The ready-mixed concrete industry is expecting a rebound next year.
The ready-mixed concrete industry is expecting a rebound in its business as a friendly market atmosphere has recently been created.
According to related industries on the 20th, the ready-mixed concrete industry, which has been on the decline since 2018, is expected to face an opportunity to rebound from next year. This is because not only large-scale construction has been predicted due to the government's expansion of construction-related budgets, but long-term growth indicators are also likely to improve. However, the increasing fixed cost is a task to be solved.
Recently, the Ministry of Land, Infrastructure and Transport announced its budget for next year. Welfare sectors such as housing and basic living amounted to 38.82 trillion KRW, up 2.5 trillion KRW from this year's (35.5 trillion KRW). It is invested in welfare fields such as support for the vulnerable in housing and guaranteeing basic living. The budget for SOC sectors such as roads, railroads, and logistics is 22.7913 trillion KRW, up 1.2 trillion KRW from this year.
The government's expansion of the construction budget is directly linked to the demand of the ready-mixed concrete industry. When constructing a new structure, concrete is used for basic laying. Remicon refers to concrete, one of the basic aggregates of a building.
At the same time, housing licensing, a leading indicator of the construction industry, is also a favorable factor. According to the Ministry of Land, Infrastructure and Transport, the number of housing licenses nationwide was 46,714, an increase of 40.5% from 33,257 cases a year earlier. As a result of this, cumulative licensing performance this year also increased 24.4% year-on-year. The fact that new buildings and complexes with licenses have been granted leads to increased demand for ready-mixed concrete.
Another indicator is also predicting a rebound. According to the Korea Construction Association, the cumulative domestic construction orders stood at 164 trillion KRW as of October this year, up 12.7% from a year earlier. Construction orders in December are expected to exceed KRW 200 trillion if 70 to 80% higher than the average between January and November according to the year-end public budget execution.
The industry also responded positively to various indicators. Various indicators are predicting a rebound in the construction industry next year, so the construction industry is expected to turn upward due to the nature of the ready-mixed concrete industry, an industry source said. "Considering the rebound before and after the presidential election, the overall boom could occur next year."
Currently, the ready-mixed concrete industry has stagnated. This is because shipments have been decreasing since 2018. According to the Korea Remicon Industrial Association, shipments recorded 174.9 billion 억 in 2017, but they were counted as 2018 (15572 ),) and 2019 (1471.5 billion )), showing a continuous decline. The prevailing assessment is that shipments decreased in the aftermath of the new coronavirus infection (COVID-19) last year.
While shipments have decreased, fixed costs have increased. The cost of transporting mix-cert trucks is increasing rapidly every year. In 2019, the strike expanded, starting with Busan and Ulsan, which led to a 10% increase in transportation costs. This year, an increase of about 8% was made. At the same time, cement prices, a major raw material, also rose 5.1 percent in seven years. This means that labor and raw material costs have increased amid a decrease in sales due to reduced shipments.
An industry official said, "As shipments are recovering again recently, expectations for next year are growing," adding, "However, reflecting the fact that labor costs and raw materials could rise next year, it is difficult to be sure of a rebound in terms of profitability."
Shin Seung-yeop sys@m-i.kr