Cement industry concerned about significant decrease in demand this year due to real estate slump’

Domestic cement companies, which recorded good results last year thanks to the increase in cement prices, stabilization of nuclear ash prices and growth in demand, predict that this year's outlook will not be good. That's because it's been difficult to do well two years in a row because of poor construction economics and the increased costs of investing in green facilities.

Cement distribution base in Uiwang-si, Gyeonggi-do. /News 1:

◇Increase in sales and operating profit… Impact of price increases and stabilization of atomic ash prices.

Hanil Cement's sales (on a consolidated basis) rose 21% from 1.4876 trillion won in 2022 to 1.8007 trillion won last year, according to the Financial Supervisory Service's electronic disclosure system on the 22nd. Sales of industry leader Ssangyong C&E rose nearly 10% over the same period, from KRW 1.7059 trillion to KRW 1.8694 trillion. Asia Cement rose 15.4% from KRW 1.0401 trillion to KRW 1.2005 trillion, and Sungshin Cement rose 8% from KRW 1.0304 trillion to KRW 1.1133 trillion : Sampyo Cement also rose 14.2% to 823.7 billion won from 721.1 billion won.

Year-on-year operating profit also increased for all companies except Ssangyong C&E. Sungshin Cement grew by 3,899.3% (KRW 1.8 billion → KRW 73.3 billion) and Hanil Cement also more than doubled by 109% (KRW 118 billion → KRW 246.6 billion ). Next, Asia Cement grew by 24.5% (KRW 118 billion → KRW 146.9 billion) and Sampyo Cement grew by 19.13% (KRW 71.1 billion → KRW 84.7 billion ). Ssangyong C&E's operating profit alone fell 4.1% from 192 billion won in 2022 to 184.1 billion won last year.

This good performance is due to the increase in cement prices by cement companies at the end of last year. Cement prices exceeded 110,000 won per ton due to an additional increase for the first time in a year last November. Cement prices have soared by nearly 50% as they have gone up four times in the last two years.

Stabilization of raw material prices also played a role. The price of bituminous coal, which accounts for 30-40% of the cost of cement, rose to $400 a tonne in 2022 as a result of the war between Russia and Ukraine, but has stabilized at around $100. last year.

Ready-mixed concrete factory. The photo has nothing to do with the content of the article / News 1

◇ Industry and experts… “It's hard to perform well this year”

Unlike last year, the cement industry predicts that the outlook for this year will not be good. This is because production is expected to decline due to the real estate downturn. The large-scale investment in building environmentally friendly buildings is also a factor of long-term concern.

An official of the cement industry said: “Construction is currently at a standstill, so even if we produce cement, it is not being used on construction sites, so the outlook is really bleak.” He added: “There is a possibility, there are additional price increases in the future, but we are not saying that we are the only ones who will buy by raising prices again right now. “It's the same,” he said.

Another cement industry official said. “Once the ongoing construction of the green facility begins in earnest, the post-completion costs and operating costs will be enormous, amounting to a projected loss.” He added: “Because recently questions have arisen. talking about the efficiency of this eco-friendly facility, it's a long-term concern.” “There are many situations,” he said.

The outlook for the related ready-mixed concrete industry is also similar. “As we set conservative management goals for this year, the outlook is not good. Since cement makes up 40-50% of the cost of ready-made concrete, we have to: “I'm concerned about whether most of the ready-mixed concrete industry will be able to survive,” he said.

The same goes for expert predictions. Hana Securities researcher Kim Seung-joon says: “It is difficult to predict the direction of sales and operating profit as production is expected to decrease and there is a base effect of rising electricity costs,” but added: “However. It is expected that the decline in production will increase, so it will be difficult to register good indicators at the level of the fourth quarter.

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