China’s cement industry surges ahead

China’s cement industry surges ahead
Published: 18 February 2008

China’s cement industry posted a remarkable profit surge last year, amid government’s macro control measures to cool down an economy that could be starting to overheat. Total output hit 1.35 billion tonnes last year, up 13.5 per cent from a year earlier. Sales revenue grew 23.1 percent from 2006 to reach 410.4 billion yuan (US$57bn), according to the latest figure released by the National Development and Reform Commission (NDRC).

 The NDRC predicted the yearly net profit for 2007 will jump more than 60 per cent to 24 billion yuan thanks to a price rise and the growth in fixed asset investment growth.

Cement prices have been rising since last November in most large and medium-sized cities in China, with the highest price topping 600 yuan per tonne (approx US$75). The wholesale prices of major cement producers rose 10 yuan in general from 2006.

The fixed asset investment growth in the sector grew by 33 percent from the previous year to 65.4 billion yuan after falling for two straight years, NDRC said in a report. That gave rise to more than 80 million tons of capacity increase last year.

The industry reshuffle picked up speed, as the NDRC noted in the report, with large-sized producers accounting for 55 per cent of the total, up five  percent from a year earlier amid merges and acquisitions in the sector. The top ten producers churn out 23 per cent of the national total, up three per cent from the end of 2006.

Obsolete factories with obsolete production facilities were closed last year, losing a capacity of 52Mt, to cut pollution and raise efficiency, the NDRC noted. The NDRC also said exports dropped 8.6 percent year-on-year to 33Mt last year as a result of export refund cut.

The Chinese government has tried to prevent the economy from overheating. The National Bureau of Statistics (NBS) head Xie Fuzhan said there was still a risk that China’s economy could shift from rapid growth to overheating this year, with growing inflationary pressure. China’s gross domestic product (GDP) grew 11.4 percent year-on-year to 24.6619 trillion yuan (3.43 trillion U.S. dollars) in 2007, but the risks of spiraling inflation and economic overheating were also rising.

Last year also witnessed accelerated growth in fixed-asset investment nationwide, with the real estate sector leading the way. Spending on fixed assets totaled 13.72 trillion yuan, up 24.8 percent, or 0.9 percentage points more than in 2006.