Due to Safe Freight Rate Increase, '30 Billion' Cost Bomb... Cement Industry Says "IMF-Level Crisis"

BCT Next Week Safe Freight Rate Increased by 8.97%... "Increase Factors and Calculation Basis Both Unacceptable"

Panoramic view of Hanil Cement Danyang Plant. The photo is unrelated to specific expressions in the article. Photo by Asia Economy DB

[Asia Economy Reporter Lee Junhyung] The cement industry, struggling due to the aftermath of the novel coronavirus infection (COVID-19) and a downturn in the construction market, will bear an additional cost of approximately 30 billion KRW due to the increase in the safety freight rates for cargo trucks. Already suffering from a decline in domestic cement demand and an environmental regulation cost burden of around 180 billion KRW, the cement industry is unable to hide its bewilderment over this increase.

The Korea Cement Association issued a statement on the 28th, opposing the increase in cargo truck safety freight rates, saying, "We cannot accept either the reasons for the increase or the basis for its calculation." On the 26th, the Ministry of Land, Infrastructure and Transport's Cargo Truck Safety Freight Committee announced an 8.97% increase in this year's safety freight rate for bulk cement trailer (BCT) owners, classified as individual business operators (based on general cement).

According to the industry, the additional logistics cost burden on the cement industry due to this increase amounts to about 30 billion KRW. Compared to logistics costs before the implementation of the safety freight system in 2019, this is an increase of about 60 billion KRW over two years. The Korea Cement Association pointed out, "An additional surcharge of 20% each is applied for mortar, a secondary cement product, and for transportation on rough roads," adding, "With a maximum 40% increase, the total safety freight cost will require an additional burden of about 40 billion KRW this year alone."

Domestic cement performance over the past 5 years.
[Photo by Korea Cement Association]

The cement industry states that the increase in safety freight rates adds to the already difficult situation. In fact, the construction industry has experienced continuous downturns over the past five years due to persistent construction market slumps and poor social overhead capital (SOC) investment, with provisional domestic demand last year falling about 18% compared to 2016.

Cost increases are also a significant burden. The price of cement is about 62,000 KRW per ton, which has not changed much in over 20 years. However, cement companies must bear expanded investments of around 180 billion KRW due to strengthened government environmental regulations such as nitrogen oxide emission charges, as well as the cost of purchasing greenhouse gas emission permits (expected to be 30,000 KRW per ton this year), which amounts to about half the price of cement.

The Korea Cement Association pointed out, "The biggest problem with the safety freight system is its representativeness." They added, "The safety freight system is a law designed to guarantee appropriate freight rates to cargo truck owners to prevent overwork, overloading, and speeding. Among the 400,000 commercial cargo trucks nationwide, BCT vehicles account for only about 2,700 units, less than 1%." The safety freight system was introduced as a three-year sunset system from last year to 2022 due to concerns about market disruption at the time of its introduction.

A Korea Cement Association official said, "It is absurd to use BCT vehicles, which are only a tiny fraction of commercial cargo trucks, as a barometer necessary for the future operation of the safety freight system," adding, "It is obvious that this will only cause confusion on the ground." They also stated, "Although the cement industry boycotted the vote on this increase, we cannot accept the unilaterally made decision," emphasizing, "With the end of the sunset system, BCT vehicles must be excluded from the safety freight system application."

This content was produced with the assistance of AI translation services.