As the commercial real estate market, including shopping centers and Knowledge Industry Complexes, freezes, analysis suggests that demand in the ready-mixed concrete market, which is a downstream industry, will decrease compared to the International Monetary Fund (IMF) financial crisis.
The unstable political situation last year led to delayed public sector investment and policies, along with postponed private sales, which are believed to have affected the sharp drop in ready-mixed concrete demand this year.
According to the Sampyo Market Research Center on the 23rd, the estimated annual nationwide ready-mixed concrete shipment volume is expected to be 93 million cubic meters, which is more than 18% lower than last year's estimated 114 million cubic meters. This is a smaller volume than during the sharp decline after the 1997 IMF financial crisis.
According to the ready-mixed concrete statistical yearbook, annual cement shipments fell from 133 million cubic meters in 1997 as the IMF financial crisis erupted to 96 million cubic meters in both 1998 and 1999. This was followed by a recovery thanks to the government's increased investment in social overhead capital (SOC) and real estate regulatory easing policies, bringing shipments back up to over 100 million cubic meters.
However, since the outbreak of the COVID-19 pandemic, the construction market has been sluggish due to economic recession, rising construction costs, and prolonged high-interest rates, leading to a reduction in ready-mixed concrete demand.
The nationwide annual ready-mixed concrete shipment volume, which recorded 146 million cubic meters in 2021, is on a declining trend with estimates of ▲141 million cubic meters in 2022 ▲136 million cubic meters in 2023 ▲114 million cubic meters in 2024.
At the end of last year, Sampyo Group predicted this year's national ready-mixed concrete shipment volume to be 96 million cubic meters based on its own demand forecasting model, but in May, it lowered the annual estimate to 93 million cubic meters.
As the commercial real estate market faces a recession and difficulties in project financing (PF) loans, leading to delays and stoppages in construction, it is anticipated that ready-mixed concrete shipments will also decrease.
Additionally, political instability marked by martial law and impeachment has resulted in delays in SOC investments and postponement of PF policy support, which is believed to have exacerbated the decline in shipment volumes.
A representative from a domestic ready-mixed concrete company, identified as A, stated, "Due to the recession in the construction and real estate markets, public and private sector construction projects continue to be postponed, leading to a sharp decline in shipment volumes," adding, "Especially in the case of residential real estate, some construction has been carried out in the metropolitan area, while commercial real estate has seen significant reductions in construction due to inadequate PF execution."
People in the ready-mixed concrete industry expressed that this year, the reduction in ready-mixed concrete prices, increased transportation costs, and decreased shipment volumes have led to a triple burden.
A noted, "During the IMF crisis in the past, annual shipment volumes also plummeted below 100 million cubic meters, but the government quickly expanded SOC investments, stabilizing the figures back above 100 million cubic meters. However, with large public construction projects like the third new town development constantly being delayed, there are no foreseeable elements that could increase shipment volumes. Therefore, the ready-mixed concrete market shows no signs of improvement ahead."
A representative from the ready-mixed concrete company, identified as B, noted, "The price of ready-mixed concrete fell from 94,700 won per cubic meter at the end of last year to 91,400 won in March this year, while transportation costs increased by a total of 6,400 won over the past two years, including 3,100 won last year and 3,300 won this year," adding, "Starting in July, the transportation cost for one truck carrying 6 cubic meters of ready-mixed concrete will rise to 75,000 won."
It is projected, "With the decrease in ready-mixed concrete shipment volumes shrinking the market size, while the procurement cost for ready-mixed concrete rises due to transportation costs, the falling prices of ready-mixed concrete are worsening profitability, creating a bleak situation."