Cement Price Additional Increase Proposed... 'Cement vs. Remicon and Construction' Conflict Intensifies

Ready-mix Concrete and Construction "Demand Disclosure of Cost Increase Factors Including Use of Some Russian Coal"
Cement "Request to Reveal Trade Secrets, Counter with Disclosure of Ready-mix Concrete Cement Mix Ratios"

A cement plant is operating a kiln to produce clinker, which is the stage before the final product that becomes cement when finely ground.
[Photo by Asia Economy DB]

[Asia Economy Reporter Kim Jong-hwa] As the cement industry is pushing for the second cement price increase this year, tensions are rising between the cement industry and the ready-mixed concrete (Remicon) and construction sectors. While the Remicon and construction industries are opposing the additional price hike, demanding "transparent disclosure of cost increase factors," the cement industry has countered by demanding "disclosure of cement mix ratios at construction sites."

The Korea Construction Materials Council (KCMC) held a "Joint Emergency Countermeasure Meeting on Cement Companies' Additional Price Increase" on the 4th, attended by major construction companies such as Hyundai Engineering & Construction and DL E&C, Remicon companies without cement affiliates, and representatives from the metropolitan area and Busan Remicon sectors, agreeing to jointly respond to the push for additional cement price increases.

The KCMC stated, "We accepted the cement companies' price hike proposal earlier this year due to the significant rise in bituminous coal prices, but it is hard to accept the unilateral notification of an additional increase in less than four months," and pressured the cement industry by saying, "We understand that the actual purchase price of bituminous coal by cement companies is lower than the market price, and some are using low-priced Russian bituminous coal."

The KCMC also demanded detailed and transparent disclosure of various cost increase factors, including the actual purchase prices of key raw materials such as bituminous coal, and maritime and land transportation costs before any price increase.

In response, a cement industry official said, "Requesting disclosure of cost increase factors is tantamount to asking for trade secrets," and countered, "If so, shouldn't the Remicon and construction industries also disclose the cement mix ratios and various material costs at construction sites?"

Nevertheless, both sides seem to want to avoid further escalation of the controversy. A cement company official said, "Even if only Russian bituminous coal was used, an additional price increase is inevitable due to the difficult situation. If only Australian coal was used, the additional price increase rate would exceed 30%," adding, "Cement companies also find pushing for additional price hikes burdensome, so they have no choice but to seek understanding."

A senior official from a major Remicon company also said, "When cement prices rise, Remicon prices must also increase, but since this affects housing construction costs and sale prices, it is not easy to demand a price hike," and confessed, "Although there is talk of joint action, it seems unrealistic. Ultimately, we are in a position where we have to ask construction companies to raise prices, which is frustrating."

Despite opposition from Remicon and construction companies, an additional cement price increase in September appears inevitable. Hanil Cement sent a notice on the 3rd to Remicon companies and others that from the 1st of next month, cement prices will increase by about 15%, from the current 92,200 KRW per ton to 106,000 KRW per ton. Earlier, Sampyo Cement also notified Remicon companies that cement prices would rise by 11.7%, from 94,000 KRW per ton to 105,000 KRW per ton. Ssangyong C&E, Sungshin Cement, Asia Cement, and Halla Cement are also expected to announce price increases soon.

Cement companies raised prices by 5.1% last July, from 75,000 KRW per ton to 78,800 KRW per ton, and again by about 15% in February this year. If this third increase goes through, cement prices will exceed 100,000 KRW per ton.

The cement industry insists that the additional price increase is unavoidable due to the surge in bituminous coal prices, which account for about 40% of cement production costs. Bituminous coal prices soared from an average of 137 USD per ton last year (based on Australian Newcastle 6000 kcal/t) to 414 USD per ton as of the 2nd of this month, more than tripling. The won-dollar exchange rate also rose from 1,190 KRW at the end of last year to 1,304 KRW as of the 1st, increasing the actual cost burden felt by cement companies.

Rising transportation and logistics costs due to the Cargo Solidarity Union strike, as well as increases in electricity costs and interest rates, have also contributed to cost increases. The cement industry's severe business performance is another factor driving the additional price hike. Ssangyong C&E's sales in the first half reached 862.556 billion KRW, up 14.6% from the same period last year, but operating profit fell 53.2% to 52.494 billion KRW. Although sales increased reflecting the February price hike, performance worsened due to a serious industrial accident.

A cement industry official said, "Even if prices rise, the cost increases make it a tough situation. This can be understood by comparing the performance of the Remicon and cement industries," adding, "If we cannot raise prices further, some companies may actually have to stop production, which is an extreme situation."

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