Cement Industry Unable to Smile Despite 'Banjjak's Strong Q3 Performance

Analysis of Price Increase Effect in November Last Year
Shipment Volume Expected to Decrease in Q4

Major domestic cement companies recorded strong performance in the third quarter, but it is expected to be a 'temporary effect.'

A cement factory located on the outskirts of Seoul. Photo by Dongju Yoon doso7@

According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Ssangyong C&E reported consolidated third-quarter sales of 420.4 billion KRW and operating profit of 47.6 billion KRW. Sales increased by 4.2% year-on-year, and operating profit rose by 81.4%. Hanil (Hanil Hyundai) Cement's sales in the third quarter increased by 14% compared to the same period last year, and operating profit surged 2.8 times from 24.8 billion KRW to 69.6 billion KRW. Asia (Hanra) Cement also saw sales increase by 6.9% and operating profit by 22.5%. Sampyo Cement and Sungshin Cement also posted double-digit growth in operating profit.

The significant increase in operating profit in the cement industry is attributed to the price hike implemented in November last year. At that time, the industry raised the average cement price from 92,400 KRW per ton to 105,400 KRW per ton. The third quarter of last year did not reflect the price increase, resulting in a 'base effect.'

The rise in cement demand due to controversies over 'poor construction' across the country also contributed to the strong performance. A cement industry official said, "There was a prediction that demand would decrease this year due to a sluggish construction market, but as apartment collapse incidents continued, some places increased concrete strength, leading to a slight increase in cement demand and supporting volume."

The cement industry raised cement prices again in November to 112,000 KRW per ton, an increase of about 6%. However, the effect is expected to be offset by the rise in industrial electricity rates. From this month, industrial electricity rates will increase by an average of 10.6 KRW per kWh. Electricity costs typically account for 20-25% of cement manufacturing costs, but this increase is estimated to raise that share to 30%. Shipments are also expected to decline in the off-season fourth quarter.

The cement industry is focusing investments on carbon neutrality and environmental improvements. Ssangyong C&E plans to invest 800 billion KRW by 2030 to establish eco-friendly facilities. It will allocate 500 billion KRW for process improvements such as nitrogen oxide reduction, 140 billion KRW for fuel substitution and productivity enhancement, and 160 billion KRW for improving dust collector performance.

Other cement companies are in similar situations. A cement industry official said, "To comply with Ministry of Environment regulations, eco-friendly facilities must be established, which requires thousands of billions of KRW in facility investments and hundreds of billions of KRW annually in maintenance costs until stabilization. Considering these complex factors, there is a slight possibility that the favorable trend will continue until the fourth quarter, but the decline from next year is more concerning."

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