Displaying items by tag: China Cement Association
Half-year update on China 2019
28 August 2019The publication of CNBM’s financial results presents a good opportunity to take stock of the Chinese cement industry in the first half of 2019. Looking at the big picture first, cement sales rose by 5% year-on-year to 1.03Bnt in the first half of 2019 from 0.98Bnt in the same period in 2018. Graph 1 below shows the sales over the last five years since 2014. Generally, sales are decreasing each year but there has been some variation in the half-year periods.
Graph 1: Cement sales in China, 2014 – 2019. Source: National Bureau of Statistics of China.
As the China Cement Association (CCA) pointed out in its summary for the first half of 2019, the cement industry ‘swelled in volume and price’ as industry efficiency grew but that the growth rate dropped ‘significantly’ compared in 2018. By region, as Graph 2 shows, variation can be seen between the south-east of the country where growth was slow or even fell compared to stronger performance elsewhere. Cement production increased by above 20% in Jilin, Shanxi, Shandong, Tibet and Heilongjiang and by over 10% in Hebei, Gansu, Tianjin, and Liaoning. However, it fell in Hainan, Beijing, Qinghai, Guizhou, Guangxi, Hunan, Guangdong and Ningxia. Most of these changes were attributed to either rising or falling demand for cement, except for Jilin where reduced imports from neighbouring provinces pushed up its demand. In most of these latter regions it attribute the decline to falling demand for cement.
Graph 2: Cement production growth by province in first half of 2019. Source: China Cement Association.
Other points of note from the CCA include the surge in imports to China. Imports of cement and clinker rose by 149% year-on-year to 8.97Mt in the five months from January to May 2019. Vietnam supplied 68% of this followed by 11% from Thailand. On the production side, 10 new production lines with a total capacity of 15.5Mt/yr were commissioned in the period. These were fairly scattered across nine provinces, in Shanxi, Anhui, Hubei, Fujian, Guangxi, Hunan, Guizhou, Gansu and Yunnan respectively.
Sales and profits were supported by growing demand and prices on the corporate side. CNBM’s operating income for its cement businesses grew by 16% to US$8.14bn from US$7.04bn. Its adjusted profit increased by 40% to US$2.76bn from US$1.98bn. Anhui Conch’s sales rose by 17.9% to US$2.15bn from US$2.11bn. It blamed poorer profits in the south of the country on adverse weather leading to weakened demand.
The weaker sales in the south could be seen in China Resources Cement’s (CRC) results with its turnover down by 6% to US$2.22bn from US$2.36bn. Likewise, its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 8.5% to US$820m from US$896m. The majority of its cement plants are based in Guangxi, Guangdong and Fujian. Jidong Cement was also reported as having received US$30m in subsidies from the government during the first half of 2019 in relation to its ‘daily activities.’
As is usual for these kinds of roundups the dynamic in China is between government industrial policies, like peak shifting and pollution mitigation, and local demand and price trends. One of the latest spins on peak shifting, for example, is a rating system that is being considered to decide which companies should be subject to production limits and for how long. General cement sales are slowly falling each year but the rise of imports into the word’s biggest cement producing nation (!) mark an interesting trend. Also, it may not be connected, but lots of those provinces with falling demand so far in 2019 are those on the south coast facing the heavy clinker exporting nations of South-East Asia. Given the decisiveness with which the Chinese government dispensed with imports of waste materials under its National Sword initiative since 2017, those countries importing cement to China should beware. It could change very quickly. The Chinese cement market is never dull.
Update on China in 2017
28 March 2018Many of the Chinese cement producers have released their annual results for 2017 over the last week, giving us plenty to consider. The first takeaway is the stabilisation of cement sales since 2014. As can be seen in Graph 1, National Bureau of Statistics data shows that cement sales grew year-on-year from 2008 to 2014. This trend stopped in 2015 and then government mandated measures to control production overcapacity kicked-in such as a industry consolidation, shutting ‘obsolete’ plants and seasonal closures. Although it’s not shown here, that last measure, also known as peak shifting, cans be seen in quarterly sales data, with an 8% year-on-year fall in cement sales to 578Mt in the fourth quarter of 2017.
Graph 1: Cement sales in China, 2007 – 2017. Source: National Bureau of Statistics.
Looking at the sales revenue from the larger producers in 2017 doesn’t show a great deal except for the massive lead the two largest producers – CNBM and Anhui Conch – hold over their rivals. CNBM reported sales roughly twice as large as Anhui Conch, which in turn reported sales twice as large as China Resources Cement (CRC). With everything set for the merger between CNBM and Sinoma to complete at some point in the second quarter of 2018, that leader’s advantage can only get bigger.
Graph 2: Sales revenue of selected Chinese cement producers. Source: Company reports.
What’s more interesting here is how all of these companies are growing their sales at over 15% in a market where cement sales volumes appear to have fallen by 1.67% to 2.31Bnt in 2017. CNBM explained that its sale growth arose from improving cement prices in the wake of the government’s supply side changes. It added that national cement production fell by 3.1% to 2.34Bnt. CNBM’s annual results also suggested that the cement production capacity utilisation rate was 63% in 2017.
Anhui Conch’s results were notable for its large number of overseas projects as it followed the state’s ‘One Belt, One Road’ overseas industrial expansion strategy. Projects in Indonesia and Cambodia were finished in 2017 with production set for 2018. Further plants are in various states of development in Laos, Russia and Myanmar. The other point of interest was that Anhui Conch is developing a 50,000t CO2 capture and purification pilot project at its Baimashan cement plant. Given the way the Chinese government has been able to direct the local industry, should it decide to promote CO2 capture at cement plants in the way it has pushed for waste heat recovery units or co-processing, then the results could be enormous.
CRC reported its continued focus on alternative fuels. Municipal waste co-processing projects in Tianyang County, Guangxi and Midu County, Yunnan are under construction and are expected to be completed in the first half of 2018. Construction of its hazardous waste co-processing project in Changjiang, Hainan was completed in February 2018.
As ever with the Chinese cement industry, the worry is what happens once the production overcapacity kicks in. The state–published figures and state-owned cement companies suggest that the industry is in the early stages of coping with this. In February 2018 Reuters reported that the Ministry of Industry and Information Technology (MIIT) had banned new cement production capacity in 2018. The detail here is that new capacity is allowed but that it has to follow specific rules designed to decrease capacity overall. This followed an announcement by the China Cement Association that it would eliminate 393Mt of capacity and shut down 540 cement grinding companies by 2020. The aim here is to hold capacity utilisation rates at 80% and 70% for clinker and cement respectively and to consolidate clinker and cement production within the top ten producers by 70% and 60%. If the utilisation rate from CNBM is accurate then the industry has a way to go yet.
Ethiopia and China sign cement industry agreement
13 March 2017Ethiopia: Representatives of the Ethiopian and Chinese cement industries have signed a memorandum of understanding at the 2017 Ethio-China Cement Forum. Industry Minister Alemu Sime said that the forum was ‘vital’ to bring Chinese skills and experience into the local industry, according to the Ethiopian Herald newspaper. Representatives from the Chinese Cement Association, the Ethiopian Cement Association and local producers were in attendance.
China: The China Cement Association has asked the Ministry of Industry and Information Technology to speed up the consolidation process in the local cement industry. According to documents seen by the South China Morning Post the cement body wants the ministry to consolidate at least 60% of the country’s cement production capacity into 10 producers by 2020. The association made its proposals in July 2016 and has since chased the ministry for a response.
Association data shows that China may have to cut 390Mt/yr of production capacity and cut 130,000 jobs in the next five years in order to maintain an adequate balance between supply and demand. Larger cement plants could also be required to exchange production quotas and seek cross holdings in equity stakes.
To aid the consolidation process, existing cement companies will pool together US$3bn in a restructuring fund. This is expected to aid the larger cement producers, including Anhui Conch, Huaxin Cement, Qilianshan Cement and Sichuan Shuangma Cement.
Ministry of Industry and Information Technology considering guidelines on eliminating outdated cement capacity
02 March 2016China: The Ministry of Industry and Information Technology (MIIT) and related departments are considering draft guidelines on eliminating outdated production capacity in cement, ship-making, electrolytic aluminium and glass industries, according to Xinhua. At least 500Mt of ‘low-grade’ cement production capacity will be phased out.
The central government decided to promote supply-side reform at the end of 2015. Eliminating outdated capacity is a top priority. Methods to do this include phasing out outdated capacity, removing ‘zombie’ enterprises and promoting industrial reorganisation.
Kong Xiangzhong, vice president of China Cement Association, has advised the central government to provide certain compensation for the industry and establish a special fund so as to appropriately deal with the re-employment of redundant personnel and enterprise debts. Several provinces have specified their targets. Guangdong Province plans to cut clinker production capacity to 110Mt by the end of 2018.
China outlines merger targets for cement sector
02 July 2013China: The China Cement Association (CCA) has drafted a plan to promote mergers and acquisitions in the cement industry, according to an 'industry insider' quoted by Xinhua's China Economic Information Service. The plan is to help the cement industry to eliminate its out-dated production capacity and increase the concentration ratio of the industry.
According to the plan, the number of cement enterprises in the country will witness a significant drop during the 12th Five-Year Plan period (2011-2015) from that in seen in 2010, with no more than 1000 cement clinker enterprises and no more than 2000 large-scale cement grinding stations, each with annual output of more than 600,000t/yr, left by the end of 2015.
The plan also aims to develop five enterprise groups that each have annual output of more than 100Mt/yr and have a complete industry chain, core competence and international influence.
China: The cement sector on China's A-share market fell on 4 March 2013 following the announcement of new property control policies. China's central government announced on 1 March 2013 a set of measures to reduce rising domestic housing prices. The new measures included higher transaction duties, increased down payments and mortgage interest rates as well as strict purchase qualifications.
Cement demand in China is mainly driven by the property market and infrastructure construction. The market information supplier Chem99.com analyst Lu Ning said that the property market provided about 30% of the cement demand. Data from the China Cement Association showed that profits for the domestic cement industry fell by 32.8% year-on-year in 2012 to US$10.6bn.
China cement news in brief
06 February 2013Production in 2012: China built 124 new dry-process cement production lines and added 160Mt of cement clinker production capacity in 2012, according to the China Cement association. China had 1637 dry-process cement production lines with a production capacity of 1.6Bnt/yr of clinker by the end of 2012.
Sichuan Province in south-western China has seen its cement output climb by 2.02% year-on-year to 130Mt in 2012, according to the local Statistics Bureau. In 2012, Sichuan's cement industry recorded US$7.68bn in total output value, a year-on-year increase of 1.87%. Meanwhile, the industry's profit rose by 0.81% year-on-year to US$0.44bn.
North China's Hebei Province's cement output reached 128.1Mt in 2012. The province's building materials industry recorded US$1.7bn in profit in 2012, a year-on-year decrease of 21.8%.
East China's Jiangxi Province saw its cement output increase by 10.2% to 76.4Mt in 2012, according to the local branch of the Ministry of Industry and Information Technology.
Sinoma: Sinoma International Engineering has announced that the company plans to invest US$25.2m to set up a subsidiary in Hong Kong. The Hong Kong unit will acquire a 68% stake in the India-based cement firm, LNV Technology. Sinoma International said that the acquisition will increase its competitiveness in India's cement engineering market.
Separately, Sinoma estimated that the company's net profit for 2012 will decrease by 50% year-on-year in 2012, compared with a profit of US$247m in 2011.
Company news: Shanghai-listed cement and clinker producer, Xishui Strong Year Co Ltd Inner Mongolia, has estimated that the company's net profit will surge by 590% on-year in 2012, compared with a profit of US$1.51m in 2011.
Fujian Cement Inc expects to earn US$4.17m to US$4.98m in net profit in 2012, a year-on-year decrease of 79.2% to 75.27%.
Henan Tongli Cement Co Ltd, a Shenzhen-listed cement producer, has estimated that its net profit for 2012 will be between US$23.9m and US$28.6m, a year-on-year decrease of 26.1% to 38.1%. Tongli Cement earned US$38.7m in net profit in 2011.
China to restrict capacity expansion in 2012
30 March 2012China: China intends to implement strict restrictions on the increase of new cement production capacity in 2012 to deal with a capacity surplus, said Liu Ming, an official with the department of industry within the National Development and Reform Commission.
Speaking at an industrial meeting, Liu said the main task for the time being is to contain the rapid increase of capacity. Currently China faces national overcapacity during the period of 2011-2015. Liu said the government will encourage mergers and acquisitions in the national industry, and increase financial support.
China's cement output increased by 11% to 2.09Bt in 2011 with an annual capacity of 2.9Bt. Liu added that China would roughly complete its task of phasing out out-dated capacity by the end of 2012. However, domestic producers remain optimistic about the growth of national consumption in 2012. The performance of China's cement industry will remain optimistic and annual output will reach new high with around 8% of growth, predicted Kong Xiangzhong, secretary general of the China Cement Association.
China's cement industry will see around 5% of growth in 2012 and 2013, said Cui Xingtai, chairman of the China United Cement Corporation. Cui said that the Chinese cement market will shake off its current weak performance from the second half of 2012 with the annual peak season. The decrease of cement demand in the first quarter of 2012 was directly related to the slowdown of construction projects in the railway, road and airport sectors and cement demand would have good performance in the second half, said Cui.