As environmental, social, and governance (ESG) management is emerging as the biggest topic in the industry, the cement industry is accelerating its transformation into a sustainable and eco-friendly industry, removing its stigma as an environment-polluting industry.
The cement industry is classified as a representative carbon emission industry that is highly dependent on energy such as fossil fuels. This is because there is a problem of greenhouse gas emission due to carbonate among raw materials and carbon emission problem caused by the use of fossil fuels such as bituminous coal among fuels.
But now it's different. It is transforming into an eco friendly industry that not only solves the waste problem but also creates economic benefits by recycling waste tires and waste synthetic resin as circulating resources instead of bituminous coal, a major fuel source used in cement production. This is the story of Ssangyong C&E, No. 1 in the cement industry.
Entering the waste treatment market… Strengthening eco-friendly business
Ssangyong C&E has been betting on eco friendly businesses to preoccupy the waste treatment market following cement. Ssangyong C&E recently acquired waste disposal company KC Eco Logistics. KC Eco Logistics is a company that collects and processes combustible resin waste that can be recycled as fuel.
Through this acquisition, it is expected that it will be possible to stably secure waste, which is the main fuel source for circulating resource treatment facilities. Ssangyong C&E has been receiving waste plastics from other waste treatment and processing companies, but through this acquisition, it has become possible to directly collect and dispose of it. Synergies are also expected with the landfill project currently being pursued.
The reason Ssangyong C&E entered the waste market is because it can reduce environmental risks while generating profits such as incineration fees and reducing subsidiary materials and fuel costs. By using circulating resources as a fuel source for the cement manufacturing process, the use of bituminous coal, a natural resource, can be reduced, resulting in cost savings.
Recycling of recycled resources is evaluated as eco friendly in that a significant portion of pollutants are decomposed at a high temperature of up to 2000 degrees Celsius, and secondary waste is hardly generated.
The high growth potential of the waste treatment market cannot be overlooked. As China banned all waste imports in 2017 and the amount of waste to be treated in Korea has increased rapidly, finding landfill sites is not easy.
According to Samsung Securities, the remaining years of landfills in Korea will drop to 0.74 years in 2027 and the landfills are expected to be exhausted. Due to the narrow land area and opposition from residents, the rate of waste disposal through incineration has no choice but to increase, so the replacement rate of recycled resource fuel in the cement industry is expected to continue rising.
The government plans to maximize the recycling and incineration of waste while promoting the 'zero direct landfill (0)' policy, which prohibits incineration or direct landfilling of household waste in the metropolitan area from 2026. This appears to be increasing.
The size of the Korean waste treatment market is expected to grow from 16.7 trillion won in 2018 to 23.7 trillion won in 2025. Germany has a high growth potential as the replacement rate for renewable fuels is 78%, but Korea is only 24%.
Ssangyong C&E has been investing in facilities in eco friendly businesses since Han & Company, a private equity fund (PEF) manager, acquired a 77.44% stake in 2016 and became a major shareholder. Over the past five years, it has invested more than 100 billion won annually in the construction of eco-friendly production facilities.
At the end of last year, an extraordinary general meeting of shareholders was held and the articles of incorporation were changed, and a number of environmental related businesses were added to the business purpose. From 2015 to 2024, Ssangyong C&E's investment in the environment sector is estimated to be 470 billion won (annual average of 47 billion won). Through facility investment, the replacement rate of recyclable resources has been achieved at 38% in 2021, and it is planned to raise it to 60% by 2022.
Thanks to preemptive investment, Ssangyong C&E's environmental sales increased from 46.3 billion won in 2019 to 71 billion won in 2020 and is expected to reach 91.9 billion won in 2021. In addition, it is expected that additional profits will be generated through the waste reclamation project at the Yeongwol limestone abandoned mine, which is currently being pursued.
Ssangyong C&E is promoting the creation of an industrial waste landfill by investing about 120 billion won in an abandoned mine of Ssangyong Cement Limestone, 119,225㎡ in Ssangyong-ri, Gangwon-myeon, Yeongwol-gun, Gangwondo, adjacent to Jecheon and Danyang. It is capable of reclaiming 5.6 million tons over the next 16 years.
If the project is carried out normally, the waste landfill project will be operated from 2022. However, local residents are opposed to the establishment of an industrial waste landfill, so the issue of conflict among residents is a task to be resolved.
Green Bonds Achieved Highest Certification Rating
In March 2021, Ssangyong C&E abandoned its mission of 60 years, Ssangyong Cement, and changed its name to Ssangyong C&E (Cement&Environment), which means cement and environment, and is spurring the transformation of the eco-friendly industry.
Ssangyong C&E Chairman Hong Sa-seung said, “Based on our know-how of recycling recycled resources, we will expand our environmental business and become a comprehensive environmental company that takes the lead in creating a clean and livable future environment.”
ESG management also began in earnest. Ssangyong C&E established the ESG Management Committee for the first time in the industry in 2020 and announced ‘Green 2030’ as its ESG management vision. The goal is to break away from the existing business model centered on the cement business and increase the profits of the eco friendly business to 50% of the company's total profits by replacing bituminous coal with waste synthetic resin and expanding waste heat power generation by 2030.
The results of the eco friendly strategy are also being visualized. In May 2021, Ssangyong C&E obtained the highest certification grades (GB1 and G1), respectively, for the first time in the industry in the certification evaluation for green bond issuance by the Korea Credit Rating and the Korean Enterprise Ratings.
Green bonds are a type of ESG bond issued for green investment. The green bonds promoted by Ssangyong C&E are evaluated as not only meeting the Green Bond Guidelines of the Ministry of Environment and the Green Bond Principles (GBP) of the International Capital Market Association (ICMA), but also well equipped with an operational evaluation process centered on the ESG Management Committee. received
As it obtained the highest certification grade, it is highly likely to lead to actual bond issuance. The timing and size of the issuance has not yet been confirmed, but the funds will be used to build a recycling resource processing facility (secondary) and waste heat power generation facilities. It is evaluated that Ssangyong C&E's eco-friendly strategy had a positive effect on liquidity.
“Ssangyong C&E has a virtuous cycle of investment in the environment sector → improvement of cement manufacturing costs, fees for processing cyclic resources, profits from the sale of carbon credits → improvement of profitability compared to competitors → expansion of investment in the environment sector,” said Yunho Jo, an analyst at DB Financial Investment. C&E's eco friendly strategy is leading to an increase in profits at the business level while lowering the environmental risks inherent in the cement industry.”
