Currently, my country's cement industry is entering an important period of adjustment, with industry overcapacity intensifying, demand continuing to shrink, and facing long-term structural adjustments.

Compared with 2019, industry profits will fall by more than 80% for two consecutive years in 2022 and 2023.

　　Cement demand is expected to still decline in 2024.

Market demand is insufficient and total production capacity is at a high level. The cement industry urgently needs to solve the problem of exiting excess production capacity.

Production capacity is at an all-time high

　　From a supply perspective, overcapacity in the cement industry has intensified and is at a historically high level.

The reporter learned from the China Cement Association that in 2023, the national cement clinker production capacity utilization rate will be less than 60%, and the capacity utilization rate of Shanxi, Guizhou, Liaoning, Jilin, Heilongjiang, Henan, Xinjiang, Inner Mongolia and other places will be less than 50%.

　　As demand further decreases, the problem of overcapacity in the cement industry becomes more prominent, capacity utilization rates further decline, and overcapacity has a tendency to intensify rapidly.

"Dual controls on energy efficiency, dual controls on pollution, rising prices of energy and raw materials have led to rising product costs, coupled with serious industry involution, the pressure of market competition is high," said Kong Xiangzhong, executive director of the China Cement Association.

　　The cement industry has long been characterized by fierce competition and increasing losses.

Data from the China Cement Association shows that in 2023, 18 of the 20 listed companies with cement as their main business will have negative year-on-year net profit growth, and 6 of them will suffer losses.

　　However, not all cement manufacturers are losing money.

It is worth noting that the 2023 annual performance report released by Tapai Group, an industry leader, shows that corporate revenue bucked the trend and rose. The net profit attributable to shareholders of listed companies during the reporting period ranged from 665.5174 million yuan to 798.6209 million yuan, an increase from the same period last year. 150% to 200%.

Relevant experts believe that as an industry with high carbon emissions, cement production companies have begun to take the initiative to clear out inefficient production capacity in recent years, as is the case with Tapai Group.

Thanks to a series of measures, Tapai Group's cement manufacturing costs dropped year-on-year, and the drop was greater than the year-on-year drop in cement prices, resulting in a year-on-year improvement in profitability.

This gives us hope that the cement industry will get out of the trough.

　　Accelerate the removal of inefficient production capacity

　　The present is an important window period to resolve excess cement production capacity, and we must be determined to fundamentally solve the problem.

　　Li Chen, deputy secretary-general of the China Cement Association and director of the Policy Research Center, analyzed that the overcapacity in the cement industry is mainly due to the following reasons: First, due to the deep downturn in real estate and other industries, insufficient demand and shrinking market; second, overheating of early investment and overcapacity While backward production capacity has been phased out, a batch of advanced production capacities have been newly built; third, advanced and relatively advanced new dry process cement with a daily output of more than 4,000 tons has a high production capacity, using the "five rulers" of energy consumption, environmental protection, quality, safety, and technology, in accordance with laws and regulations. The effect of reducing production capacity is gradually diminishing; fourth, although the off-peak production policy and kiln shutdown and production restriction strategies can stabilize prices and reduce production, and extend the survival space of some production capacity, they have not fundamentally reduced production capacity; fifth, mergers, reorganizations and integrations The market requires huge financial support, the efficiency of the cement industry has declined rapidly, and the capital market lacks confidence, making it difficult to obtain financing support.

　　“Compressing the scale of cement production by implementing common measures such as peak-shifting production can no longer reverse the current imbalance between supply and demand on a large scale.” Chen Bolin, president of Digital Cement Network, said that by adopting “dual control” of energy consumption intensity and total volume, and total emission The "dual control" method of quantity and intensity can effectively accelerate the elimination of inefficient production capacity in the industry, increase industrial concentration, and adjust the structure, which is the key to maintaining the medium and long-term healthy development of the cement industry.

　　In the future, cement production companies will still face the pressure and challenges of insufficient market demand.

Experts proposed that we should give full play to the leading role of large enterprise groups, adhere to the supply-side structural reform of the industry, strengthen peak-shifting production and production capacity replacement, and focus on resolving the main contradiction between serious overcapacity and declining market demand; we should actively study and explore industries for the exit of excess production capacity. Policies encourage the implementation of equity consolidation, mergers and reorganizations, and equity cooperation among large enterprises to further increase industry concentration and achieve green, low-carbon, and high-quality development of the industry.

　　Three-party linkage strengthens regulation

　　Resolving the severe overcapacity in the cement industry requires the cooperation of the government, enterprises, and industry associations.

　　Kong Xiangzhong believes that only by maintaining the dynamic balance of market supply and demand can the industry have room for growth.

Government authorities must focus not only on investment growth, but also on the gain of existing assets.

　　At present, cement production enterprises have strong scientific and technological innovation capabilities, and new technologies are constantly emerging.

Kong Xiangzhong expressed the hope that the competent authorities will 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 severe overcapacity, the entry threshold must be continuously raised, the elimination of backward production capacity should be accelerated, and the transformation and upgrading of enterprises should be promoted.

　　Kong Xiangzhong suggested that the existing cement production capacity replacement policy should be revised in a timely manner, a binding carbon quota allocation mechanism should be established, and the supply-side structural reform of the industry should be promoted in the long term.

　　Li Chen said that effective measures of "policy + market" should be adopted to allow excess production capacity to exit in an orderly manner, providing support and leaving space for resolving overcapacity and high-quality development of industry transformation and upgrading.

　　Resolving overcapacity is a complex systematic project.

First, we must 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, and ensure that production capacity is only reduced but not increased.

Experts believe that with regard to the issue of increasing the proportion of waste co-processed in cement kilns, the current capacity of my country's general cement production capacity stock projects can fully absorb local domestic waste and other wastes through technical transformation, and there is no need to build new cement projects to provide cement products and consume Na-waste balance.

　　It is necessary to raise funds for the exit of production capacity.

It is very difficult to clear production capacity simply by raising the threshold of comprehensive standards and market-oriented means to reduce prices and compete. Relevant departments can provide preferential support in environmental protection, taxation, finance, energy and other aspects.

　　In addition, for enterprises that are benchmarks for high-quality development in the industry, it is recommended that qualified enterprises be allowed to raise funds through a variety of channels.

Continue to increase rigid constraints on peak-shifting production to gain time and accumulate strength for resolving overcapacity.

　　Zhu Junbi

Zhu Junbi