Facing challenges from soaring raw material prices and a slump in construction, the cement industry is expanding exports. It is not an entirely positive situation. Because cement carries heavy transportation costs, profitability is effectively limited, but as domestic demand has frozen rapidly, companies are pursuing export strategies to at least cover fixed costs.
According to the Korea Cement Association, which includes SAMPYO Cement, Ssangyong C&E, Hanil Cement, Asia Cement, Halla Cement Corp., and Sungshin Cement, cement exports this year are expected to reach 4.5 million tons, up 52% from a year earlier. That stands out compared with projections that this year's domestic shipments will be the lowest in 34 years. Domestic shipments this year are expected to fall 16.5% from a year earlier to 36.5 million tons.
At Ssangyong C&E, which has the largest export volume among cement companies, domestic cement sales are declining from 1.3887 trillion won in 2023 to 1.2884 trillion won in 2024. It posted 804.2 billion won through the third quarter this year. In contrast, exports have increased each year, from 100.2 billion won in 2023 and 104.2 billion won in 2024 to 106.0 billion won through the third quarter this year.
Halla Cement Corp. also recently held an emergency management strategy meeting chaired by Chairman Lee Hoon-beom and set a strategy to expand exports to respond to the domestic slump. Until last year, more than 90% of Halla Cement Corp.'s exports were concentrated in Latin American markets such as Peru and Chile, but this year it is expanding sales channels to the African continent, including Cameroon and Guinea. As a result, it increased export volume this year by 63% from a year earlier. SAMPYO Cement is also boosting exports, including signing export contracts with South America in the second quarter this year.
The problem is that the successive export increases by cement companies are not an entirely positive signal. Cement is heavy, so transportation costs are high. And relatively nearby markets such as Southeast Asia are dominated by Chinese and Vietnamese companies, leaving Latin America and Africa—farther regions—as the realistic targets. Considering transportation expenses, which rise with heavier products and longer distances, profitability is virtually negligible.
Even so, companies are choosing exports to secure funds for equipment expenses and to sustain operating rates. A cement industry official said, "The domestic economy is as bad as during the IMF crisis, but we cannot stop the plants, so we are sending the cement piling up overseas," and added, "On top of that, we need to keep the plant kilns running to maintain a minimum allocation of carbon emission allowances, so the goal is also to secure at least fixed costs."
Another industry official said, "Ssangyong C&E, Halla Cement Corp., and SAMPYO Cement have plants on the coast, so their transportation expenses are lower than those of corporations located inland," adding, "For inland companies, transportation costs double when you add ocean freight to land shipping, so it is difficult even to choose exports as a stopgap measure."
The industry expects cement demand next year to fall from this year. The Korea Cement Association projected next year's cement demand at 36 million tons, down 1.3% from this year. Because the main cause of declining domestic cement demand is the sluggish construction market, it is difficult to expect a recovery in cement demand.