Last Year's Strong Performance in the Cement Industry, What About This Year?

Analyzed as Benefiting from Last Year's Product Price Increase
This Year, Construction Market Is Weak
Costs of Investing in Eco-Friendly Facilities Also Burdensome

Major domestic cement companies recorded strong performances last year. This was thanks to factors such as product price increases, rising demand, and stabilization of thermal coal prices. However, the industry predicts that growth cannot be guaranteed this year due to a sluggish construction market and the financial burden of investing in eco-friendly facilities.

According to the Financial Supervisory Service's electronic disclosure system on the 22nd, Hanil Cement's sales (consolidated basis) increased by 21%, from KRW 1.4876 trillion in 2022 to KRW 1.8007 trillion last year. During the same period, Ssangyong C&E's sales rose from KRW 1.7059 trillion to KRW 1.8694 trillion, Asia Cement from KRW 1.0401 trillion to KRW 1.2005 trillion, Sungshin Cement from KRW 1.0304 trillion to KRW 1.1133 trillion, and Sampyo Cement from KRW 721.1 billion to KRW 823.7 billion.

Operating profits last year also increased compared to 2022, except for Ssangyong C&E. Hanil Cement's operating profit rose 109% from KRW 118 billion to KRW 246.6 billion, Asia Cement's from KRW 118 billion to KRW 146.9 billion (24.5%), Sungshin Cement's from KRW 1.8 billion to KRW 73.3 billion (3899.3%), and Sampyo Cement's from KRW 71.1 billion to KRW 84.7 billion (19.13%). Only Ssangyong C&E saw a 4.1% decrease in operating profit, from KRW 192 billion in 2022 to KRW 184.1 billion in 2023.

This performance reflects the effect of product price increases last year. Cement companies raised bulk cement prices by about 6-7% at the end of last year.

The increase in cement demand due to controversies over ‘poor construction’ occurring nationwide also positively impacted results. A representative from a cement company explained, "Following several incidents such as the underground parking lot collapse at an apartment complex in Geomdan, Incheon last year, the amount of cement used per unit area slightly increased. For example, technically, if previously 90% cement and 10% admixtures were used, some government-funded construction sites last year demanded 100% cement only, which increased the input volume."

The stabilization of thermal coal prices, which account for about 30% of cement production costs, also eased concerns. Thermal coal prices soared to the $400 range per ton in 2022 due to the Russia-Ukraine war but dropped to the $100 range last year.

However, the industry forecasts a bleak outlook for this year. The construction market is weak, with fewer housing sales by construction companies. According to housing statistics released by the Ministry of Land, Infrastructure and Transport on January 30, nationwide housing permits last year totaled 388,891 units, a 25.5% decrease compared to the previous year.

Massive costs are also expected for investments in eco-friendly facilities to comply with Ministry of Environment regulations. Cement companies must install Selective Catalytic Reduction (SCR) systems, which reduce pollutants, by 2027 according to the Ministry's policy. According to the Korea Cement Association, cement companies have invested over KRW 2 trillion in environmental facilities from 2019 through last year. It is estimated that operating costs alone for SCR installations will exceed KRW 700 billion annually. Ssangyong C&E has committed to large-scale investments in eco-friendly facilities aiming for coal phase-out by 2030. Another cement company representative said, "We must complete eco-friendly facilities within a few years, but since investment and operating costs exceed operating profits, the outlook for this year is not very positive."