
Displaying items by tag: China Resources Cement
Update on China, May 2022
11 May 2022China Daily ran a story this week entitled “Steel and cement don't reflect China's growth story any more.” The piece reassured English-language readers that the country’s economy is moving on and that recent falling production of cement simply reflected the “profound changes China's economic structure is undergoing.” Profound is the right word here given that China is home to the world’s largest cement sector.
Graph 1: Cement output by quarter in China, 2019 - 2022. Source: National Bureau of Statistics of China.
Data from the Ministry of Industry and Information Technology shows that cement output fell by 12% year-on-year to 387Mt in the first quarter of 2022. This compares to 7% and 15% falls in the third and fourth quarters of 2021 respectively. On an annual cumulative rolling basis, output previously hit a low of 2.22Bnt in March 2020 as the initial coronavirus outbreak was brought under control. Output then surged to a high of 2.53Bnt/yr in April 2021 before it started to fall in the autumn of 2021. On a monthly basis, output volumes fell by 5.6% year-on-year to 187Mt in March 2022.
As covered in last week’s column (GCW 555), the financial results from the larger Chinese cement producers have also suffered in the first quarter of 2022. CNBM’s total operating revenue fell by 1% year-on-year to US$7.29bn in the first quarter of 2022. Anhui Conch’s revenue fell by 26% to US$3.85bn and China Resources Cement’s (CRC) turnover fell by 18% to US$889m. Of these three only CRC has released cement sales volumes. Its sales volumes of cement and clinker decreased by 34% and 12% respectively.
In its own analysis, the China Cement Association (CCA) has summarised the current situation as one of rising costs, falling demand and declining benefits. The latest large-scale coronavirus lockdowns and a poor real estate market have hit demand. Rising energy and freight prices have increased the cost of cement. Together, higher costs and falling demand have hit the profits of the cement producers. CNBM’s net profit, for example, fell by 9% to US$420m. Regionally, the CCA observed that the losses of the northern-based producers had increased and that the profits of the southern producers had started to fall sharply also. Another interesting point it made was that the year-on-year decline in March 2022 was slower than compared to the first quarter as a whole and that high levels of inventory may have made March 2022 look worse than it actually was. The association is now pinning its hopes upon demand and prices picking up again later in the second quarter after the current quarantine controls are eased and the government curbs high coal prices.
The CCA’s take doesn’t seem unreasonable, although the first quarter of 2022 was previously deemed to be a continuation of the trouble the Chinese cement sector experienced in the autumn of 2021. Possibly the first quarter has turned out worse than expected but the monthly output in March 2022 has started to look like it might be a tail-off from the worst. The period to watch remains the second quarter of 2022. Looking more widely, energy shocks from the war in Ukraine couldn’t be easily predicted but coal prices were already becoming a concern in the autumn of 2021. China’s renewed zero-Covid policy meanwhile is starting to look unpalatable both economically and socially. Throw in a continued slowdown of the real estate sector and China Daily’s profound pronouncement about the future of cement may prove accurate.
Many first quarter financial results for cement producers are out already and what can be seen so far deserves discussion. The first observation is that the sales revenues of Chinese companies have suffered compared to their international peers. As can be seen in Graph 1 (below) CNBM increased its sales slightly in the first quarter of 2022 but Anhui Conch and China Resources Cement (CRC) had significant falls. Stronger results from CNBM’s non-cement production subsidiaries released so far suggest that the parent company’s slow performance is likely due to the cement market. The China Cement Association has reported that national cement output dropped by 12% year-on-year to 387Mt in the first quarter of 2022. It blamed this on the latest local coronavirus wave, limited construction project funds and poor weather.
Graph 1: Sales revenues in the first quarter of 2022 from selected cement producers. Source: Company financial reports. Note: SCG data is for its building materials division only.
Outside of China sales revenue growth has been better with Holcim and Dangote Cement leading the companies presented here. Holcim attributed its success to “strong demand, acquisitions and pricing”. Demand and pricing have been familiar refrains in many of the results reports this quarter. The undertone though has been the destabilising effects upon energy prices by the ongoing war in Ukraine. Holcim’s head Jan Jenisch summed it up as navigating “challenging times, from the pandemic to geopolitical uncertainty.” The producers with operations in the Americas and Europe seem to have coped with this so far mostly due to resurgent markets. Quarterly sales revenue growth for Holcim, CRH (not shown in the graphs) and Cemex each exceeded 10% year-on-year in both of these regions.
The regionally focused companies presented here have suffered more. India-based UltraTech Cement said that its energy costs grew by 48%, with prices of petcoke and coal doubling during the period. Nigeria-based Dangote Cement reported that its group sales volumes were down 3.6% mainly due to energy supply challenges in Nigeria. Internationally, its operations relying on cement and clinker imports – in Ghana, Sierra-Leone and Cameroon – were also hit by high freight rates caused by global supply chain issues. Thailand-based SCG said that national demand for cement demand fell by 3% due to negative geopolitical effects causing inflation, a delay to the recovery of tourism and a generally subdued market.
Graph 2: Cement sales volumes in the first quarter of 2022 from selected cement producers. Source: Company financial reports.
It’s too early to read much into it but one final point is worth considering from cement sales volumes in the first quarter of 2022. They have appeared to fall for the companies that have actually released the data. The reasons for CRC in China and Dangote Cement in Sub-Saharan Africa have been covered above. Holcim’s volume decline was 2% on a like-for-like basis and the others were all very small changes.
To summarise, it’s been a good quarter for those cement producers covered here with operations in North American and Europe. Energy instability caused by the war in Ukraine so far seems to have been passed on to consumers through higher prices with no apparent ill effect. The regional producers have suffered more, with the Chinese ones having to cope with falling demand and the others finding it harder to absorb mounting energy costs and supply chain issues. Plenty more first quarter results are due from other cement companies in the next few days and weeks and it will be interesting to see whether these trends hold or if others are taking place.
China: China Resources Cement’s (CRC) turnover fell by 18% year-on-year to US$889m in the first quarter of 2022 from US$1.08bn in the same period in 2021. Its sales volumes of cement, clinker and concrete decreased by 34%, 12% and 23% respectively to 12.2Mt, 0.78Mt and 2.22Mm3 respectively. Its profit dropped by 43% to US$92.9m from US$164m.
China: China Resources Cement has appointed Tan Ying as its chief financial officer.
Tan, aged 45 years, joined China Resources Group in 2010 and has worked as the Assistant Controller, the Deputy Controller and the Deputy General Manager of the Finance Department. She holds a bachelor’s degree in economics from the China Institute of Finance and Banking and a master’s degree in business from the University of Sydney in Australia. She holds over 20 years of experience in finance, banking and corporate management.
China Resources Cement’s profit drops in 2021
21 March 2022China: China Resources Cement’s profit was US$993m in 2021, down by 13% year-on-year from 2020 levels. Its cost of sales grew by 22% to US$3.81bn from US$3.12bn. The group noted that the average cost of coal increased by 54% in 2021. It also pointed out that infrastructure investment growth slowed down in 2021. The company increased its turnover for the year by 9.7% to US$5.62bn. Sales volumes of cement and clinker fell by 7% to 81.3Mt and 7% to 3.3Mt respectively. Concrete sales volumes grew by 11% to 14.8Mm3.
During 2021 the group started construction of a second clinker production line and two cement grinding lines at its plant in Wuxuan, Guangxi. Once the upgrades are completed the plant will have a total cement and clinker capacities of 2.4Mt/yr and 1.4Mt/yr respectively. The group also acquired a 51% stake in Hunan Liangtian Cement in January 2022 to enter into the market in Chenzhou, Hunan. This company has cement and clinker production capacities of 1.6Mt/yr and 2Mt/yr respectively. An ongoing upgrade will increase the cement production capacity of 2.1Mt/yr. In March 2022 it sold its 72% stake in Shanxi China Resources Fulong Cement to Tangshan Jidong Cement to enable it to leave the northern market.
China Resources Cement has also been growing its co-processing capabilities in 2021. At the end of the year it reported 10 co-processing projects with a total capacity of 1.7Mt/yr. The projects, mostly based in Guangxi and Yunnan provinces, process municipal solid waste, urban sludge and industrial waste.
CO2 emissions by the Chinese cement sector
01 December 2021Holcim has announced today that it has concluded the sale of its 75% stake of its Zambian business to Huaxin Cement. Meanwhile, in Tanzania last week, Huaxin Cement officially commissioned a cement grinding line at its Tanzanian Maweni Limestone plant. China produces about half the world’s cement and some its producers are expanding overseas as domestic growth dwindles. These actions and others place increased scrutiny on sustainability issues for Chinese cement producers. Readers therefore may be interested to note the publication last week of a list of the 100 largest Chinese corporate emitters of CO2 in 2020.
The Chinese Cement Association (CCA) website carries some highlights on the work by from the cement sector’s perspective. China Venture Carbon and Caixin compiled the list of publicly listed companies using a mixture of freely available data such as sustainability reports, by adjusting public data or by making estimates. The companies covered released 4.42Bnt of CO2 in 2020 or 45% of the Chinese total. The 15 cement firms in the top 100 were responsible for 893Mt of CO2 or around 9% of the national total. This ratio is in keeping with the usual 5 – 10% share of global CO2 emissions attributed to cement production.
Graph 1: Global gross CO2 emissions by large cement companies in 2020. Source: China Venture Carbon/ Caixin, corporate sustainability reports. Note: Includes all reported direct and indirect emissions for all company business lines.
Many of the Chinese cement companies already release sustainability data each year so this data isn’t exactly new. Yet seeing it all in one place like this is illuminating. Unsurprisingly, on the cement side the ranking is a list of producers ordered roughly by production capacity. The world’s biggest cement producer CNBM is also the cement company that emits the most CO2. It released 255Mt of CO2 in 2020. If it were a country, for example, it would be around the 20th largest emitter in the world with a similar output to France or Thailand. In China CNBM is then followed by Anhui Conch, BBMG, Tangshan Jidong Cement and China Resources Cement (CRC).
Graph 1 above also includes the total gross CO2 emissions for other large cement producers outside of China in 2020 for comparison. These figures are estimates compiled from company sustainability reports and they attempt to cover all direct and indirect emissions across all business lines not just cement. Similar to the Chinese list, generally, the less CO2 a cement company emits on this graph the less cement it produces. It is also worth noting that 2020 was an unusual year given the outbreak of the coronavirus pandemic. Generally this reduced global manufacturing output but there was wide regional variation.
The other interesting point to note from the China Venture Carbon-Caixin project is that they re-ranked their list by carbon emission intensity, measured as emissions as a proportion of revenue. This totally changes the ordering. Where before the 15 cement companies were fairly evenly spaced out amongst power generators, coal producers and petrochemical companies, now all of them are in the top 50. As the CCA notes in its commentary, “The emission intensity of electricity and cement is much higher than that of other industries. The top 30 companies in terms of carbon emission intensity are almost all power and cement companies.” Whilst most of these companies are probably safe for the time being, given their size, what this might mean for smaller Chinese cement companies with high emission intensity in light of the Chinese government’s energy efficiency drives might be seen as worrying.
Promoting gross CO2 emissions by cement producers is generally avoided by cement producers because it makes them look bad! It prompts an argument with the environmental lobby and doesn’t recognise the essential nature of cementitious building products to society. However, to their credit producers are publishing the data. The preferred metric for the non-Chinese multinationals is specific emissions per tonne of cement as this better shows the hard-work made to reduce emissions. However, this risks a credibility gap from the outside world, if specific emissions go down but total emissions keep rising each year. In the meantime though the more data the better from China and everywhere else.
China Resources Cement to buy new head office in Shenzhen
24 November 2021China: China Resources Cement has agreed to buy new head office, with an area of 26,700m2, in Shenzhen from its real estate subsidiary China Resources Shenzhen for US$126m. It consists of 91 units in the Runqi Technology Mansion in Shenzhen’s Louhu district. The property will be used by another subsidiary, CR Cement Investments, as its new headquarters. The group says that it wants to use the deal as a showcase of a ‘successful’ high profile transaction in the Shenzhen market to boost sales of other projects.
China Resources Cement increases turnover as profit falls in first nine months of 2021
25 October 2021China: China Resources Cement’s consolidated turnover was US$3.96bn in the first nine months of 2021, up by 13% year-on-year. ET Net News has reported that the company saw its net profit fall by 28% to US$683m.
China: China Resources Cement recorded a consolidated turnover of US$2.59bn in the first half of 2021, up by 19% year-on-year from US$2.17bn in the first half of 2020. Cement and clinker sales volumes increased by 16% to 41.6Mt and 30% to 7.04Mm3 respectively. Its profit attributable to owners of the company rose by 13% to US$467m from US$538m. Its capital expenditure (CAPEX) for the half totalled US$159m. It plans to spend US$540m in the full year in 2021.
China: China Resources Cement has appointed Jing Shiqing as its vice president.
Jing joined China Resources Cement in 2003 working in various production technology, human resources management and administration management. He became the Deputy General Manager of the Human Resources Department in 2018 and became a non-executive director of the company in the same year. Jing holds a bachelor's degree in engineering from the Changsha University of Science and Technology and a master's degree of business administration from the Nanjing University.