My Opinion on Dealing with Cement Overcapacity in Bayannaoer City, Inner Mongolia

   In the market economy system, the supply and demand of cement production are two contradictory aspects. The contradiction between supply and demand is frequent, and the balance between supply and demand is temporary. Cement production has been developed in the constant contradiction and balance between supply and demand. Overcapacity is one aspect of the contradiction between supply and demand, and it often happens accordingly. Through the market mechanism, the survival of the fittest, the balance of supply and demand, promote the continuous progress of cement production and technology.

   The problem of local cement overcapacity in Bayannaoer City of Inner Mongolia has a long history, and the reason behind it lies in the unreasonable industrial structure. When the economy is in the boom stage, enterprises are easy to get loans, and they have the impulse to expand their production capacity, which leads to the expansion of production capacity beyond the potential demand, so when the economic boom falls, it is easy to form inventory backlog and overcapacity. Moreover, most of the local cement in Bayannaoer City is vertical kiln cement, with high energy consumption, low output and low cement grade, which belongs to the elimination of backward production capacity. In 2012, Inner Mongolia Autonomous Region and Bayannaoer City experienced serious cement overcapacity, serious cement inventory backlog, and the market price continued to decline. Many cement enterprises could not maintain production and had to stop production halfway. According to relevant data, the demand for cement in Bayannur City was about 5 million to 6 million tons in that year, while the total local cement production capacity had reached 8.9 million tons. 28.78 million tons of cement produced by the new dry process in the surrounding areas of Wuhai were still impacting the cement market in Bayannur City, and it was high-grade and high-quality cement. In this way, Bayannur City is facing a serious surplus of cement. In the past 10 years, overcapacity of cement often occurs. In the case of continuous overcapacity, cement production technology has made great progress due to the government's supervision, the guidance of national policies and the role of market mechanism, and has realized the historic transformation from backward technology such as shaft kiln production to advanced new dry process technology. The new dry process technology of Wuqianqi Tongda Building Materials Co., Ltd. with a daily output of 4500 tons of cement clinker has emerged.

   Reasons for cement overcapacity

   Cyclical changes in economic development. Under the condition of market economy system, the national economy develops periodically, with peak and trough periods. In the peak period, the social investment is large, there are many construction projects, the cement market demand is large, and the cement production capacity scale expands rapidly; when the peak goes to the trough, the cement demand decreases, and the expanded production capacity in the peak period can not be released, thus resulting in excess. At present, the economy of Bayannaoer City has entered a period of steady growth from the peak development period, which will naturally aggravate the excess cement production capacity. This is the external business environment that the cement industry must face.

   The elimination of backward production capacity is slow. There are still a lot of backward production capacity in the total production capacity of local cement in Bayannur City, and its content is constantly changing with the progress of production technology. For a long time, the backward production capacity is mainly the capacity of vertical kiln and the capacity of cement grinding below 3.0 meters in diameter. With the former Wuqianqi Tongda Building Materials Co., Ltd., which is now Bayannaoer Zhonglian Cement Co., Ltd., the new dry process production line of cement clinker with a daily output of 4500 tons has been completed and put into operation, the original surrounding small vertical kiln clinker cement production line has become backward production capacity and has been eliminated. Therefore, the backward production capacity occupied the market space in the past, and the failure to withdraw in time was one of the reasons for the excess production capacity of local cement.

& emsp; & emsp; blind investment. Blind investment refers to the investment behavior that does not follow the market rules. The normal investment procedure of the cement industry is to make a thorough investigation and study of the investment factors such as mine, transportation, market and environment before making a decision, and to make an investment feasibility assessment. Blind investment often does not carry out or does not fully carry out such decision-making procedures, and the completed production line will have various problems. Some do not build their own mines; some have inconvenient transportation or long transportation distance, and the sales cost is high; Some local markets are small and do not have the ability to digest local production; some processes are incomplete, especially the proportion of environmental protection input is very low. Blind investment has many disadvantages and serious consequences.

   Some investments are irrational. For example, in order to expand the market and seize resources to build production lines, individual enterprises have caused serious surplus in some areas, and the profit margin of the whole industry has been greatly reduced.

   Measures to deal with overcapacity

   Cement industry is a fully competitive industry. To solve the problem of overcapacity, we must follow the law of market economy, give full play to the role of market mechanism under the supervision of the government, adjust production capacity within a reasonable range through competition and survival of the fittest, and promote production development and technological progress.

   Strengthen government supervision. Under the market economy, the government should strengthen and improve the supervision of investors' investment behavior, and the main contents of supervision are environmental protection, land use, energy consumption and product quality. In supervision, the government should deal with the relationship with the market, fully mobilize the positive role of the market mechanism, and hand over the problems that should be solved by the market to the market. At the same time, the government should regularly release relevant information to guide investors.

   Stop blind investment. In order to stop blind investment, on the one hand, the government should strengthen supervision and put measures in place. On the other hand, we should give full play to the role of market mechanism, fully compete and eliminate the fittest. In the competition, investors should be responsible for their own investment behavior, and blind investors must bear the consequences of blind behavior, so as to learn lessons and stop blind behavior.

   In the process of merger and reorganization, we should avoid blind behavior to prevent new blind investment.

   Speed up the elimination of backward production capacity. In order to speed up the elimination of backward production capacity, the government should strengthen supervision, market competition and enterprise merger and reorganization.

   Government supervision is very important, and on-site supervision should be carried out according to the policies formulated by the state, and law enforcement should be strengthened.

   Full competition and survival of the fittest is one of the basic characteristics of the market economic system. To speed up the elimination of backward production capacity, we must vigorously develop advanced production capacity, replace backward production capacity by advanced production capacity through competition, and eliminate backward production capacity such as vertical kilns by new dry process, so as to make progress in production and technology. After several years of continuous elimination of backward production capacity such as vertical kilns and cement mills with a diameter of less than 3.0 meters, Bayannur City has effectively freed up part of the market space and created conditions for the development of new dry cement production lines.

   The merger and reorganization of enterprises can improve the production concentration and market competitiveness of the industry, build a combination of large, medium and small industrial structure, especially the merger and acquisition of large enterprise groups, help to establish a normal market order, promote the speed of eliminating backward production capacity, help to upgrade technology and transform to quality and efficiency, and take the road of green development. After joining China United Cement Group, Inner Mongolia Tongda Building Materials Co., Ltd. has achieved remarkable benefits and realized complementary advantages.

   Enterprises should strengthen their own construction and constantly improve their competitiveness. In the market economy system, the basic measures for cement enterprises to cope with overcapacity are to deepen the reform of enterprise system and technological innovation. Institutional reform is multifaceted, and the most important thing is to deepen the reform of property rights system, establish and improve incentive and restraint mechanisms. Technological innovation is to innovate existing production lines, open up circular economy industries and build new production lines with technological advantages around saving resources and protecting the environment.

   We should guide consumption and promote the use of high-grade cement and high-performance concrete. According to the requirements of the Guiding Opinions of the State Council on Resolving the Serious Contradiction of Overcapacity (Guofa [2013] No.41), "We should speed up the revision of cement and concrete product standards and related design specifications, promote the use of high-grade cement and high-performance concrete, cancel 32.5 composite cement product standards as soon as possible, and gradually reduce the proportion of 32.5 composite cement." Can improve that current situation that a large numb of low-end cement products are use. It is estimated that if the use of high-grade cement and high-performance concrete is promoted, the total amount of cement can be reduced by a relatively large margin.