Ssangyong Cement and other major South Korean cement makers have cut production as inventories pile up amid a slump in construction spending, company officials said on Friday. Ssangyong Cement Industrial Co. Ltd, the country’s largest cement maker, has shut two of its production lines since September 25 for nine days’ maintenance work, said company spokesman Park Joong-seok. Second-ranked Tong Yang Cement Corp., almost wholly owned by Tong Yang Major Corp, has recently closed two of its seven production lines for an indefinite period, said company spokesman Suh Byung-hoon.
Domestic construction orders during the second quarter fell by nearly a third from a year earlier because of a soft local economy, following a 14.2 percent drop for the first quarter, according to the latest government data. The nine days of lost output at Ssangyong is equivalent to three per cent of its capacity of 14.5Mta.
"It’s unusual for us to do maintenance work at this time of a year," Park said. "We usually do that in winter when demand is very low, but this time, we shut the lines because cement is not selling well, hit by the bad construction demand." The company held stocks of 250,000t of cement, which he said was higher than normal levels.
Tony Yang had no choice but to cut production because of the weak market, said Suh. "Cement becomes hard quick, so it requires special storage facilities, but we don’t have enough storage," he said.
French-South Korean joint venture Lafarge-Halla Cement Corp. has shut four lines since Sept. 24 and will not restart them until Oct. 10, the Korea Economic Daily reported on Friday. Company officials were not available for comment.
Shares of Ssangyong Cement were up 0.8 per cent at 1,210 won at 0425 GMT, in line with the broader market’s 0.9 percent gain. Tong Yang Major gained 0.8 percent to 2,660 won.
The construction industry is responsible for nearly a 10th of gross domestic product in an economy grappling with depressed consumer spending. The government expects economic growth of 5 per cent this year thanks to robust exports.