First Half Production Decreased by About 13% Compared to the Same Period Last Year
Inventory Increased by About 16% Due to Shipment Decline
The cement industry is facing difficulties as the construction market continues to slump. Domestic cement production and shipments decreased in the first half of the year, but inventories surged sharply, leading to concerns about potential shutdowns of production facilities.
According to the Korea Cement Association on the 11th, production in the first half of the year recorded 22.74 million tons, down about 13% compared to the same period last year. Shipments during the same period were about 22.84 million tons, a decrease of approximately 12%. On the other hand, inventories increased by about 16% due to the decline in shipments.
If this trend continues, it is forecasted that shipments could fall to around 40 million tons within 2 to 3 years. An industry insider stated, “An annual shipment volume of 40 million tons is an unprecedented situation not even experienced during the 1997 financial crisis,” adding, “Some companies are reportedly even considering partial shutdowns of facilities to adjust production soon.” Along with this, there are cases where emergency management measures such as internal cost-cutting are being declared.
Although key leading indicators for construction have entered a recovery phase, it is expected to take more than a year for this to translate into full-fledged cement demand, raising concerns that a full-scale downturn has not yet begun. An association official pointed out, “According to the Monthly Construction Economic Trends (June) report released by the Construction Association on the 8th, building starts, a coincident indicator of construction, increased by 6.1% (January to June) due to the government’s active economic stimulus efforts, increased finishing works, and a base effect from last year’s sluggish construction market. However, the leading indicator, building permit area, decreased by 18.7% in the first half compared to the previous year, and construction orders also fell by 8.6%, making it difficult to be optimistic about construction market recovery based on building starts alone.”
Furthermore, although construction orders in June increased by 15.4% compared to the same month last year, a detailed look reveals that this was thanks to strong public sector orders such as ports and airports (342.6%) and railroads and tracks (108.5%). In this regard, an association official said, “New housing orders in the private sector, which is crucial for domestic cement demand such as apartments, decreased by 50.2%, making it premature to judge this as a recovery.”
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