Cement market expected to grow 6% in 2013
Last Updated:2013-06-20 09:15 |
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By Zhu Junbi

According to estimation statistics published by China Cement Association, China's cement market is expected to grow by about 6 percent in 2013, slightly better than the 5.74 percent growth of 2012. Single-digit growth of the cement market indicates that the industry is entering a stable development phase. At present, the priority is to solve the problem of excessive production capacity and to promote the green development of the industry.


Encouraging signs in the market recently

"The new type of urbanization and the huge market of infrastructure construction is a lasting source of demands for raw material commodities like cement and steel", Kong Xiangzhong, executive vice chairman and secretary general of China Cement Association, told the reporter. Mr. Kong estimated that the market's demand for cement would grow for at least another 10 years, and the so-called turning point of cement market demand was not yet to come. 

The China's cement industry prosperity index report shows that after the initial seasonal adjustment, cement output across China grew by 10.8 percent in the first quarter. Statistics provided by Digital Cement show that the growth of market demand in the first quarter was 8.2 percent.

"The growth of 8.2 percent in the first quarter this year is not only higher than that at the same period of last year, but also higher than the estimated 6 percent annual growth", said Chen Bolin, president of Digital Cement. Mr. Chen points out that, considering conditions throughout the year, cement demand in 2013 may be slightly higher than the expected 6 percent. Judging from historic pattern, with the exception of 2009 when the annual growth was higher than that of the first quarter, annual growth in other years was slighter lower or equal to that in the first quarter; therefore, the growth of cement demand in 2013 should be lower than 8.2 percent. 

Great pressure of over capacity

Based on the normal progress of projects under construction within the knowledge of China Cement Association, the size of new projects in 2013 is estimated at about 120 million tons. Based on this calculation, new cement production capacity in 2013 will be increased by about 7.5 percent, whereas growth of the market demand is about 6 percent; the pressure of over production capacity is by no means reduced.

"New cement production capacity growing at a rate of 7.5 percent means that in 2013 the installed production capacity of clinker will be as much as 1.72 billion tons; actual clinker production capacity approaches 1.9 billion tons, which is equal to cement production capacity of 3.1 billion tons". According to the analysis of Chen Bolin, geographically, new growth of production capacity this year concentrates in southwestern and northwestern regions, accounting for almost half of new production capacity across the country. 

In terms of price, apparent month-on-month improvements have been seen since mid March this year. "As demand in the south begins to recover, sales pick up, inventory is reduced greatly, and price goes back up significantly", said Chen Bolin, who points out that profit of the industry will still depend more on whether enterprises are able to maintain a desirable supply-and-demand situation and restrain the growth of new production capacity through the effective restraining power of the relations between supply and demand.

Pundits point out that in the short term growth of new production capacity will still outrun the increment of market demand. According to statistics, the utilization rate of production capacity in the cement industry in 2012 was below 75 percent, and in some provinces and cities, kilns were suspended for as many as 150 days in the year. "The beginning of the year should have been a time to reduce inventory, but the collective release of the production capacity of 160 million tons of clinkers added last year impacted the 8.2 percent market increment in the first quarter", said Kong Xiangzhong.

The severely excessive production capacity of the cement industry has attracted great attention from the government. On May 10, relevant government agencies jointly issued the Notice on Resolutely Reining the Irrational Expansion of Industries that Have Severely Excessive Production Capacity. The Notice propose to forbid the approval of new production capacity projects in industries with overcapacity, decidedly suspend illegal ongoing projects in industries with overcapacity, and stringently investigate and hold responsible organizations and personnel of illegal projects.

Prominent problems that require solutions

"As the cement industry enters a stable phase, there are still some problems to be solved besides overcapacity, so as to promote the wholesome development of the market", said Kong Xiangzhong.

First, optimization of industrial structure. As of the end of 2012, the clinker production capacity of the 10 largest cement enterprises in China accounted for 48.93 percent of total production capacity of the country, their cement output accounted for 31 percent of national total, and two of them had the clinker production capacity of more than 100 million tons annually. However, China still lags behind developed world in terms of concentration of the cement industry. Kong Xiangzhong also suggests that large enterprises are the main players for merging and restructuring in the cement industry; during the process of merging and restructuring, there is objective difficulty and risks for large enterprises to bear.

Second, transference of production capacity. According to analysis, increment of market demand in the future lies in the mid-western regions; in coastal regions on the east, cement production capacity is being cut down. "We should study the demand of the international market, and transfer our advanced technology, equipments, human resources, and high-quality clinker to the international market, and claim more of the commercial concrete market through industrial extension. Also, we should, through revising cement standards, transfer some of the mineral additives used in the production of cement to commercial concrete so as to reduce the production of cement", said Kong Xiangzhong.

Third, environment protection and utilization of resources. "Currently, over 2000 cement grinding stations around China have dust pollution problem, and more than 1,000 clinker production lines are emitting hazardous gas. These problems should be addressed", said Qiao Longde, chairman of China Building Materials Federation and president of China Cement Association, during the 2013 International Cement Summit. Mr. Qiao said that even the best cement enterprises in China lag behind advanced international standard in terms of energy saving and emission reduction. China accounts for 54 percent of the world's cement output, so it is extremely important for the cement industry to achieve green development and build a beautiful China.  

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