Cement consumption in China is expected to reach a record 2bnt in 2011, up 7% YoY, Xiangzhong Kong, Secretary General of the China Cement Association, told International Cement Review in a recent interview. In spite of fears that China’s economy is growing at an unsustainable rate, Mr Kong insisted that 2011 would be a year of “stable development” as the country continues its drive to develop from an agricultural to an industrial nation.
“China can still maintain the current pace of development and the speed is sustainable,” he argues, adding that, “At present, China’s urbanisation rate is about 50%. The construction industry will experience rapid development for a very long time to achieve the desired urbanisation rate of 65%.”
These comments were made in the week when China was formally recognised as the second biggest economy in the world, overtaking Japan as it powers ahead on the back of its continuing manufacturing boom. Last year, the economy grew by 10% and in 2011 is forecast to expand by 9.9%, with similar growth rates over the coming five years, according to IMF data. At this pace, China will overtake the US in terms of economic output to become the largest economy in the world within a decade.
While demand prospects appear robust, the industry itself continues to undergo a major technological transition as millions of tonnes of backward capacity – largely vertical shaft kilns and small-capacity operations – is eliminated in a government-sponsored drive to modernise the production base. In 2011, a further 250Mt of backward cement capacity will be shut down. By the end of the 12th Five-Year Plan (2011-15), dry-process lines will account for an estimated 95% of production, up from 80% in 2010.
In a second major initiative that will shape the industry over the next five years, the government has reinforced its policy to accelerate the level of mergers and acquisitions in the industry to increase the concentration of players, thereby creating a more rational, efficient and modern industrial structure. At present there are more than 10 groups with a capacity of 20Mta or more and two of more than 100Mt, namely Anhui Conch and the China National Building Materials Group (CNBM).
According to Mr Kong, the increased level of concentration resulting from this M&A activity will achieve an “…optimal allocation of resources and create the conditions for Chinese producers to become international”. This last comment regarding the internationalisation of the industry may well be the natural next step for a modernised and well-structured domestic industry. The coming five years will be vital in laying down the foundations for China’s industry to finally break its borders.