[Cement·Ready-Mix Crisis] Construction Sites Come to a Complete Halt Even if Cement Production Pauses Briefly

[Planning] Cement and Remicon Industry in Crisis
To Reduce Greenhouse Gases, Production Must Decrease
Even Minimizing Disruptions Like Facility Expansion, Buying Carbon Credits Ultimately Means Loss

Panoramic view of Hanil Cement Danyang Plant. [Photo by Hanil Cement]

② Cement Cough Causes Pain in Ready-Mix Concrete and Construction Industries

[Asia Economy Reporter Kim Jong-hwa] The cement industry is linked in a value chain with the ready-mix concrete and construction industries. If cement production is delayed and supply is not timely, construction sites have no choice but to halt work. This means that the ready-mix concrete and construction sectors cannot simply stand by and watch the cement industry's carbon neutrality efforts as if it were someone else's problem.

Last March, some regional construction sites came to a halt as cement stockpiles dropped to only three days' worth. The cement industry typically maintains at least 60% of its storage capacity (2.1 million tons), or 1.26 million tons, as inventory. However, with the start of eco-friendly facility expansions and replacements, construction sites were impacted when inventory fell to 630,000 tons, which is 78% of the minimum stock level. Since daily shipments (200,000 tons) exceeded daily production (150,000 tons), the supply crisis lasted for about six months.

During that time, due to supply shortages, "same-day production, same-day shipment" continued for several months, and some factories witnessed the unusual sight of cement transport trucks lined up waiting to receive cement. If the cement industry reduces production to achieve carbon neutrality goals, such phenomena are bound to become commonplace.

In 2018, the baseline year for greenhouse gas reduction, domestic cement production and shipments were 52.1 million tons and 51.24 million tons, respectively. Since most greenhouse gas emissions in the cement industry come from process emissions (65% emitted during limestone decarbonation), reducing emissions by 50% by 2050 would simply require cutting cement production to half of 2018 levels, i.e., 26.05 million tons.

The problem is that halving production would cause confusion not only in the cement industry but also in the ready-mix concrete, construction, and related industries, making it a difficult option. The industry's current stance is to minimize production disruptions by introducing various reduction technologies, including expanding facility investments.

However, if the pace of technological development does not keep up with demand growth or if profits do not materialize, a production decrease seems inevitable. If the cement industry reduces production, supply crises at construction sites could recur at any time.

Even if cement demand increases, additional production is unlikely. Last year, the price of carbon emission permits was 30,239 KRW per ton, about 38% of the cement price (78,800 KRW per ton). Purchasing additional carbon permits to increase production is not financially viable for the cement industry. When adding electricity and logistics costs to the carbon permit purchase price, producing more cement results in losses. Ultimately, the cement industry may be forced to choose production cuts to meet carbon neutrality goals.

An industry insider said, "Since this is a global trend and government policy, we are doing our best to achieve carbon neutrality, but there are real difficulties," adding, "The carbon permit price is approaching 50% of the cement price. In the end, carbon reduction capability will determine production volume."

Would importing the shortfall of cement from overseas solve the problem? Although domestic cement prices rose 5.1% to 78,800 KRW per ton in July, they remain among the lowest worldwide. It is also impossible to fill the gap by importing from neighboring countries like China and Japan, where prices are higher. According to last year's KOTRA overseas market survey, the average cement price in 11 countries including the U.S. and Japan was 105,000 KRW per ton.

If major countries introduce carbon border taxes on products produced or imported from countries with higher CO2 emissions than their own, imports will become even more difficult. Considering expensive logistics and tariffs, it is better to use domestic cement than to import. Unless a cheap and high-quality new material that can replace cement is developed, the construction and ready-mix concrete industries cannot just watch the cement industry's challenges as if they were someone else's problem.

This is why Lee Hyun-jun, chairman of the Cement Association, urged at a meeting with members of the National Assembly's Carbon Neutrality Committee on the 27th of last month, saying, "The cement industry will continue to actively invest in facilities and conduct research and development (R&D) to establish additional reduction measures," while also requesting, "We ask for active industrial policies, financial support, and public interest and support so that the general public can properly understand the positive role of the cement industry."

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