Setting Sail

Introduction

At the end of 1995, the former State Bureau of the building materials industry proposed a development strategy with the aim of enhancing the industry’s strength through innovation. The strategy has been a guiding light to the Chinese building materials industry, providing developmental targets, routes and measures. Since its implementation, the country’s cement industry has increased cement production to 50% of the world’s total output. Its new suspension preheater dry process (NSP) cement technology is now world class and it has also become the world’s largest cement technology and equipment exporter and contractor. The development strategy has not only guided the industry’s short and medium-term industrial restructuring, but has also scientifically directed the sustainable future development of the industry.

NSP cement technology

The 9^th Five Year Plan period (1996 – 2000) happened to be the first five years of the implementation of the development strategy, when the foundations were laid. The two fundamental changes targeted by the State Bureau revolved around “control of total output and structural adjustment”. The accumulated growth in cement production during this five year period was 25.52%, while NSP clinker capacity increased 120.29%. Both energy conservation and emission reductions were achieved at this early stage, and a sound foundation was laid for later development.

NSP technology developed rapidly during the second phase of the development strategy’s implementation (the 10^th and 11^th Five Year Plan periods). In 2009, cement production using NSP accounted for 76.8% of the total output and it was expected that this would reach over 85% by 2010. Such development would have been difficult without a “low investment and localisation” guideline.

The size of NSP cement production lines is effectively increasing the processing and manufacturing capacity of the Chinese building materials machine industry. The 10 000 tpd kiln systems and associated large vertical mills and roller presses are now locally produced.

Continuous growth

Other obstacles to the development of the cement industry included too many operators, small scales of operations and poor competitiveness. To become a more competitive, larger and stronger industry, it was important to complete structural and organisational adjustments, increase production concentration and build the market mechanism. The growth of China’s large cement producers is significant to the future development of the country’s cement industry. 

In the last 10 years in particular, the technological, managerial, marketing and capital advantages brought about by the enlargement of the scale of the industry have rendered mergers and restructuring an effective development strategy for the industry to upscale, increase market shares and position itself. The industrial scale, financing capability and policy support are key factors driving mergers and restructuring.

Preliminary estimates suggest that 80 million t of cement capacity was involved in acquisitions and restructuring in 2009. Through competition, consolidation and restructuring, the Chinese domestic markets are becoming more defined and market concentration has been significantly increased.

A huge reshuffle in the country’s cement industry is inevitable as its role in national economic construction becomes increasingly significant.

New challenges and opportunities

Technological innovations in the industry are facing new challenges and opportunities against the background of globalisation, increasing access to information and a low-carbon economy.

Opportunities for technological innovations

• With the anticipated reduction in construction of new production lines, there will be increased demand for technological modification. 

Opportunities for new technologies

• The focus is on technology and equipment that can help rotary cement kilns to treat urban sludge and incinerate hazardous waste.  

Opportunities for international cooperation

• Advanced Chinese cement technology can be transferred and applied internationally. 

The next twenty years

The coming twenty years is the time to continue with the development strategy, pursue the “larger and stronger” target, enhance the breadth of the development strategy and set higher targets.

Mergers and restructuring

In the next 10 years, as a result of mergers and restructuring, the phenomena of “large and strong operators becoming larger and stronger” is likely to occur and, consequently, market positions will require further demarcation. A “6-3-1” market pattern is expected: the top ten operators accounting for 60%, the 20 - 50^th largest operators accounting for 30%, and the remaining operators accounting for 10% of China’s total annual cement output. Once this pattern is established, some of the large corporations will develop into international corporations and look for investments overseas. 

Internationalisation

The technological, equipment and engineering capability of the Chinese cement industry can already compete internationally. Countries with under-developed cement industries and the emerging markets are huge future markets for Chinese corporations. These companies will gain financial returns through the transfer of technology, export of equipment, and participation in product trading with subsidiaries or joint-venture companies.

The importance of corporate social responsibility

According to the Corporate Social Responsibility Blue Book 2010, recently published by the Chinese Academy Of Social Science, as far as the CSR index is concerned, the building materials sector of the non-metallic mineral industry is just a “bystander”. Jilin Yatai Group Limited, ranked 66, was the only one on the Top 100 Bystanders List in the China Top 100 Company CSR Index (2010) and the names of many large cement corporations were absent. The industry should study the CSR assessment and indicator system in order to ensure that more corporations will be included in the “beginners list” as soon as possible.

Energy conservation and emission reduction

The Chinese cement industry should place increasing emphasis on the use of alternative raw materials and fuels in order to implement low-carbon economic development. There should also be a reasonable increase in waste residues usage, as well as the integration of urban rubbish and sludge treatment into the development of an urban recycling economy.

Note

This article is the result of studying and reviewing the Development Strategy.

Some of the data and diagrams are from the Digital Cement and China Cement Almanac.

The 2010 cement data is forecast data and is for reference only.

Author: Kong Xiang-Zhong, Secretary General of the China Cement Association

Read the article online at: https://www.worldcement.com/asia-pacific-rim/30032011/setting_sail/