[Cement·Remicon Crisis] Struggling with Transportation Costs, Construction Companies Stand Firm... Internal and External Challenges for Remicon

[Planning] Crisis in Cement and Remicon Industries
Extension of Truck New Registration Restrictions, License Plates Cost 25 Million Won
Unilateral 40-Hour Workweek and Collective Action by Transport Operators
"Only 5% of Construction Industry Accepts Increase, Minimum Profit Guarantee Not Met"

Ready-mix concrete mixer truck. [Photo by Asia Economy DB]

③ Labor Union 'Stubbornness' Amid Carbon Neutrality... Compounding Adversities in the Ready-Mix Concrete Industry

[Asia Economy Reporter Kim Jong-hwa] On July 22, the ready-mix concrete (Remicon) industry was thrown into panic when the long-standing demand for an increase in Remicon vehicle quotas was rejected. The Ministry of Land, Infrastructure and Transport, which had blocked new registrations of Remicon concrete mixer trucks (mixer trucks) for 12 years, decided at the Construction Machinery Supply Adjustment Committee meeting held after two years to extend the restriction period on new registrations by another two years.

Despite the steady growth of about 21% in the Remicon industry, the chronic shortage of transportation means has caused the number of contracted (operating) mixer trucks per plant to sharply decline by 15.7%, making timely supply of Remicon to construction sites difficult. This has led not only the Remicon industry but also the construction industry, which has regarded on-schedule construction as a strict rule, to face the worst situation.

With the total number of mixer trucks limited, there is no way for new transport operators to enter the market unless existing users return their license plates. Currently, the price of mixer truck license plates varies by region but is traded at around 25 million KRW. Due to the guaranteed high income compared to other transport sectors, it is a reality that license plates are illegally traded with initial costs reaching several tens of millions of KRW, including yard fees (a form of key money or mutual aid fees, up to 20 million KRW).

Because of this, the government has been criticized for "having no intention to correct the tilted playing field from the start." An industry insider said, "The 12 years of regulation only raised the transportation fees for Remicon," and criticized, "The government has extended the interests of the vested interest groups (cartels) of Remicon transport operators for another two years." The insider added, "From the beginning, the government had no intention to correct the tilted playing field caused by transport operators who have invited industrial polarization and imbalance."

The industry claims, "With the entry of new Remicon transport operators blocked, existing operators have transformed into interest groups (cartels) that focus solely on their own profits rather than sharing the fruits of the Remicon industry's growth," adding, "This has created a bizarre phenomenon where the tail (transport operators) shakes the body (Remicon and construction industry) by creating permanent 40-hour workweek jobs without retirement age, but no one can control it."

The problem is that the collective actions of Remicon transport operators have intensified every year, and their demands have grown to the point of pressuring the management of the Remicon industry. The transport operators organized the National Remicon Transport Federation in 2012, introduced the 8.5-hour work system (08:00-17:00 partial operation) from January 2016, and unilaterally enforced the 40-hour workweek system from March this year without prior consultation with Remicon companies, causing frequent delays at construction sites due to transport refusals, according to the industry.

An industry official criticized, "Recently, the Korean Federation of Trade Unions and the Federation of Korean Trade Unions have competitively engaged in collective actions using transport monopoly rights as leverage, forcing rapid increases in transportation fees," adding, "They have pressured good-faith operators who do not join the transport refusal through illegal collective actions such as forced collection of proxy documents, destroying the healthy ecosystem of the construction industry by causing construction delays and reducing work for daily construction laborers."

The Remicon industry is currently suffering from internal and external difficulties as it fails to turn around management conditions due to issues with increasing mixer truck quotas, rising transportation costs, and differences in positions with the construction industry over cement price hikes, the raw material for Remicon. Inside the industry, there is dissatisfaction that while the cement industry's price increase was accepted, the construction industry did not pay the proper price. The Remicon industry considered an 8% increase as the limit, but the construction industry drew the line at 5%, leaving the Remicon industry unable to secure the minimum profits necessary for management, making business deterioration inevitable.

If the issues of increasing mixer truck quotas and rapid transportation cost hikes continue as they are next year, when the construction of the 3rd phase new towns is expected to accelerate, the Remicon industry's insolvency is likely to deepen. If the Remicon industry becomes insolvent, the construction and cement industries will also suffer simultaneously. This is because, beyond being different industries, the entire construction industry, including civil engineering and architecture, is linked as a value chain.

An industry insider said, "Especially the construction industry should remember the old saying 'If the lips are gone, the teeth feel cold' (순망치한, 脣亡齒寒)," adding, "It is a desirable phenomenon for building a healthy industrial development ecosystem to establish a collaborative and partnership position rather than a unilateral 'gap' position that forces concessions." This means that the cement and Remicon industries, as downstream industries, must be stabilized for the sustainable development of the construction industry.

The insider also urged transport operators to become aware of their situation. A Remicon industry official said, "They must realize that if they become insolvent and phased out due to cost pressures such as transportation fees, their jobs will also disappear," appealing, "The Remicon industry must advance toward high-tech solutions such as expanding eco-friendly Remicon certification and gradually introducing smart factories. At times like this, self-destructive moves only harm everyone."