Fu Lijuan, China National Building Materials Exhibition & Trade Centre (CBME), and Tian Guiping & Cui Yuansheng, Institute of Technical Information for Building Materials Industry of China (ITIBMIC), discuss the development status and future prospects of China’s cement industry.
In 2020, despite the impacts of the COVID-19 pandemic, China took a number of measures to prevent and control the spread of the virus and accelerate the resumption of work and production, which ensured a steady economic recovery and enabled China’s GDP to exceed 100 trillion yuan, with a year-on-year growth rate of 2.3%. In 2020, though affected by the pandemic and flood situation, with the support of infrastructure construction investment and real estate investment, China’s cement industry maintained steady growth. The cement demand which decreased at the beginning of 2020 was reversed and the cumulative cement output in 2020 reached a high level compared to recent years.
The economic performance of the cement industry in 2020 could be described as a sharp decline, followed by rapid recovery and stabilisation. Cement production and sales saw year-on-year growth from negative to positive. In 2020, the annual output of cement reached 2.377 billion t, with a year-on-year growth of 1.6%. In 2020, the cement industry achieved a profit of 183.3 billion yuan, similar to that of 2019. The cement industry still maintains steady development.
In 2021, it is expected that cement demand will strive to maintain a high plateau, or slowly enter a medium to long-term development trend of continuous fluctuation and decline. With the influence of demand saturation and environmental pressure, cement production is likely to enter a steady downward trend. Cement prices are hoped to maintain the levels of the past two years due to the risk of decline caused by new added production capacity. The mainstream market prices are expected to remain strong, and benefits are expected to continue to remain stable.
China’s cement output is expected to stabilise at 1 – 1.5 billion t by 2030 after peaking at 2.48 billion t in 2014, according to recent years’ data and preliminary projections.
In 2020, the whole year benefited from the impact of the active investment policy. Cement production increased slightly over the previous year, showing the second rebound peak of outputs since 2014, with 2.377 billion t of cement produced. Production development over the past 10 years is shown in Figure 1.
Figure 1. Cement production in 2010 – 2020.
In 2020, China’s cement clinker output was 1.579 billion t, with a year-on-year growth of 3.07%. From 2010 to 2020, the output of cement clinker in China showed a fluctuating growth trend. However, cement clinker continues to grow, and may reach a peak in the next two years (Figure 2).
Figure 2. Clinker production in 2010 – 2020.
Figure 3 shows the change in cement clinker factor in China from 2010 to 2020. In 2013, the clinker factor was at its lowest and almost reached 0.56. Since then, with the acceleration of the elimination of small cement grinding stations and backward enterprise production capacities, the clinker factor rose above 0.66 in 2020. It is estimated that with the re-development of low carbon cement and ultra-fine premium cement, the clinker factor may fall again in the future. The national cement output has six regional markets.
Figure 3. Change in cement clinker factor in China in the past 10 years.
As shown in this table, Eastern China (32.97%), Central South China (26.89%) and Southwestern China (19.30%) are still the largest cement consumption regions in China. These three regions are also the most economically developed and active southern regions in China. Northern China, northwestern and northeastern areas, with future economic prosperity, may see a rise in cement demand.
In 2020, there were a total of 1609 NSP kilns of clinker production lines nationwide (excluding some production lines that have been shut down and dismantled, and excluding production lines with a daily output of less than 700 t). The designed annual capacity of clinker was 1.83 billion t, and the actual annual capacity of clinker was more than 2 billion t. From the recent production data, new ignition cement kiln production lines have increased by 10 from 2019 to 2020. Thanks to the capacity replacement and elimination of lagging projects which have been replaced with new large cement production lines, the total production capacity of the NSP kilns producing clinker also increased slightly compared to 2019. As a result, the supply of clinker in these regions has increased rapidly.
Number of cement enterprises
In 2019, there were more than 3400 cement enterprises in China. Among these enterprises, about two thirds were cement milling enterprises (2188). Most of these milling enterprises were transformed after the elimination of shaft kiln cement enterprises. The country’s existing cement grinding capacity is about 4.4 billion t. Based on the annual cement output of 2.3 billion t, the availability of cement grinding capacity is only 52.3%, which demonstrates a serious excess capacity.
Large cement enterprises
For the over 3400 existing cement enterprises, China’s government is encouraging mergers and reorganisation and the development of large enterprise groups. In 2020, the clinker production capacity of China’s top 20 large cement enterprises reached 1.221 billion t, accounting for 66.72% of the designed clinker production capacity of the whole industry of 1.83 billion t, and having a strong influence on the pricing in the cement market. Figure 4 shows the clinker capacity of the top 10 cement groups in China in 2020.
Figure 4. Top 10 cement enterprises with clinker capacity in China in 2020 (Unit: Kiloton/a).
In 2020, the overseas investments of Chinese cement enterprises continued to grow; clinker capacity reached 43.174 million t, an increase of 3.891 million t from 2019. Among the clinker production capacity that has been put into production, Conch Cement ranks first with 10.943 million t, Huaxin Cement ranks second with 6.867 million t, and Red Lion Group ranks third with 6.2 million t (Figure 5).
Figure 5. Top 10 Clinker production capacity of cement enterprises on investment abroad from China in 2020 (Unit: Kiloton/a).
Import volume of cement clinker
China’s cement clinker imports totalled 33.37 million t in 2020 and 22.74 million t in 2019, which is a 47% year on year growth rate. Demonstrated in China’s import data from 2016 to 2020, the cement clinker import volume has increased rapidly year by year (Figure 6).
Figure 6. China clinker import volume from 2016 – 2020 (Unit: Kiloton/a).
Cement clinker imports are mainly from Vietnam, Indonesia, Thailand and Japan. In 2020, the amount of clinker imported from Vietnam totalled 19.8 million t, accounting for 59% of total imports. Followed by Indonesia, Thailand and Japan, the imported clinker volume accounted for 10%, 9.9% and 8.2% of total imports, respectively.
Figure 7 shows the growth of China’s imports of clinker in the past two years. As can be seen from the figure, in recent years, China’s imported cement clinker market has become increasingly hot, and the total amount of clinker imported has grown. The increasing domestic demand and increasing cement price have attracted imports of cement clinker from surrounding countries to enter the booming coastal market of China.
Figure 7. China clinker import volume in 2019 and 2020 (Unit: Kiloton/month).
China signed the RCEP trade agreement in January 2021. Cement clinker tariffs between member countries will be reduced accordingly, and the market for clinker imports from China’s coastal areas is expected to become more active this year.
Cement and clinker exports
From January to November in 2020, China exported 83 000 t of clinker, a decline of 81% year on year. The export of cement totalled 2.515 million t, showing a decline of 43.5% year on year. China’s export cement volume only accounts for 0.14% of China’s total cement production.
Changes in cement demand market structure
In recent years, China’s total demand for cement has been stable at 2.3 to 2.4 billion t. The cement market demand is mainly concentrated on infrastructure and housing construction projects, and housing construction is mainly concerned with commercial concrete. According to the investigation of 506 concrete enterprises, the concrete output will be 225 million m3 in 2020, with a year-on-year decrease of 12.56%. However, overall cement consumption in 2020 is slightly higher than in 2019, having been increasingly used for transportation and infrastructure. In order to maintain economic growth, China has increased its investment in roads and infrastructure, which has led to a significant change in the downstream demand structure of cement in 2020, and a significant increase in the demand for infrastructure cement.
Economic operation of the industry
Average price and profit of cement
In 2020, the national cement output increased slightly compared with the same period last year, the average price of cement decreased slightly, and the industry profit decreased slightly compared with the same period last year. On the one hand, due to the pandemic situation and the real estate saturation, the downstream demand structure has changed; on the other hand, due to the release of new capacity and the growth of imported clinker, cement supply and demand tend to rebalance.
Influenced by the pandemic in 2020, (although the overall demand has not changed greatly), the downstream demand structure has changed and the supply has increased, resulting in the average cement price index falling by 2% compared with that in 2019 (Figure 8).
Figure 8. Comparison of cement price index from 2019 – 2020.
However, in the past five years, due to the elimination of backward production capacity and the improvement of industry concentration, the market control of China’s cement industry improved, the overall product price generally increased, and the economic benefits of the industry also tended to increase (Figure 9). Yet, since the second half of 2019, the average industry cement price has started to decline again (Figure 9). There are two reasons for this. One is the overcapacity in the industry, and the other is that China has begun to regulate the monopolistic price behaviour of large regional enterprises. Figure 10 shows the distribution of cement market prices by different regions in the country in 2020.
Figure 9. Trend of China’s five-year cement market price (PO42.5) from 2016 to 2020 (yuan/ton).
Figure 10. Price chart of cement market in different regions of China in 2020 (Including tax and freight, yuan/ton).
Profit of cement industry decreased year on year
In 2020, the national cement demand and cement market prices reached stability, and generally continued to run at a high level. Therefore, the cement industry has seen a good profit, and the operating income of the cement enterprises above designated size is 996 billion yuan. However, this is down 2.2% from a year earlier. The total profit was 183.3 billion yuan, down 2.1% year on year. Profit in the cement industry has declined slightly from 2019, but is still higher than the pre- 2018 level. Figure 11 shows the profit situation of the national cement industry over the past five years. Since 2018, corporate profits have begun to decline.
Figure 11. Profits of China’s cement industry over the past five years. (Unit: Billion yuan).
Carbon neutrality and technological progress
In order to implement the Paris Climate Change Agreement and achieve carbon neutrality as soon as possible, China’s cement industry will step up the pace of energy conservation, emissions reductions and technological progress, especially in the following aspects.
Carbon emissions and carbon peak
Clinker output is the biggest factor affecting the direct carbon emissions of the cement industry. Over the past decade (2009 – 2020), carbon emissions from China’s cement industry have gradually increased from 971 million t to 1.375 billion t with the increase of cement clinker production. In recent years, as a series of policies to reduce capacity has been vigorously implemented, outdated capacity has been eliminated against comprehensive standards such as environmental protection, quality, energy, technology and safety. The cement industry’s carbon emissions are gradually reaching a peak during the transition period from the 13th Five-Year Plan (2016 – 2020) to the 14th Five-Year Plan (2021 – 2025). It is estimated that the clinker output at the peak will be about 1.4 to 1.6 billion t, and the annual cement output will be about 2.2 to 2.4 billion t.
During the 14th Five-Year Plan period (2021 –2025), the industry will continue to cut production capacity, eliminate backwardness and consolidate achievements in cutting overcapacity. It is estimated that annual carbon emissions from the cement industry will decline after about 1.45 billion t of CO2 equivalent. Around 2023, the industry will reach a carbon peak and move towards carbon neutrality thereafter. Figure 12 shows the carbon emission statistics of China’s cement industry from 2009 to 2020.
Figure 12. Statistics of clinker production and carbon emissions in China from 2009 to 2020 (Unit: Million t of clinker and CO2 equivalent).
Technical roadmap of carbon neutrality
After China’s cement industry reaches a carbon peak by 2025, it will continue to advance technology to become carbon neutral by 2060. Efforts on technological progress will be made in the following areas:
Improving energy efficiency
Direct emissions from the cement industry are mainly from clinker sintering. The national average heat consumption of clinker in China is about 100 kg tce/t of clinker (700 k cal./kg Cli.). Compared with the international advanced level, unless the cement variety is changed, there is not much room to further improve on the thermal efficiency, energy savings and emissions reduction.
Improving the proportion of AFR
China has about 100 cement plants in which it can carry out alternative fuel and raw material (AFR) trials, but the replacement rate is still relatively low, at less than 5% on average; individual manufacturers can reach more than 30%. While the future is still relatively uncertain, cement industry AFR replacement potential is large. The main obstacle is that China’s waste sorting has only just begun, with much of it still treated in primitive ways such as in simple landfills or incineration to generate electricity.
Specific statistical data shows that 60 projects using cement kilns to dispose of domestic garbage have been in operation, and the disposal scale is 7.9 million tpy. There are 34 projects under construction, with a disposal scale of 4.15 million tpy. 63 operation projects of sewage sludge disposal by cement kilns, with a disposal scale of 3.6 million tpy, are also in operation. There are 16 projects under construction, with a disposal scale of 1.45 million tpy.
Improving the efficiency of clinker
China’s cement clinker factor used to be close to 0.5, but with the elimination of backward capacity such as shaft kilns and small grinding stations, the clinker factor has risen to more than 0.6. In the future, if the quality of clinker continues to improve or cement varieties change, such as the development of LC3 type of low-carbon cement, there will be scope for the utilisation of various solid wastes in the cement industry.
Improving the proportion of bulk cement
Bulk cement shipments in China are now about 68% and are rising at a rate of 1% per year. Preliminary estimates show that the carbon emissions per ton of bulk cement are 45 kg less than those of cement in bags. If carbon neutrality is to be achieved in the next 20 to 30 years, China will need to continue to increase the proportion of bulk cement to more than 90%.
Developing green energy and green transportation
In cement production, with China’s current technology levels, direct carbon dioxide emissions total around 556 kg and indirect carbon dioxide emissions total 50 kg per ton of cement. Thus, the total CO2 emissions per ton of cement produced are about 606 kg (Table 2) (670 kg for the EU, Figure 13). China’s lower carbon emissions per ton of cement may be mainly due to its low clinker factor (higher admixtures), coarser cement fineness than EU countries, and the low degree of automation of the cement industry (resulting in lower power consumption and less indirect emissions).
Figure 13. EU Cement Industry 2050 Carbon Neutral Roadmap (kg CO2/t of cement).
As discussed, the room for emissions reduction is limited to improving the thermal efficiency of the kiln and reducing the clinker factor, which is already low, unless the cement type is changed. By increasing the rate of AFR, China also has scope for improvement. In addition, indirect emissions can be reduced by using renewable energy sources. There is also the use of green transport, including the transport of the whole life cycle of cement. If renewable energy is used in transportation, carbon dioxide emissions from the production process of cement can be reduced further.
According to the European Cement Association, 280 kg of CO2 per ton of cement simply cannot be removed during the cement production process (Figure 13). Therefore, CCS-CCU must be used to solve the problem. At present, Conch Group has built China’s first environmental demonstration project of carbon dioxide capture and purification of cement kiln flue gas. The project converts carbon dioxide from the flue gas of the cement plant into carbon dioxide products that can be used in industry, food and medicine. This flue gas carbon dioxide capture and purification technology has been listed in the category of ‘Industrial Structure Adjustment Guidance Catalogue (2019 version)’, which belongs to the exploration of carbon neutrality of cement enterprises in the industry.
Developing zero-energy buildings
Given the difficulty of the above measures, it is also possible to continue to neutralise the remaining carbon dioxide in subsequent cement and concrete industries. At present, China has been promoting passive zero energy buildings for nearly 10 years, including Passive House Premium, which makes the energy consumption of concrete and cement buildings become negative. Passive House Premium does not consume fossil energy and also generates green renewable energy, which is fed back to the grid and thus neutralises the excess carbon released in cement production.
Prospects of the cement industry in 2021
In 2021, according to the national encouragement policies to accelerate the construction of new infrastructure, new urbanisation, transportation, water conservancy and other major projects, it can be inferred that infrastructure investment will remain high, thus hopefully maintaining a high demand for cement. It is expected that in 2021, infrastructure investment will surge under the base effect in the first half of the year and fall in the second half of the year. There is downward pressure on new construction of real estate in 2021, which will have a negative impact on cement demand. At the same time, considering the relative saturation of real estate, and contraction and reduction of dependence on financing, the cement demand is expected to fluctuate in the range of -2%~0 in 2021.
To make up for the negative impact on economic growth from the slowdown in real estate investment, the country will step up construction of infrastructure and transportation. Major transport and infrastructure projects, such as the Guangdong-Hong Kong-Macao Greater Bay Area, Nanjing Metropolitan Area, Northeast Revitalisation, Rural Revitalisation and Hebei Xiong’an New Area, will continue to boost the country’s cement demand. Therefore, it is expected that in the next five to ten years, the demand for cement in the central and western regions will remain high.
In 2020 China’s cement capacity utilisation rate was only a little more than half (52.3%) of the total, and in recent years, new replacement capacity has been put on the market, so the cement and clinker supply market has sufficient resources. As the market concentration and price control is relatively high, coupled with economic prosperity, the price of cement in the developed coastal areas is relatively high, which will also lead to the supply of cement clinker from outside the region. From the cement market supply quantity, the national production capacity is still in a serious state of excess.
Cement market price and benefit
In 2021, the government will maintain nearly two years of sustained investment growth or stability. Therefore, in addition to the cement demand and price downside risk in individual regions, cement demand and price in the mainstream market is expected to remain strong, and the benefit is expected to continue to remain stable.
Adjustment of industrial policies The implementation of regulations and policies, such as replacement of capacity reduction, normalisation of off-peak production, early warning of weather and production limits, total pollution emission control, and anti-monopoly supervision, are conducive to the control of new production capacity, dynamic supply balance, industry self-discipline, and the creation of a mature market environment with integrity and fair competition.
Scientific and technological innovation
With the improvement of profitability, large enterprise groups are increasing their investment in scientific and technological innovation, and their energy efficiency utilisation level and comprehensive utilisation level of resources are being significantly improved. The application of digital information technology is leading the transformation and upgrading of the industry, and environmental protection and work safety standards are being further improved. In 2021, the carbon peak of China’s cement industry will be further revealed, and the carbon neutrality roadmap will be further defined, which will also bring a new development pattern for the cement industry’s scientific and technological innovation, further high quality and sustainable development.
In 2020, there was stable support for infrastructure projects, and the growth rate of infrastructure investment is expected to slow down in 2021. With real estate policy tightening again, new construction is likely to continue to decline. In 2021, the national cement output is expected to be about 2.2 to 2.4 billion t, with a slight decline compared with 2020, but it is still running in the platform period of high demand.
Increased replacement projects of equivalent capacity
In 2020, the number of cement capacity replacement projects increased significantly, and the planned capacity increased by 77% year-on-year. It is expected that the number of annual capacity replacement projects in 2021 will be stable compared with that in 2020.
In 2021, 29 production lines are expected to be put into production, with a total production capacity of 48.79 million t, mainly in the southern region, among which Guangxi has nearly 15 million tons of clinker production capacity to be put into production, and the new supply pressure in the southern market will increase.
Coal prices are high and cement costs are rising
Coal prices rose sharply at the end of last year, and the long-coordinate prices for thermal coal also rose. It is expected that coal prices will continue to remain high in 2021, and the production cost of cement will rise significantly.
The increasing trend of industry concentration unlikely to change
At present, more than 60% of the new production and capacity replacement capacity belongs to leading enterprises, and the industry concentration will continue to increase.
The action plan for the cement industry to reach carbon peak is released
The Measures for the Administration of Carbon Emission Trading (Trial) came into force on 01 February 2021. Action plans and road maps for cement and other key industries to achieve the carbon peak will soon be released. The year 2021 may be the first year when the cement industry reaches a carbon peak or begins its journey towards becoming carbon neutral.
Accelerating the digital transformation of industrial intelligent manufacturing
From 2021 to 2023, the cement industry will focus on forming a series of integrated system solutions such as digital planning and design, intelligent plant construction and solid waste collaborative disposal. Through digitisation and intelligent transformation, enterprises can constantly improve the efficiency of production and management, and realise cost reduction and efficiency increases. In particular, attention should be paid to the extension of the cement industry chain investment, increasing sales output values and improving enterprise profits.
Overseas markets are expected to rebound
The World Bank expects the global economy to grow by 4% in 2021. The cement industry, which had been hurt by a drop in construction activity, is expected to rebound in 2021. India, the second largest cement producer, has announced that it will support infrastructure cement demand with a number of major projects, and cement capacity will increase by about 14 to 15 million tons. With this international background and China’s cement industry capacity in serious excess, the desire for overseas investment will further rise.
About the authors
Fu Lijuan, Senior Engineer, is Assistant Director of the China National Building Materials Exhibition and Trade Centre and General Manager of the Quality Standard Department of the China National Building Materials Exhibition and Trade Centre.
Prof. Cui Yuansheng is Chief Expert at the Institute of Technical Information for Building Materials Industry of China and Professor at Green Materials.
Tian Guiping is an Engineer at the Institute of Technical Information for Building Materials Industry of China and Director of Green Materials.
Read the article online at: https://www.worldcement.com/asia-pacific-rim/05102021/fine-china/