Recently, Gao Dengbang, president of China Cement Association, said that the current predicament of the industry is largely caused by the industry itself, which has aroused widespread discussion in the industry.
Why is the current predicament largely caused by the industry itself? This problem is too complex, the author only talks about the superficial opinion from the point that the root of commodity price changes lies in the relationship between supply and demand.
Demand trend can not be changed, but the total amount is still huge
. From the demand side, the decline of cement demand is the objective law of economic development. This conclusion can be easily drawn from the development track of developed economies in Japan, Europe and the United States. Almost all mature economies, after economic development to a certain scale, will have a decline in demand.
Simply put, the decline in cement demand is the inevitable result of economic development, independent of human will, but in view of China's huge economic volume, land area and economic development gradient differences, the decline in cement demand is relatively slow.
From the perspective of demand, after the trough in 2015, the domestic demand for cement has officially entered a high platform period. By 2022, the demand for cement will gradually decline, with an output of 2.13 billion tons in that year, down 10.5% year-on-year. By 2023, the domestic cement output will still be 2.023 billion tons, and the total amount is still very large. To sum up
briefly, the downward trend of cement demand on the demand side is irreversible, but there will be no collapse. At present, the total demand for cement is still around 2 billion tons, which is still "crushing" other countries in the world.
Demand is still at a high level, domestic cement prices continue to decline, and even in the first quarter of this year, the whole industry suffered losses, as the supply side, the industry itself really has to bear a great responsibility. The blind increase of
supply-side capacity is the "root of all evil"
. In the past few years, there has been a wave of capacity replacement in China, and a large number of backward and zombie capacity have been transformed into advanced capacity through "capacity replacement", which has had a serious impact on the market. Statistics from
China Cement Network show that from 2018 to 2023, there are 57 production lines in the national cement industry, with a total capacity of about 91 million tons. A total of 41.3621 million tons of zombie production capacity participated in capacity replacement, and more than 30 million tons of "revival" production capacity.
Moreover, most of the new production lines are large lines with strong overcapacity, which aggravates the problem of overcapacity in a disguised way. It is rumored in the industry that the actual capacity of a new 6200t/d clinker production line built by an enterprise is close to 10000 tons. With such a replacement, can overcapacity not be aggravated?
In addition, the production lines that did not participate in the replacement were not "idle", but began a drastic transformation of production. The actual capacity of 3,200t/d production line is 4,000t/d; the actual capacity of 5,000t/d production line is nearly 7,000t/d. Similar situations have existed in the industry in the past few years.
From 2015 to 2022, the whole seven-year window period, the industry did not think about how to put the capacity into practice, but continued to increase the actual capacity through various means.
In this way, who can blame the cement industry for coming to the present field? The implementation of
peak staggering production is becoming more and more difficult, and regional differences are large
. At this time, many people in the industry want to say that since the contradiction between supply and demand has been so serious, we should increase the intensity of peak staggering and stabilize the market by controlling production.
Indeed, from the perspective of improving the relationship between supply and demand and stabilizing the market situation, this is indeed a way. However, when the market is relatively good, the implementation difficulty of peak staggering production is much lower, after all, large enterprises can be "generous", but when the market is poor, the implementation difficulty will be greatly increased.
Take Henan as an example, even if the first two strong Zhonglian Tongli and Tianrui Cement do not produce, the rest of the manufacturers can meet the current market demand, how can large enterprises make concessions at this time? This situation is basically similar in many provinces in China.
The more serious problem is that some enterprises desperately built lines and expanded production in the past few years, but now the production line has been built, seeing that the market is not good, they want to attract other enterprises to strengthen peak staggering production. Think about it, can those enterprises that do not build lines on a large scale be happy?
Therefore, we see that many enterprises in the industry call for production according to the design capacity, or even if they support increasing peak staggering on the surface, they will more or less show dissatisfaction with the problems of new lines in the past. In such a state of mind, I am afraid the effect of peak staggering production will be discounted.
Of course, there are still many problems in the industry itself, and the space is limited, so the author only talks about the supply problem.
