At present, China's cement industry is entering an important adjustment period, with increasing overcapacity and shrinking demand, facing a long-term structural adjustment. Compared with 2019, industry profits fell by more than 80% for two consecutive years in 2022 and 2023. Cement demand is
expected to continue to decline in 2024. With insufficient market demand and high total production capacity, the cement industry urgently needs to solve the problem of excess capacity withdrawal.
Production capacity is at a historical high
. From the perspective of supply, the overcapacity of the cement industry has intensified and is at a historical high. Reporters learned from the China Cement Association that in 2023, the utilization rate of cement clinker production capacity in China was less than 60%, and that in Shanxi, Guizhou, Liaoning, Jilin, Heilongjiang, Henan, Xinjiang and Inner Mongolia was less than 50%.
With the further reduction of demand, the contradiction of excess capacity in cement industry has become more prominent, the utilization rate of capacity has further declined, and the trend of excess capacity has increased rapidly. "Due to the double control of energy efficiency, pollution, energy and raw material prices, the cost of products has risen, coupled with the serious volume of the industry, the pressure of market competition is great." Kong Xiangzhong, executive chairman of China Cement Association, said. For a long time, the competition in the
cement industry has been fierce, and the loss has been increasing. According to the data of China Cement Association, in 2023, 18 of the 20 listed companies with cement as their main business had a negative net profit growth year on year, of which 6 lost money.
However, not all cement producers are losing money. It is worth noting that the 2023 annual performance report issued by Tapai Group, the leading enterprise in the industry, shows that the revenue of enterprises has risen against the trend, and the net profit attributable to shareholders of listed companies in the reporting period is 66551 7400 yuan to 798.6209 million yuan, an increase of 150% to 200% over the same period last year. Relevant experts believe that as a high-carbon emission industry, in recent years, cement production enterprises have begun to take the initiative to clear inefficient production capacity, which is the case with Tapai Group. Under a series of measures, the cement manufacturing cost of Tapai Group decreased year on year, and the decrease was greater than the decrease of cement price year on year, which improved the profitability year on year. This shows us the hope that the cement industry will come out of the trough.
Speeding up the clearance of inefficient production capacity
is an important window period to resolve the overcapacity of cement, and we must make up our minds to solve the problem fundamentally. Li Chen, deputy Secretary-General of
China Cement Association and director of the Policy Research Center, analyzed that the main reasons for the overcapacity of the cement industry are as follows: First, due to the deep downward impact of real estate and other industries, the demand is insufficient and the market is shrinking; Second, the investment in the early stage is overheated, and a batch of advanced production capacity is built while the excess and backward production capacity is withdrawn; Third, the advanced and relatively advanced new dry process cement with a daily output of more than 4,000 tons has a high production capacity, and the effect of reducing production capacity in accordance with the law and regulations is gradually decreasing by using the "five rulers" of energy consumption, environmental protection, quality, safety and technology. Fourth, although the peak staggering production policy and the kiln shutdown and production restriction strategy can play a role in stabilizing the price and reducing production, and continue the living space of some production capacity, they have not fundamentally reduced production capacity; Fifth, the merger, reorganization and integration of the market requires huge financial support, the rapid decline in the efficiency of the cement industry, the lack of confidence in the capital market, and it is difficult to obtain financing support.
In the future, cement production enterprises still have to face the pressure and challenges of insufficient market demand. Experts pointed out that we should give full play to the leading role of large enterprise groups, adhere to the structural reform of the supply side of the industry, strengthen peak staggering production and capacity replacement, and focus on resolving the main contradictions between serious overcapacity and market demand downturn; We should actively study and explore industrial policies for the withdrawal of excess capacity, encourage the implementation of equity integration, mergers and reorganizations, and equity cooperation among large enterprises, further improve industry concentration, and achieve green, low-carbon and high-quality development of the industry.
Tripartite linkage to strengthen regulation and control
to resolve the serious overcapacity of the cement industry requires the tripartite linkage of the government, enterprises and industry associations.
Kong Xiangzhong believes that only by maintaining the dynamic balance between supply and demand in the market can the industry have room for growth. The competent government departments should not only focus on investment growth, but also on the gain of stock assets.
At present, cement production enterprises have strong scientific and technological innovation ability, and new technologies are constantly emerging. Kong Xiangzhong expressed the hope that the competent authorities would formulate and revise various technical standards in a timely manner to guide the green, low-carbon and high-quality development of the industry. For industries with serious overcapacity, we should constantly raise the entry threshold, speed up the elimination of backward production capacity, and promote the transformation and upgrading of enterprises.
Kong Xiangzhong suggested that the existing cement capacity replacement policy should be revised in time, a binding carbon quota allocation mechanism should be established, and the structural reform of the supply side of the industry should be promoted in a long-term manner.
Li Chen said that effective measures of "policy + market" should be taken to allow the orderly withdrawal of excess capacity and provide support and space for resolving excess capacity and high-quality development of industry transformation and upgrading.
Resolving overcapacity is a complex systematic project. First of all, we should adjust the capacity replacement policy and strictly prohibit any form of new capacity cement projects. All localities have stopped implementing new general cement projects that have been included in the plan, so as to ensure that production capacity is only reduced but not increased. Experts believe that in order to increase the proportion of waste co-disposal in cement kilns, the capacity of China's general cement production capacity stock projects can fully absorb local domestic waste and other wastes through technical transformation, and the balance between providing cement products and absorbing waste can be achieved without new cement projects.
It is necessary to raise funds for capacity withdrawal. It is very difficult to simply use the means of raising the threshold of comprehensive standards and market-oriented price reduction competition to clear production capacity, and relevant departments can give preferential support in environmental protection, finance, taxation, energy and other aspects.
In addition, for benchmarking enterprises with high-quality development in the industry, it is suggested that eligible enterprises should be allowed to finance through various channels. Continue to increase the rigid constraints of peak staggering production to win time and accumulate strength for resolving overcapacity.
Cement industry has serious overcapacity, the impact of peak staggering production on the supply side has declined significantly, the "competition and cooperation relationship" formed over the years has broken down, and the pressure of industry operation has doubled. How should the cement industry get out of the predicament and face the new cycle? On March 28-29, China Cement Network will hold the "13th China Cement Industry Summit and TOP100 Award Ceremony" in Hangzhou, during which awards will be given to top 100 cement and supplier enterprises, and experts and scholars will be invited. China Railway and other construction units jointly discuss the new development trend of the cement industry in the future, and work together to create the future!
