Recently, Gao Dengbang, president of the China Cement Association, said that the current dilemma of the industry is largely caused by the industry itself. This statement has triggered extensive discussion in the industry.

Why do we say that the current predicament is largely caused by the industry itself? This problem is too complicated, and the author only talks about my humble opinion from the point that the root of commodity price changes lies in the relationship between supply and demand.

 

 

　　The trend of demand cannot be changed, but the total amount is still huge.

From the demand side, the decline in cement demand is the objective law of economic development, this conclusion can be easily drawn from the development trajectory of Japan and developed economies in Europe and the United States, almost all mature economies, after the economic development to a certain scale, there will be a decline in demand.

To put it simply, the decline in cement demand is the inevitable result of economic development and is not subject to human will. However, in view of my country's huge economic volume, land area and the gradient of economic development, the decline in cement demand is relatively slow.

From the perspective of demand, after the cement industry experienced a trough in 2015, domestic cement demand officially entered a high platform period, and cement demand gradually declined around 2022, with an annual output of 2.13 billion tons, down 10.5 per cent from the same period last year. By 2023, the domestic cement production will still be 2.023 billion tons, and the total amount will still be very large.

To sum up briefly, the downward trend of cement demand on the demand side is irreversible, but there will be no collapse. At present, the total cement demand is still about 2 billion tons, which is still "crushing" other countries in the world.

With demand still at a high level, domestic cement prices continue to decline, and even industry-wide losses occurred in the first quarter of this year. As the supply side, the industry itself does have a great responsibility.

　　Blind increase in supply-side capacity is the "source of all evil"

In the past few years, there has been a wave of capacity replacement in China. A large number of backward production capacity and zombie production capacity have been transformed into advanced production capacity through "capacity replacement", which has a serious impact on the market in the early days.

Statistics from China Cement Network show that from 2018 to 2023, there are 57 production lines in the national cement industry, with a total production capacity of about 91 million tons. A total of 41.3621 million tons of zombie production capacity to participate in capacity replacement, "resurrection" production capacity of more than 3000 million tons.

 

 

Not only that, the new production lines are mostly large lines, with extremely strong overproduction capacity, which aggravates the problem of overcapacity in disguise. It is rumored in the industry that the 6200t/d clinker production line newly built by an enterprise has an actual production capacity of nearly 10,000 tons.

　　Such replacement, overcapacity can not aggravate?

In addition, the production line that did not participate in the replacement was not "idle", but began a drastic transformation of production. 3200t/d production line, actual production capacity 4000t/d; The 5000t/d production line has an actual production capacity of nearly 7000t/d. Similar situations have existed in the industry in large numbers in the past few years.

 

 

From 2015 to 2022, a full 7-year window period, the industry does not want to implement capacity reduction, but continues to increase actual capacity in disguise through various means.

　　In this way, who can be blamed when the cement industry comes to the present field?

　　Staggering production is increasingly difficult to execute and varies regionally

At this time, many people in the industry have to say that since the contradiction between supply and demand is so serious, then increase the intensity of peak shifting and stabilize the market by controlling production.

Indeed, from the perspective of improving the relationship between supply and demand and stabilizing the market situation, this is indeed a way. However, when the market is relatively good, the implementation difficulty of staggered production is much lower. After all, large enterprises can be "generous", but when the market is poor, the implementation difficulty will be greatly increased.

Take Henan as an example, the top twoZhonglian TongliEven if Tianrui Cement does not produce, other manufacturers can also meet the current market demand. How can large enterprises make concessions at this time? This situation is basically similar in many provinces in China.

A more serious problem is that some enterprises tried their best to build lines and expand production in the past few years. Now that the production line has been built, seeing that the market is not good, they want to win over other enterprises to strengthen off peak production. If you think about it from another perspective, can those enterprises that have not built large-scale lines be happy?

Therefore, we see that many enterprises in the industry call for production according to the design capacity, or even explicitly support to increase the peak shift, but more or less will also show dissatisfaction with the past new line problems. In such a state of mind, I'm afraid the effect of peak production will be discounted.

Of course, there are still many problems in the industry itself, and the space is limited. The author only talks about the supply problem.

Welcome to the comment area to talk about their own views.