Stances harden in cement price war

Conflict is deepening among cement manufacturers, ready-mixed concrete makers and construction firms over the recent announcement of a hike in the price of cement.

Last month, cement producers, including market leaders Ssangyong Cement and Tongyang Cement & Energy, notified their customers that they planed to raise prices by 15 percent from 67,500 won ($60) per ton to 76,000 won starting this year.

The Korea Federation of Ready-mixed Concrete Industry Cooperatives, a group of small-sized companies that mix the cement with other material to make concrete, announced immediately that if the cement makers didn’t back down from the price hike, they would “cease operations from Feb. 22.”

Cement accounts for 40 percent of the cost of making concrete.

Large construction companies also said earlier this month that they will be boycotting cement from Ssangyong and Tongyang starting today to protest the price increase.

Last week, the cement producers halted supplies to those construction companies.

“It’s nonsense that cement manufacturing firms are raising prices less than a year after their last hike,” said an official of a large construction company. “The construction industry is in a slump, and it is not the right time to increase material prices.”

Cement producers, however, say the international price of bituminous coal, which accounts for 35 percent of cement’s manufacturing cost, jumped to $140 last year from $90 in 2009. The coal is used to heat the kilns that make the cement. The more cement they sell, they say, the more money they lose.

“This will be the most critical time for cement companies because if they report heavier losses, there will be several firms closing down,” said an official from a cement firm.

Ready-mixed concrete makers said that though the price of cement and other components of concrete have gone up, construction companies won’t pay more for concrete.

Some are asking for the government to mediate.

“The Land Ministry should urge cement companies to withdraw or lower the price hike,” said an industry official.

By Lee Eun-joo [angie@joongang.co.kr]