Update on China, March 2023

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The Chinese cement sector had a tough time in 2022. This was confirmed this week as the large domestic cement producers released their financial results. Revenue was down, profits fell and cement sales volumes tumbled. The key causes included the continuation of the country’s zero-coronavirus policy, the declining real estate market and rising input costs for raw materials such as coal. Demand for cement withered and so did the fortunes of the cement companies.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China. 

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

Data from the National Bureau of Statistics of China shows that cement output fell by 9.8% year-on-year to 2.13Bnt in 2022 from 2.36Bnt in 2021. The greater decrease was in the first half of the year rather than the second. The China Cement Association (CCA) said that this was nearly the lowest output in the last decade and the largest decline since 1969 ! The National Bureau of Statistics of China also pointed out in a release that, despite investment in fixed assets increasing by around 5% in 2022 and national infrastructure spending growing by 9%, real estate development investment dropped by 10% to US$1.46Tn.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. 

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports. 

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The cement producers warned in their forecasts that the results for 2022 were going to be rough and so it came to pass. China National Building Material (CNBM)’s revenue fell by 16% year-on-year to US$33.4bn in 2022 and Anhui Conch’s sales fell by 21% to US$19.2bn in 2022. Although, Tangshang Jidong Cement and Huaxin Cement reported declines of income or revenue in single digits. Profits halved for all of the companies covered here. Various combinations of the reasons covered above were cited for the situation.

What is more interesting are the responses some of the producers are making and what has gone well. CNBM, for example, is pinning its hopes on better staggered peak production and infrastructure projects. Anhui Conch, meanwhile, appears to have been diversifying its business by increasing both its concrete and solar power production capacity significantly in 2022. It was also announced that it plans to spend US$2.81bn on capital expenditure projects in 2023. China Resources Cement (CRC) said it had optimised its presence in South China through selected acquisition and divestments. Huaxin Cement has continued its focus on overseas markets with its share of operating revenue originating from outside China rising to 13% of the group’s total in 2022 compared to 8% in 2021. It also mentioned a number of unnamed projects around the world steadily drawing nearer to action. Sure enough, the group announced earlier in March 2023 that it was buying a majority stake in Oman Cement.

As for 2023, the CCA forecast in January 2023 that cement demand would be flat or slightly down. However, at the same time, provincial changes to the real estate market are expected to improve market conditions and infrastructure development will further drive demand for cement. The CCA identified that the cement sector’s production overcapacity could become an issue with lower demand. In 2022 the national clinker production utilisation rate was 65%, a fall of 10% from that in 2021. It also pointed out that peak-staggered production had actually helped cement producers generally to cope with smaller declines in profits compared to less well regulated industries.

Problems such as the zero-coronavirus policy, the real estate market and rising raw material costs have made the country’s production overcapacity issue worse. Changes are being made such as the national abandonment of the coronavirus lockdowns in late 2022, and, as mentioned above, the real estate market is being modified. In addition to this, various environmental changes are on the way, as the government works towards its sustainability goals. The country remains the largest cement producer in the world. Yet the message here is that we should expect more of the same for the cement sector in China in 2023.

Last modified on 31 March 2023

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