Will the Spring Construction Sites Come to a Complete Halt Due to the Material Shortage Crisis?

Russian soft coal supply decreases, cement stock only 3 days' worth
Delayed construction demand intensifies, production increase insufficient
Yangju quarry accident halts work, high-quality aggregate also in short supply

A construction site of an apartment in Gyeonggi-do where construction has been halted./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Jong-hwa] The construction sites are facing a severe shortage of materials. With cement stocks depleted and aggregate supply reduced due to quarry shutdowns, the ready-mixed concrete industry is crying out in distress. Construction sites, threatened with work stoppages due to lack of materials, are already in a state of panic.

According to industry sources on the 17th, domestic cement inventory stands at 650,000 tons, enough for only three days. Daily shipment volume is 200,000 tons, and the appropriate cement stock level is 1.2 million tons. This is 90,000 tons less than the unprecedented supply crisis in March last year (740,000 tons), when construction sites came to a halt.

Cement Inventory Depleted

The cement industry increased supply last year during the supply crisis by advancing major maintenance schedules at some companies. The cement industry conducts a "winter major maintenance" from early January to early April every year. Some kilns, which have accumulated fatigue from 365-day operation, are shut down, and each company carries out about 80 days of kiln maintenance along with eco-friendly equipment replacement. This year, the maintenance period was moved up to early March to operate kilns earlier than scheduled and increase production.

However, there is no such leeway this year. Due to Russia's invasion of Ukraine, the supply of Russian thermal coal, which accounts for 70% dependency, has sharply declined. Without thermal coal, cement cannot be produced, and soaring thermal coal prices have pushed producers into losses the more they produce. As of the 15th, high-quality thermal coal (6,000 kcal/kg standard) at Newcastle Port, Australia, is trading at $351.69 per ton. Although this is down from $427.50 per ton on the 7th, it is about 2.6 times higher than last year's average price of $137.

Despite this, cement companies are running kilns at full capacity to increase production. Ssangyong C&E, which holds a 23% share of the domestic cement market, has increased its daily average production by 2,000 to 3,000 tons (5-7%) compared to March last year (about 40,000 tons). Hanil and Hanil Hyundai Cement also increased production by about 10% during the same period, and Sungshin Cement and Halla Cement have increased production by about 5%. Even with increased production, shipments are immediate, so inventory is not accumulating.

An industry insider said, "As spring arrives, postponed construction demand is picking up, so even with increased production, demand cannot be met," adding, "In April, some factories may have to halt operations due to lack of thermal coal inventory."

Heavy machinery is halted and stopped at the Sampyo Industrial Yangju Quarry in Eunhyeon-myeon, Yangju-si, Gyeonggi-do.
[Photo by Yonhap News]

Searching Nationwide for Aggregate

Aggregate is also problematic. Since the fatal accident at Sampyo Industrial's Yangju quarry in January, aggregate extraction has stopped, causing an aggregate shortage in Seoul and the metropolitan area. The Yangju quarry produces 18,000 cubic meters of aggregate daily, supplying about 20% of the aggregate demand for downtown Seoul and northern Gyeonggi Province.

According to the ready-mixed concrete industry, the Yangju quarry is the only one in the metropolitan area producing 20mm aggregate, which has finer particles and better fluidity than the typical 25mm aggregate used in general concrete, making it suitable for high-rise apartments and building construction.

A ready-mixed concrete industry official said, "Aggregate is the most important factor determining concrete quality. Since the Gwangju I-Park accident, the importance of high-quality aggregate has increased," adding, "Especially ready-mixed concrete companies and construction firms that prefer high-quality quarry aggregate are running nationwide in search of aggregate as they cannot receive high-quality aggregate supply from the Yangju quarry."

Aggregate prices have also risen. Following cement price hikes, metropolitan area aggregate suppliers have notified the ready-mixed concrete industry that from this month, due to raw material price increases, aggregate prices will rise from an average of 13,500 KRW per cubic meter (gravel) to 14,000 KRW (sand) to 14,450 KRW (gravel, 7%) to 15,400 KRW (sand, 10%). The price increase is expected to be reflected in aggregate prices from the end of this month.

Another ready-mixed concrete industry official expressed frustration, saying, "The aftershocks of various regulations such as the Serious Accident Punishment Act are intensifying, causing damage to related industries, but the government is standing idly by," adding, "While it is natural for the parties involved to be punished, neglecting to provide any measures for the damage to related industries for nearly two months is a serious dereliction of duty."

A construction industry insider said, "Cement, aggregate, and ready-mixed concrete supply are unstable, especially in the metropolitan area. If this continues, all construction sites could come to a complete stop," emphasizing, "The government must actively intervene and resolve the situation before it escalates into a serious crisis."

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