According to market feedback, Northeast China will continue to implement peak staggering and kiln shutdown at the end of August to ease the contradiction between supply and demand in the market. Jilin Yatai, Jilin Xintianshan, Liaoning Jinyu Jidong, Harbin Pennsylvania Cement, Baishan Shanshui and other Northeast enterprises notified that the price of cement would be raised by 50-100 yuan/ton from August 22. It is understood that some enterprises in Northeast China have raised their quotations several times in the early stage, and the cumulative increase has reached 200 yuan/ton. After this price adjustment, individual enterprises have accumulated an increase of 300 yuan/ton in the year.
First, short-term rigid peak staggering is the only way out
for the cement industry. In the short term, rigid peak staggering is the only way out for the cement industry. We must accurately stagger the peak and stop at the same time. If it is difficult to start at the same time, we should stop at the same time first. In the long run, further improving the concentration is an effective way to reduce production capacity in the cement industry. Zhao Xinjun, member of the Standing Committee of the Party Committee of China National Building Material Co., Ltd., Secretary of the Party Committee and President of Tianshan Materials. Influenced
by the slowdown of national macroeconomic growth, the deep adjustment of real estate and the slowdown of infrastructure construction, the demand for cement in Northeast China has been declining continuously since 2020, while the production capacity has not declined sharply. Under the background of excess supply, the price of cement in Northeast China has been falling all the way. However, since the end of April this year, the price of cement in Northeast China has changed, ending the downward trend for more than two years and rising continuously. Up to now, the price of cement in Northeast China has risen to 450-500 yuan/ton. Tracing back to the source, the direct cause of the rise in cement prices is rigid peak staggering to reduce production, directly breaking the pattern of excess supply.
Figures 1 and 2: Cement output and price in Northeast China (yuan/ton)
Data source: Cement Big Data (https://data.ccement.com/)
II. High self-discipline and coordinated production suspension
Cement prices in Northeast China have risen. Major cement production enterprises have shown a high degree of industry self-discipline. This year, the coordination of enterprises in Northeast China is relatively good. Since May, cement enterprises in Northeast China have taken the initiative to arrange 15 days of kiln shutdown every month, and the implementation is in place, which directly leads to the reduction of cement supply in Northeast China, breaks the contradiction pattern of long-term excess supply, and lays a solid foundation for the stabilization and recovery of cement market prices. Under the influence of multiple factors, such as the accumulation of peak staggering effect in the previous warm winter season, the low level of cement and clinker inventory, and the introduction of the new national standard to further push up production costs, cement prices have changed their declining trend and risen strongly.
Table 1: Source of Tracking
Data of Cement Clinker Kiln Shutdown in the Three Northeast Provinces: Cement Big Data (https://data.ccement.com/)
III. In order to further improve the concentration
of cement industry in the long run, another fundamental reason for the smooth price increase in Northeast China is the high concentration of cement industry in Northeast China. Concentration is high, coordinated kiln shutdown and price increase are easy to implement, open and stop together, rise and fall together, so as to achieve regional win-win situation. The data show that the production capacity of CR3 and CR4 enterprises in Heilongjiang, Jilin and Liaoning regions in Northeast China is highly concentrated, accounting for more than 50% of the cement production capacity of each province. With high concentration, large enterprises can play a leading role better. In order to better guide the market, exchange time for space, and win living space for the industry in the downward demand period, large enterprises should open up the pattern, not roll up prices with small enterprises, and not lose a market because of one or two customers. How to improve the industrial concentration, we can learn from the cement industry in Europe, America and Japan as a reference, such as Japan's integration of 23 cement enterprises into 5 enterprises, the industry is highly concentrated.
Figure 3: High concentration
of cement production capacity in Northeast China Source: Cement Big Data (https://data.ccement.com/)
