With the construction downturn continuing, domestic cement demand (shipments) plunged 16.5% from a year earlier. That is the lowest level in 34 years.
The Korea Cement Association said on the 11th that this year's domestic cement demand is expected to total 36.5 million tons, down 16.5% (7.21 million tons) from the same period a year earlier.
This year's domestic cement demand is the lowest since the domestic cement industry recorded 37.11 million tons in 1991. Domestic cement demand plunged to 44.61 million tons during the International Monetary Fund (IMF) foreign exchange crisis, then recovered to 56.71 million tons in 2017. But in just eight years, it has fallen by 20 million tons.
The sharp drop in domestic cement demand this year stems from a steep decline in construction orders, a key leading indicator, as well as decreases in coincident indicators such as construction starts and construction work done, which fell 12.8% and 18.1%, respectively, from the same period a year earlier (January–July). In addition, budgets for government-led social overhead capital (SOC) projects have also been on a downward trend in recent years.
The association also forecast next year's cement demand at 36 million tons, slightly below this year. That is a decrease of 1.4% (500,000 tons) from a year earlier. The association noted that with the continued slump in construction starts reducing activity at construction sites, chronic funding problems that have driven down the construction industry's profitability, and a sharp surge in construction costs, a recovery in cement demand is unlikely. However, the association said the decline in cement sales is expected to narrow due to the government's willingness to supply dwellings.
On top of weak cement demand, the cement industry argued it is facing a breaking point as it bears higher logistics costs from the introduction of the safe rates system for freight trucks and compliance with greenhouse gas emissions reduction targets. An association official said, "With the sharp drop in cement demand, additional regulatory proposals that weaken the long-term competitiveness of the cement industry continue, so the industry will face the worst business conditions going forward."