Efficiency of China’s cement industry slumps

China’s output of cement reached 456Mt in the first half, rising 7.4 per cent year on year, but 10 per cent lower than the growth in the same period last year. Output value of large cement enterprises declined 17 per cent as compared with the same period of last year.   The cement industry realized 1.75 billion RMB yuan of profits in the first half, a decrease of 76.5 per cent year on year, according to the State Development and Reform Commission (SDRC).  

Loss-making enterprises of cement industry incurred losses amounting to 3.2 billion yuan in the first half, a surge of 116.6 percent over the same period of last year, with 43.5 per cent of the enterprises running in the red, increasing 13 percentage points year on year. This is the second industrial sector reporting overall losses in the period after the electrolytic aluminum sector.  

According to analysis of the SDRC’ Bureau of Economic Operation, there existed three factors leading to the decline of profits of the cement industry:   The national macro control policies have checked the fast growth of investment in fixed assets, market demand return to a rational level, and growth of cement production slowed down. At the same time, cement industry as a major target of the state macro control policy has been the first to meet the difficulties of tightened credit policy and shortage of working funds. Compared with the same period of last year, growth of total output value, sales value and sales revenue of cement industry has declined about 20 per cent this year.  

Under to the impact of prices hikes of raw materials such as coal and electric power, production cost of cement industry increased. At present, the tight transportation and supply of coal, electric power and oil have been relaxed a bit, but the general situation has not changed much.  

The fast expansion of cement production capacity in recent years has lead to oversupply on the market, leading to drop of cement prices. Ex-factory price of cement in Zhejiang and Jiangsu provinces dropped to around Yuan 200 per ton in the first half of this year as against approx Yuan 400 in the same period last year, putting pressure on enterprises to raise efficiency.