Holding back in China

As predicted in earlier reports, new policies are being introduced in China to reduce overcapacity in cement production. The country’s State Council has announced that if the construction of new production lines or the expansion of existing facilities had not begun by 30 September, then such projects were to be put on hold.

In a move to eliminate backward capacities The National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) are expected to pass industry guidelines to phase out the country’s 600 million t of small-scaled production capacity over three years beginning in 2010.

In September, Taiwan Cement Corporation (TCC), which currently has 18 million t of capacity in Guangdong and Guangzi provinces in Southern China, indicated that the expansion of four of its production lines in Guangdong is being put on hold as the provincial government wants to phase out an equal number of lowgrade mills before TCC is given approval to proceed. It is likely that the same directive will apply to other companies in the province i.e., Anhui Conch and China Resource.

The annual cement consumption in Guangdong is about 100 million t, (compare with North America at 110 million t) but currently supply within the province is only 80 million t, the shortfall being fulfilled by suppliers in Guangxi province. The expectation is that up to 40 million t of low-grade mills will be closed in Guangdong by 2012 during China’s 12th Five-Year Plan. However it is expected that up to 40 million t of capacity will be taken out of the system when vertical kilns or low-grade mills are closed down. This will be in accord with the government’s aim of closing capacity before new facilities are brought on stream.

Cement prices in Guandong and Guangxi provinces increased by Rmb 40/t in August – September, and are expected to increase by another Rmb 30 – 40/t in October and November. Sources in China report that during the first seven months of this year cement output in the country reached 878 million t, an increase of just under 16 % year- on-year. Investment in the industry amounted to 79.2 billion yuan (US$ 11.6 billion).

Read the article online at: https://www.worldcement.com/asia-pacific-rim/27102009/holding_back_in_china/