On March 8, Shao Jun, Chairman of China Cement Network, and his delegation visited Hongshi Holding Group Co., Ltd. and were warmly received by Zhang Xiaohua, Chairman of Hongshi Group. They expressed their gratitude to China Cement Network for its long-term support to Hongshi Group. The two sides conducted in-depth discussions on the development trend of the cement industry.
< IMG SRC = "The annual demand for cement in the https://img7.ccement.com/richtext/img/xz4v41ix5wm1710144252804.2024 is expected to decline by about 5%, The utilization rate of clinker production capacity is reduced to about 50%. By 2030, the demand for cement is expected to be about 1.3-1.5 billion tons, and the utilization rate of clinker capacity may drop to about 35%.
< IMG SRC = "The https://img7.ccement.com/richtext/img/5bh7e5ub6du1710144263631.
took the initiative to reduce the supply by staggering the production peak and shutting down the kiln." It can realize the normal profit of the cement industry. As the capacity utilization rate of clinker production line continues to decline, peak-shifting production is facing more and more challenges : First, the advanced production line and the relatively backward production line have the same kiln shutdown time, which is not conducive to energy saving and emission reduction and technological progress in the cement industry; Second, the number of days of unified kiln shutdown continued to increase throughout the year, with the number of days of unified kiln shutdown in many regions reaching or even exceeding 200 days, and the willingness of advanced production lines to shut down declined; Thirdly, the utilization rate of production capacity in different regions is different, the number of days of unified kiln shutdown is different, and the market is overlapping and interacting, which makes the implementation of peak staggering production more difficult.
< a href = "From the perspective of an enterprise, it is also very painful to stop https://price.ccement. cement production line. When the production line stops, it still has to pay financial costs, employee wages, etc. When the production line starts, it will reduce more cash flow than when it stops." The production line is likely to stop.
The selling price is lower than the cost of operating contribution to revenue, which is the decision point for the production line to stop. The cost of operating contribution to revenue = accounting cost-depreciation-financial expenses-employee wages. Cement enterprises can be measured by three costs: accounting cost, net cash flow increase cost and operating contribution cost to income. For example, for the 5000t/d production line, the accounting cost is 240 yuan/ton, the depreciation is 12 yuan/ton, the financial cost is 8 yuan/ton, and the wage cost is 12 yuan/ton:
A. Both the sales price and the accounting cost are 240 yuan/ton, the profit is zero, and the net cash flow is 12 yuan/ton (depreciation).
B. The sales price is reduced to the net cash flow cost of 228 yuan/ton (accounting cost-depreciation), the profit loss is 12 yuan/ton, the net cash flow is zero, and the bank interest and employee wages can still be paid.
C. When the sales price is reduced to 208 yuan/ton (accounting cost-depreciation-financial cost-wage cost), the profit loss is 32 yuan/ton, the net cash flow is reduced by 20 yuan/ton, and the monthly cash flow reduction is the same when the enterprise starts and stops. If the price is lower than 208 yuan/ton, the enterprise will reduce more cash flow when it starts than when it stops, so the cost of operating contribution to revenue is the decision point to judge whether the enterprise starts or stops.
Assuming that the cost of the enterprise is basically the same, the book profit of each ton of cement will lose more than 32 yuan before it is possible to stop other production lines.
< IMG SRC = "https://img7.ccement.com/richtext/img/fba9687qcjs1710144289695. large enterprises have advantages in terms of capital, scale, technology and management." There are also low efficiency and long decision-making cycle. Through technological transformation, the cost and technical indicators of small and medium-sized enterprises are close to those of large enterprises. And most of the small and medium-sized enterprises are private enterprises, are their own funds, enterprises stop the value of equity, so they would rather temporarily lose money, or even put money into it to maintain the enterprise. Most of the large enterprises have entered the capital market, and low prices will greatly reduce the valuation of cement listed companies. Darwin said, "The species that can survive when the environment changes are not the strongest, nor the smartest, but those that can respond quickly to environmental changes.". Therefore, in the face of fierce market competition, enterprises with strong competitiveness and rapid response to the external environment can win the future.
Zhang Xiaohua emphasized that although it is difficult to promote peak-staggering production and its effectiveness is weakened, it is still an effective way for the cement industry to adjust the supply-demand relationship and achieve win-win situation for large and small enterprises in the short term.
In the long run, the cement industry should shift from "de-production" to "de-capacity". In the past few years, the benefit of the industry has been greatly improved and most cement enterprises have benefited from the off-peak production. At the same time, the price has lost the function of transmitting the information of the relationship between supply and demand in the market, which makes a large amount of capital enter the industry and aggravates the degree of overcapacity. In the future, it is still necessary to shift from "de-production" to "de-capacity". There are two kinds of "capacity removal". One is "competition to reduce production capacity" , through at least three to five years of fierce market competition, so that high-cost production capacity completely withdraws from the market, the withdrawal of enterprises will face debt, shareholder rights and interests of employees. At this stage, cement prices are bound to be depressed, industry benefits will be discounted, low-cost enterprises are not necessarily winners, and their interests will be damaged. The second is "rational capacity removal" , which requires more than 90% of the enterprises in the industry to reach such a consensus: demand determines that 30-40% of the capacity must be withdrawn, and the voluntary withdrawal of excess capacity is conducive to the industry and most enterprises, while the remaining enterprises jointly purchase high-cost capacity and share the purchase cost. These production capacities are not used for upgrading or replacement and reconstruction, but for write-off, so that high-cost production capacity can be withdrawn with returns, so that cement prices can be maintained at a high level to achieve a win-win situation for the industry and most enterprises. Through fierce market competition, most enterprises will realize that "rational capacity removal" may be an important strategy to achieve healthy development of the industry in the downward stage of demand.
As far as enterprises are concerned, brand premium and cost become the decisive factors for the start and stop of production lines. In areas with better implementation of peak staggering production, market share is the foundation, and only with share can we achieve better profits. In areas where the implementation of off-peak production is not good, the most important thing is not to reduce cash flow. The reduction of cash flow to protect market share will only consume the capital strength of enterprises, and it is easy to break the capital chain over time.
Therefore, for low-price areas, it is wise for enterprises to do a good job in analyzing the contribution cost of operation to revenue. When the sales price is lower than the contribution cost of operation to revenue, the kiln should be shut down in time to minimize cash flow consumption and maintain capital strength, which is also conducive to the healthy development of the industry.
In addition, the two sides also conducted in-depth discussions on the development of new photovoltaic energy, macroeconomic situation, foreign market prospects and other issues. Zhu Ruijun, senior vice president of Red Lion Group, and Jiang Xun, general manager of China Cement Network, also
participated in the exchange.
