On October 31, the Ministry of Industry and Information Technology issued the Implementation Measures for Capacity Replacement in Cement and Glass Industry (2024 edition) (hereinafter referred to as the Implementation Measures). After the promulgation of the 2021 edition of the Measures for the Implementation of Capacity Replacement in the Cement and Glass Industry (hereinafter referred to as No.80), the development environment of the cement industry has undergone significant changes, and the reform of capacity replacement measures is urgently needed, so the Measures for Implementation came into being. Compared with Document No.80, the Implementation Measures generally require more stringent, precise and standardized capacity replacement, which is of great significance for accelerating the removal of inefficient capacity, guiding the transformation and upgrading of the industry, and accelerating the promotion of high-quality development. The author will make specific interpretations and comments from the following five aspects.
First, the requirement of capacity replacement is becoming stricter and the intensity of capacity reduction is increasing
. The energy efficiency level can not reach the benchmark value of the current edition of the Benchmark Level and Benchmark Level of Energy Efficiency in Key Industrial Areas, the continuous shutdown for more than two years, the annual operation days for two consecutive years since 2024 are less than 90 days, and the capacity that can not be dismantled or sealed up by the court due to debt disputes and other reasons can not be used for capacity replacement. According to the big data of China Cement Network, the inefficient production capacity of the current energy efficiency level below the benchmark value is about 16%, about 280 million tons. In addition, due to poor efficiency, lack of mines and other reasons, the production line has been shut down for a long time and sealed up due to bankruptcy, the total production capacity may exceed 300 million tons. The Implementation Measures will prevent this part of production capacity from participating in replacement, which will force inefficient and shutdown production capacity to withdraw from the market, thus speeding up the process of capacity removal and alleviating the increasingly intensified contradiction between supply and demand.
Figure 1: Clinker Production Capacity Steady and Declining
in Recent Years Data Source: Cement Big Data (https://data.ccement.com/)
II. Cancellation of actual capacity conversion to determine the capacity verification standard
benefits from the market dividends brought by the supply-side structural reform. At the same time, with the continuous progress of production technology and equipment level, the actual production capacity of cement enterprises has been greatly improved, and the capacity calculated solely by the diameter of cement rotary kiln can not truthfully reflect the production capacity of enterprises. The Implementation Measures stipulate that the amount of capacity used for replacement shall be determined strictly in accordance with the capacity specified in the project filing (approval) documents. This actually cancels the capacity scale approved by the capacity conversion table, takes the design capacity of the record or approval document as the only statutory capacity, determines the capacity approval standard, simplifies the capacity identification procedure, and promotes the unification of the record capacity and the actual capacity.
3. The benchmark level of new production capacity promotes the improvement
of energy efficiency in the industry. Since the first year of "double carbon" in 2021, energy saving and carbon reduction in the industrial sector has become one of the important contents of high-quality development. Various policy documents have been issued frequently, among which the benchmark capacity of the cement industry will reach more than 30% by the end of 2025. The Implementation Measures require that new production lines should reach the benchmark level of energy efficiency in the cement and glass industry in the current edition of the Benchmarking Level and Benchmarking Level of Energy Efficiency in Key Industrial Areas, and the environmental performance level should reach A level. This is the continuation of the policy of "new and expanded cement projects must reach the benchmark level of energy efficiency and A-level of environmental performance" in the Action Plan for Energy Conservation and Carbon Reduction 2024-2025 issued by the State Council in May 2024. At present, the benchmark production capacity of China's cement industry is about 20%, and there is still a certain gap from the target of 30%. There are fewer enterprises whose environmental performance meets the A-level standard, and it is estimated to be about 10%. The proportion of energy efficiency and environmental protection double excellent production lines is relatively low. The energy efficiency of new production lines is required to reach the benchmark level and environmental performance level A, and the threshold of new construction in the industry is raised, which is conducive to promoting the overall improvement of energy efficiency and performance level in the cement industry.
Figure 2: Energy Efficiency Level
of Cement Industry in Some Provinces Data Source: Cement Big Data (https://data.ccement.com/)
IV. The Implementation Measures for Precise Management of Regional Replacement and Simplification of Cross-regional Transfer Procedures
require that new cement clinker production capacity be strictly prohibited in key areas of national air pollution prevention and control. Cement clinker production lines located in key areas of national air pollution prevention and control or provinces where the average capacity utilization rate of cement clinker is less than 50% in the previous three years shall carry out capacity replacement, and in principle, capacity replacement from outside the province shall not be allowed. Since 2022, the demand for cement has entered the downward channel, and each province has different degrees of excess problems, especially the cross-provincial replacement in full swing before, which has led to serious overcapacity problems in some provinces and aggravated the difficulties in the operation of the industry. The Implementation Measures strictly prohibit new production capacity in key areas of air pollution prevention and control, and in principle, no replacement of production capacity from outside the province can effectively prohibit the placement of production capacity in key areas of non-air pollution preve ntion and control, which is also the placement of provinces in key areas of air pollution prevention and control, which makes more detailed and stricter new requirements for cross-provincial replacement. Accurately control the production capacity of key areas of air pollution prevention and control and areas with serious overcapacity, and effectively curb the momentum of capacity increase. The Implementation Measures also require that the transfer of production capacity located in the key areas of national air pollution prevention and control or within the same corporate enterprise group may not be reported to the provincial industrial and information authorities in charge of the transfer of production capacity. The competent department of industry and information technology at the provincial level of the project construction site is responsible for verifying the capacity replacement plan, and publicizing and announcing the capacity replacement plan and the letter of commitment on the portal website. This greatly reduces the approval procedures for some cross-regional mobile production capacity and simplifies the outflow procedures, thereby reducing unnecessary government intervention and optimizing the allocation of resources.
Fifth, strictly regulate the replacement behavior to improve the efficiency
of resource use, the first edition of the capacity replacement method began to be implemented in 2018, when the industry was at its peak of development and there were many capacity replacement projects, but after the industry was cold in 2022, the capacity replacement ceased, although the public announcement/announcement has been completed. However, many projects have been suspended independently, and some projects have not yet started substantially, resulting in some investment drifting, resulting in a great waste of social public resources and natural resources. To this end, the new provisions of the Implementation Measures stipulate that within two years from the date of announcement, the project construction enterprise shall complete the formalities of filing and environmental assessment, complete the project construction and put into operation within three years, and the overdue capacity replacement scheme shall be invalid. If the announcement of the capacity replacement plan has been completed, the project that has not started construction before the implementation of these Measures shall be ignited and put into operation before the end of December 2026; if it has not been completed, the capacity replacement plan shall be invalid after January 1, 2027. The Implementation Measures stipulate the time limit and validity period of capacity replacement projects, strictly regulate the replacement behavior, accelerate the implementation of capacity replacement schemes, and improve the efficiency of resource use.
Table 1: Announcement of Completion of Construction Suspension and Planned Construction of Production Lines
in Six Regions Data Source: Cement Big Data (https://data.ccement.com/)
