In 2022, the operating income of coal enterprises above the national scale is 4 trillion yuan, an increase of 20% over the previous year; the total profit is 1 trillion yuan, an increase of 44% over the previous year, a record high; the operating income of cement enterprises above the national scale is about 950 billion yuan, a decline of more than 10% over the previous year; The total profit was less than 70 billion, down 60% year-on-year, a six-year low. Coal is the main fuel of the cement industry, and the cement industry is an important downstream of coal. What causes the huge difference in benefits between them? In
2000, both the coal industry and the cement industry had just turned losses into profits. The coal industry realized a total profit of 50 million yuan, and the cement industry realized a total profit of 633 million yuan. The total profit of the cement industry was 12.7 times that of the coal industry. Twenty-two years later, the total profit of the coal industry is 14.9 times that of the cement industry, leaving the cement industry in the dust.
Figure 1: Profit Trend
of Coal Industry and Cement Industry Data Source: Cement Big Data (https://data.ccement.com/)
During the 18 years from 2000 to 2017, The profit trend of the cement industry is basically synchronized with that of the coal industry, both of which achieved a high profit in 2011 and returned to a low level in 2015. Entering the first year of supply-side reform in 2016, the coal industry issued the Opinions on Resolving Excess Capacity in the Coal Industry to Achieve Difficulty Relief and Development, and the building materials industry issued the Guiding Opinions on Promoting the Steady Growth of the Building Materials Industry, Adjusting the Structure and Increasing the Benefits, and the profits of the industry rebounded. However, from 2018 to 2022, the trend of total profits of coal industry and cement industry is obviously inconsistent. According to the author's analysis, there are three main reasons for this inconsistency:
(1) Differences in demand changes: cement demand plateau VS coal demand increases
in 2018-2022, cement demand is in the plateau period, the overall demand is shrinking, and the apparent consumption of cement in 2022 is 2.131 billion tons. It decreased by 8.3% compared with 2017 and 14.2% compared with the high in 2014. In contrast to coal demand, the apparent consumption of raw coal in 2022 reached 4.849 billion tons, an increase of 28.07% over 2017, and the consumption reached a record high. From 2017 to 2022, coal consumption has increased for six consecutive years. In the past five years, the demand trend of cement and coal is generally opposite, and the performance differentiation in 2022 is more obvious. As a major coal user, the shrinking demand for cement has not significantly affected the growth of coal demand. The demand for thermal power continued to rise, and the 58531 of thermal power generation in 2022 was 0.33 billion kWh, an increase of 27% over 2017. In 2022, the coal consumption of the cement industry was 200 million tons, accounting for 4.05% of the national coal consumption, a nine-year low.
Figure 2: Trend
of apparent consumption of coal industry and cement industry Data source: Cement Big Data (https://data.ccement.com/)
(2) Rigid reduction of coal production capacity
In 2015, the number of coal mines in China reached 10,000. The Opinions on Resolving Excess Capacity in Coal Industry to Achieve Difficulty Relief and Development put forward that "from 2016, it will take three to five years to withdraw about 500 million tons of production capacity and reduce about 500 million tons of reorganization". From 2016 to 2020, 5500 coal mines were withdrawn from the country, and more than 1 billion tons of backward coal production capacity were withdrawn. In 2022, the number of coal mines dropped to less than 4400, and the production capacity was relatively rigid.
On the contrary, according to the data of the National Bureau of Statistics, the national cement production capacity was 3.44 billion tons in 2015 and 3.5 billion tons in 2021, which did not decrease but increased, although the clinker production capacity (calculated by kiln diameter) did not change much. However, the actual daily output is still enlarged through capacity replacement and technological upgrading. Since 2015, the industry has responded to the national policy and participated in the shutdown of production in heating season, rainy season and high temperature days. Although the purpose of reducing (clinker) production at a specific time can be achieved, there are great differences between regions and enterprises, and the reduction of shutdown period can be equalized before shutdown/after kiln opening or inflow from other regions. The reduction of production is structural and flexible.
(3)
Due to the change of demand and the inconsistency of the focus of supply side, the capacity utilization rate of coal mining and washing industry will reach 74.9% in 2022, which is the highest since the reform of supply side, while the capacity utilization rate of non-metallic mineral products industry, where cement is located, is only 67%. It is the lowest value since the supply-side reform. Reflected in the price, the rise in coal prices has made the cement industry very unbearable. The coal price rises sharply, the cement cost rises, and the price rises passively, but the range is far less than increase of coal price; the coal price falls, the center of gravity of cement cost moves down, and the price is easy to fall and difficult to stabilize. Taking a large cement enterprise as an example, the cost of fuel and power per ton of clinker in 2015 was 93 yuan/ton, which rose to 189 yuan/ton in 2022, doubling (coal price rose by 215% in the same period), and the sales price of cement rose by 48%. The increase of cement price is far less than increase of cost.
Figure 3: Comparison of capacity utilization rate of coal and building materials Figure 4: Intensified
fluctuation of coal price in 2021-2022 Data source: National Bureau of Statistics. Cement big data (https://data.ccement.com/)
with the "double carbon" target, low coal prices have gone forever. Faced with high costs and serious overcapacity, the cement industry should also act as soon as possible to carry out rigid capacity reduction.
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