The South Korean cement industry faces the prospect of production stoppages due to a global shortage in the supply of coal, a source said Tuesday.
South Korean cement makers mostly use coal as fuel for their plants, and with only 30-45 days of coal inventories, they may opt to shut down rather than switch to more expensive alternatives, the person said.
"Major cement companies have coal supplies of only until the end of March, and if China’s suspension of exports prolongs, then the companies will just have to shut down their plants," the person said. The Chinese authorities halted coal exports in mid-January in an emergency move to secure domestic supply, hurting South Korean cement makers.
The industry imported 3.92Mt of coal, or 72% of its total coal needs, from China last year, according to the Korea Cement Industrial Association. The companies imported the remaining 1.53Mt from Russia.
Tightening supply in the international market and surging coal prices, exacerbated by recent floods in Australian mines, are adding to the cement makers’ woes, the person said.
The "situation is similar in Japan and Taiwan. They are also trying to import more from Russia, so things aren’t easy for Korean firms which haven’t previously imported from Russia," the person said.
Despite the supply crunch, cement making firms aren’t considering switching fuel source due to the sharp increase in global oil prices.
"Rather than increasing use of Bunker-C oil as fuel, it is better to shut down the operations due to the high cost," he added.