China to curb cement overcapacity

Overcapacity

The Ministry of Industry and Information Technology (MIIT) has drawn up strict plans to curb the severe overcapacity problems currently facing the Chinese cement industry.

The country’s cement manufacturers rapidly increased their output capacity on the back of the government’s 4 trillion yuan (US$ 586 billion) stimulus package announced in November 2008, and as a result the industry appears to be running into a supply surplus. In 2008, only 67% of cement capacity was used by the construction industry, while analysts suggest that 300 million t of the country’s current 1.7 billion t cement production capacity is excess.

One area where this overcapacity threat has been highlighted is in Sichuan. Following the earthquake in
May 2008, which killed over 68,000 people and left thousands more injured and homeless, the China Cement Association predicted that around 50 million t of cement capacity would be required to reconstruct the area. However, the 21st Century Business Herald predicts that the area will have 116 cement production lines by 2011, producing 220 million tpa.

Attempts to curb the problem

In an attempt to restrict this problem, the MIIT proposes to prevent any province with over 1000 kg per capita of cement clinker from building new production lines during the 12th Five Year Plan, which will come into effect in 2011.

At present, only two provinces, Anhui and Zhejiang, exceed this 1000 kg limit, according to statistics from the China Cement Association. However, both Jiangxi and Fujian will also exceed this limit, should they implement their proposed 2000 t of new capacity.

The Chairman of China Building Materials Federation, Zhang Renwei, has also suggested that the industry’s major players should acquire smaller companies in order to reduce the number of cement producers in the country, reported to currently exceed 5500.

Meanwhile, several cement producers in Zhejiang province, the most depressed market in the country, have already embarked upon a cessation of operations period twice this year in response to oversupply problems, and a similar period is being considered for later in the year.

Published on 01/10/2009

 

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