From February, Cement Prices to Rise 18% "Limit Reached on Absorbing Cost Increases"

Ssyangyong C&E is producing cement at the Donghae plant.
[Photo by Ssyangyong C&E].

[Asia Economy Reporter Kim Jong-hwa] Cement prices will increase by 18% starting next month. The cement industry stated that "it is no longer possible to bear the sharp rise in raw material prices such as thermal coal and urea solution" as the reason for the price hike.

According to the industry on the 4th, Ssangyong C&E, the number one cement company, decided to raise the price of Type 1 bulk cement from 78,800 KRW per ton to 93,000 KRW per ton, an 18% increase, starting in February. This comes just seven months after a 5.1% price increase in July last year, the first in seven years.

Halla Cement will also raise prices by 18% starting on the 25th of this month, and Seongsin Yanghoe, Hanil Cement, and Sampyo are also planning to increase prices. Since the pricing methods are not significantly different among companies, the rate of increase is expected to be similar across the board.

According to the cost increase factor analysis derived by the cement industry, thermal coal, which was traded at an average of around 70 USD per ton, exceeded 220 USD in October last year and is still trading at over 200 USD, resulting in a cost increase factor of 7,500 KRW per ton due to the rise in thermal coal prices.

Additionally, the price of urea solution, used to reduce nitrogen oxide emissions, has surged to 500,000 KRW since the urea solution shortage in November last year, which is 3.2 times higher than the first half of last year (142,000 KRW per ton). The usage is also expected to increase about fivefold in 2024 compared to 2020. Therefore, the cost burden from urea solution alone amounts to 5,100 KRW per ton.

Wage increases have also been reflected in the cost rise. Since 2014, the cumulative minimum wage increase rate has reached 66.5%, and the total cement price increase amounts to 19,300 KRW.

The price hike in the cement industry had already been anticipated. At the end of last year, despite the fact that cement prices of nine Japanese cement companies were significantly higher than those of domestic companies, foreign media reported that Japanese cement prices would increase by 20% (about 20,000 to 24,000 KRW) starting in January. Following this, the industry began analyzing cost increase factors and has been considering an appropriate rate of increase.

A cement industry official said, "We are not asking the demand sector to bear all the cost increase factors. We will bear the increases in labor costs, but we ask that only the increases in raw materials and fuel be reflected," adding, "Please understand that we can no longer endure the cost increase factors."

Meanwhile, the cement price increase is expected to lead to a rise in prices of related construction materials such as ready-mixed concrete, and an inevitable increase in apartment construction costs and sale prices.