China’s cement production slows, but price hikes

China’s cement production slows, but price hikes
Published: 09 October 2008

Growth of China’s cement output slowed down in August of this year, but price of cement hiked, according to the National Development and Reform Commission (NDRC).

China’s cement output increased 1.5 per cent year on year in August, which was 4.8 percentage points lower than the growth in the previous month.

Price of cement continued the momentum of rising in August. The average factory price of cement of key building materials enterprises stood at 310 yuan/ton, rising two yuan/ton over the previous month, and 25 yuan/ton over the same period of last year.

China’s cement demand is forecast to keep a slow growth rate in the following years, according to Lei Qianzhi, chairman of China Cement Association (CCA).

The nominal growth rate of China’s fixed assets investment was 27.3 per cent in July, up 0.7 per cent year on year. However, excluding price increase, it posted a declined real growth rate.

The total output of cement in China increased 8.3 per cent to 767 million tons in July, down 9.4 per cent from the previous month.

According to CCA, Southeast China, East China and central China will incur a lower growth rate of cement demands, but West China, Bohai rim areas and Northeast China’s Heilongjiang Provinces will post a big demand for cement.

Investment in cement production capacity in China increased 67 per cent to 68 per cent in the first seven months of 2008.

Market experts worried that the CNY53bn of investment in the first half would enhance cement enterprises’ production capacities in 2009, and break the balance of supply and demand in the market.

CCA said the cement production capacity would not soar rapidly, as nearly 200Mt of backward production capacity would be eliminated, offsetting 200 million tons of newly added cement production capacity in 2008 and 2009.

China’s cement industry is expected to incur a slump in 2009 as the demand continues to decline while production keeps expanding. Cement enterprises have to control their capacity utilisation ratio to maintain profit.

CCA predicted that the decline of cement demand would occur from 2018 to 2020. China’s cement industry would still have a decade for its growth.