gwangyang Slag Plant after being acquired by the French global company Lafarge.
[Photo by Korea Cement Association]

In the same year, Lafarge Group, a global French multinational employing about 66,000 people in over 60 countries with annual sales of 13 trillion won, acquired Halla Cement for $200 million.

Dongyang Major (formerly Dongyang Cement) also attracted $100 million in foreign capital from Lafarge Group in 2001. As a result, foreign capital acquired more than 60% of the total shares in the cement industry, marking a new phase for the industry's future direction.

Although the industry succeeded in overcoming the IMF foreign exchange crisis in the 2000s, the overall construction downturn led to overcapacity of production facilities expanded in the mid-1990s. This intensified price competition that disrupted market order among companies, leaving the future of the cement industry still uncertain.

A notable change in the cement industry in the 2000s was the full-scale adoption of production methods that partially replaced some raw materials and fuels with recyclable waste (circular resources).

The cement industry, which had already started mixing slag, a byproduct from the steel industry, with cement to produce slag cement in the 1980s, began to gain attention in the 1990s as a solution to the disposal problem of waste tires, which increased significantly with the rise in automobile ownership.

Dongyang Cement undertook a major construction project to eliminate pollution by installing a conveyor belt extending an impressive 6.7 km, completely isolating it from the outside environment.
[Photo by Korea Cement Association]

Tires naturally take 80 years to decompose, and since disposal methods were not regulated, illegal incineration caused serious pollution problems. Additionally, many tires were discarded in vacant lots in residential areas and on roadside hills, damaging the landscape.

In 1994, the three major domestic tire manufacturers?Kumho, Hankook Tire, and Woosung Industrial?proposed to the government that the cement industry be allowed to use waste tires as fuel to address disposal issues. As the cement industry began using waste tires as fuel, the social problem quickly subsided.

A representative from the Korea Cement Association said, "We started replacing clay raw materials by using coal ash left after burning bituminous coal and recycling combustible waste such as waste plastics as fuel instead of bituminous coal," adding, "As a result, the cement industry entered a full-fledged transition to an eco-friendly industry and began to be expected to play a key role in building a future resource-circulating society."