Changes ahead for China markets?

Changes ahead for China markets?
Published: 11 October 2005

With Chinese cement consumption likely to top the 1bn tonne level in 2005, industry specialists suggest that growth in consumption is likely to moderate significantly in 2006-2007 as Chinese government planners come to terms with an overheating market economy and significant levels of unrest from the majority rural population, many of whom feel they are being bypassed by this recent surge in economic developments and more importantly local living standards, education and employment opportunities.

For the local cement sector the feeling seems to be that consumption growth might be somewhat limited in 2006 with prices remaining depressed and costs of fuel and electricity rising adding to the current squeeze on profits.

Longer term, such demand, pricing and cost developments will act to squeeze out many of the older shaft kiln and wet kiln operations which still make up over 60 per cent of China’s production base, but in the meantime, many of the more modern production facilities with access to the coast will switch to the more lucrative export sector especially as today’s FOB export prices are now higher than domestic selling prices.

Exports of cement and clinker have remained relatively static at around 5-6Mt over the 2001-2004 period but on current indicators this years export sales will top 10Mt and for 2006, the strong possibility that export sales will reach 15Mt and as much as 20Mt by 2007. Such cement and clinker availability on the open market will have a sizeable impact on more established regional trade flows and if ocean freight rates were also to decline appreciably over this same period then Chinese cement could once again find its way into more distant markets, particularly Europe which may sound a note of concern to some European producers.