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Cement industry results from China have all told an alarming story this week: profits for the first half of 2012 look set to fall by more than 50% year-on-year.

China Resources Cement Holdings warned that its first-half earnings were down sharply. China National Materials Co. Ltd. (Sinoma), the cement equipment and engineering services provider, and Gansu Qilianshan Cement, a small Shanghai-listed cement producer, have both forecast similar drops. Sinoma blamed its drop in profit partly on an overseas project but 'interestingly' no further information was released detailing which project.

Previous to this in June 2012 Anhui Conch Cement warned that its net profit would fall by more than 50% due to weak demand and falling product prices. In May 2012 China National Building Material Co Ltd (CNBM) reported that its net profit for the first quarter of 2012 was down by 45% year-on-year. In April 2012 Jidong Cement reported an increase in its net loss for the first quarter and a year-on-year revenue drop of 14%.

Each of the Chinese big players in the cement industry have issued profit warnings of a similar scale suggesting that the Chinese market faces a uniform downturn or that a slowdown is being centrally managed. Official signs that the Chinese industry faced a slowdown emerged in March 2012 when the national growth target was lowered, analysts' predictions were released forecasting weakened profits for the nation's main producers and government officials admitted that overcapacity loomed within five years.

According to OneStone Research data on the Chinese market in 2010 CNBM, Anhui Conch, Jidong and Sinoma represented over 20% of Chinese capacity. To give these figures some perspective, in 2011 CNBM's profit was US$1.7bn. Holcim's operating profit for the same period was US$2bn and Lafarge's operating income was US$2.74bn. Even halved, CNBM's profit is a massive figure for a company with less of an international presence than the European multinationals.

Friday saw the news that many have long suspected: China is producing too much cement. Liu Ming, an official with the department of industry within the National Development and Reform Commission, announced that China faces national overcapacity in the next five years.

For anyone used to reading the permanently good news from China's cement industry this is a massive jolt. The natural reaction to dealing with industrial news from a command-style economy is to assume that everything is 'airbrushed'. This then demands the question: how much trouble is the Chinese cement industry really in?

Despite persistent rumours querying how long China's unparallelled growth could last, official responses have only appeared in the last two months. First the environment ministry announced stricter rules regarding nitrogen oxide emissions from cement plants in February 2012. Commentators suggested that the move could wipe out a third of the industry's profits. Shortly afterwards FLSmidth, entered the Chinese environmental control technology market.

In early March 2012 Premier Wen Jiabao lowered China's growth target for 2012, signalling public political acceptance of an inevitable economic 'soft landing'. Then in late March 2012 analysts' reports emerged predicting that each of China's main producers would suffer weakened profits in 2012. Only CNBM, China's biggest producer, appears to have bucked this trend. It announced that it expected its net profit to jump more than 100% compared to 2011. However the general uncertainty regarding statistics from China throws doubt on how realistic this forecast may be.

Yet before we give up hope it's worth remembering that opportunity abounds in a market as gargantuan as China. The rest of 2012 will be an interesting period for the Chinese cement industry.