On September 24, the Ministry of Industry and Information Technology and other six departments jointly issued the Work Program for Steady Growth of Building Materials Industry (2025-2026) (hereinafter referred to as the "Program"), which clearly States that in 2025-2026, the building materials industry will recover and its profitability will be effectively improved. As the second largest sub-industry of the building materials industry, the operation trend of the cement industry has a significant impact on the whole building materials industry, so how will the Plan affect the cement industry and how can cement industry achieve the goal of steady growth? Steady growth of
building materials is crucial to
cement. According to the scale of business income, cement industry is the second largest sub-industry of building materials. According to the data of the past 12 years, the year-on-year trend of the total profit of the cement industry is basically the same as that of the building materials industry as a whole. From 2022 to 2024, the sharp decline in the profit of the cement industry is the main factor that drags down the continuous decline of the building materials industry for three consecutive years. Therefore, the steady growth of cement is crucial to the steady growth of the whole building materials industry. At present, the irreversible decline of cement demand has become the consensus of the whole industry, the key to improve the efficiency is to keep the price of cement above a reasonable level, and the core of the price recovery lies in the control and management of the supply side. The main content of the steady growth of the cement industry in the Plan lies in supply management. The author believes that the cement supply side will undergo significant changes in the following three aspects, thus reshaping the supply-demand relationship and ultimately achieving the goal of steady growth.
Figure 1: The year-on-year trend of total profits of cement and building materials is basically the same
Data source: Cement Big Data (https://data.ccement.com/)
More replacement projects to supplement production capacity In October
2024, the Ministry of Industry and Information Technology issued the Notice on Further Standardizing the Capacity Management of the Cement Industry, which aims to strengthen the capacity management of the cement industry, and the replacement of supplementary capacity is one of the important tasks. However, in the past year, the replacement of production capacity has been very slow. According to the statistics of China Cement Network Cement Big Data Research Institute, up to now, there are only more than 100 public projects to supplement production capacity, with a cumulative capacity of 34.969 million tons, a withdrawal of 55.82 million tons, a net reduction of 20.851 million tons, a net reduction of production capacity far less than decline in demand, a larger contradiction between supply and demand, and a poor policy effect. The Plan once again emphasizes that cement enterprises should formulate capacity replacement plans for production capacity exceeding project filing by the end of 2025, promote the unification of actual production capacity and filing capacity, and increase the content of strictly prohibiting the transfer of cement clinker and flat glass production capacity from non-key areas of air pollution prevention and control to key areas of air pollution prevention and control, so as to prevent the aggravation of overcapacity in key areas. In addition, the Plan also calls for giving full play to the role of comprehensive standards such as quality, environmental protection, energy consumption and safety, eliminating backward production capacity of cement and flat glass in accordance with the law and regulations, and promoting the gradual withdrawal of enterprises with low environmental performance. It is expected that the replacement projects of cement enterprises will increase significantly, the withdrawal of backward and inefficient production capacity will be accelerated, and new substantive steps will be taken to restore the balance between supply and demand.
Table 1: Replacement of production capacity Data
Source: Cement Big Data (https://data.ccement.com/)
Self-discipline Awareness Strengthened "Anti-involution" Resumption Price Becomes Industry Consensus
In the first half of this year, Demand for cement decreased by 4.3%, but thanks to the increase in the average price of cement in the first half of the year and the decrease in cost, the benefits of the industry were significantly restored. In the face of the downward demand, if the price of cement is reasonable, the industry can still achieve a better profit level. Around July, although the national level and industry associations have issued documents to guide the cement industry to strengthen self-discipline and "anti-involution", but with little effect, cement prices fluctuated at a low level in the third quarter, and now they have reached a low level in the same period, and the pressure of enterprise operation has increased sharply. The Plan puts forward specific requirements and measures for the industry: key enterprises should put steady growth in a more prominent position, strengthen their leading and exemplary role in the industrial chain and supply chain, and promote the coordinated development of upstream and downstream industries. Strengthen industry self-discipline, organize and carry out peak staggering production in cement industry. Strengthening industry self-discipline awareness and "anti-involution" price recovery have become the consensus of the industry, which is conducive to the realization of the steady growth target of the cement industry in the fourth quarter and 2026.
Figure 2: National cement price index is at a low level (point)
Data source: cement big data (https://data.ccement.com/)
Optimize the market competition pattern The Plan for Effectively Enhancing Industry Concentration
proposes to encourage key enterprises to unite social capital, explore the establishment of a green low-carbon transformation fund, and speed up the withdrawal of inefficient production capacity through market-oriented operation. Since this year, the pressure of market operation has continued to increase, many small and medium-sized enterprises have been calling for withdrawal, and large enterprises have increased their willingness to integrate the market. Conch has acquired the assets of Western Cement Xinjiang, Jinyu Jidong has acquired Hengwei Cement, Red Lion has acquired Shoulushan Cement, and so on. At present, the concentration of clinker production capacity of the top ten enterprises is 56.5%, which is at a low level compared with European and American countries. With the support of policies, the pace of integration of large enterprises into the domestic market will be accelerated, the market competition pattern is expected to be optimized, and the industry concentration will be effectively enhanced.
Figure 3: Trend
of clinker production capacity concentration of top ten enterprises Data source: cement big data (https://data.ccement.com/)
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