The Production Efficiency Of Cement Continues To Grow, And It Is Expected That The Annual Profit Will Be Considerable

In recent years, the cement industry has operated steadily, achieved significant results in curbing new production capacity, adhered to energy-saving and emission reduction technology transformation and improved management level investment, continuously reduced operating costs, and increased profit margins. In the future, we will continue to eliminate outdated production capacity, integrate the market, and increase industry concentration, with the goal of technological improvement and green and low-carbon development, and continuously promote high-quality development of the industry——

Since the beginning of this year, facing increasing economic downward pressure, the cement industry has conscientiously implemented the decisions and deployments of the Party Central Committee and the State Council, deepened the implementation of the eight character policy of "consolidation, enhancement, improvement, and smoothness", firmly established and practiced the new development concept, and deepened the supply side structural reform. The overall operation of the industry is good.

Continuous growth in production efficiency

According to data released by the Ministry of Industry and Information Technology, from January to September this year, the production and efficiency of the cement industry maintained a growth trend, with a national cement production of 1.69 billion tons, a year-on-year increase of 6.9%. Among them, the cement production in September was 220 million tons, a year-on-year increase of 4.1%. The national cement industry achieved a revenue of 719.9 billion yuan, a year-on-year increase of 14.3%, 9.8 percentage points higher than the overall industrial growth rate. The total profit was 131.8 billion yuan, a year-on-year increase of 25.3%, 27.4 percentage points higher than the overall industrial growth rate.

From the perspective of cement prices, they still tend to be in a reasonable range. Since the beginning of this year, the overall price of cement products in China has shown a slight year-on-year increase and a month on month decrease. According to industry monitoring data provided by Digital Cement Network, cement prices continued to decline from January to August, with the cement price index dropping from 121.5 in January to 113.8 in August, a decrease of 6.3%. After entering the traditional peak season of "Golden Nine Silver Ten", cement prices have slightly rebounded, with a cement price index of 114.4 in September, a month on month increase of 0.5%.

From an export perspective, the export volume of cement clinker has decreased while the import volume has increased. From January to August this year, the cumulative export of cement clinker in China was 299000 tons, a year-on-year decrease of 76.8%. The cumulative import was 12.553 million tons, a year-on-year increase of 114%, with an import amount of 575 million US dollars, a year-on-year increase of 120.8%, seriously impacting the domestic coastal cement market.

The production efficiency of cement continues to grow, and it is expected that the annual profit will be considerable

"Overall, in the context of sustained and stable economic development and growth in the country, the cement industry's economy is operating steadily, with significant achievements in curbing new production capacity. The overall fluctuation of cement prices in the southern region has decreased, but the serious problem of cement overcapacity in various regions has not been effectively solved. Some provinces still have a strong willingness to launch new cement projects," Kong Xiangzhong, Executive Chairman of the China Cement Association, told Economic Daily reporters, The next step for the cement industry is to continue to firmly establish and practice the new development concept, with quality and efficiency as the center, supply side structural reform as the main line, strict control of new production capacity, strict implementation of capacity reduction and replacement policies, proper disposal of remaining problems in project construction, active exploration of market-oriented capacity reduction models, increased industrial chain extension and overseas cement project investment, with technological improvement and green and low-carbon goals, Continuously promoting high-quality development of the industry.

Technological transformation performance improvement

Recently, cement listed companies have successively released performance announcements for the first three quarters of 2019, with a general increase in performance, laying a solid foundation for the cement industry's annual profitability. Among them, the total operating revenue of China Building Materials in the first three quarters reached 183.14 billion yuan, a year-on-year increase of 16.8%; Conch Cement (43.650, -0.03, -0.07%) achieved its first breakthrough in revenue of over 100 billion yuan in the first three quarters, reaching 110.756 billion yuan, a year-on-year increase of 42.37%, and a nearly three fold increase in net profit compared to the same period in 2016; Jinyu Group (3.220, -0.05, -1.53%) had a revenue of 67.364 billion yuan in the first three quarters, a year-on-year increase of 20.15%.

"Most cement listed companies have production line layouts in the North China, Northwest, and Southwest regions, where demand has increased this year, driving overall efficiency growth for each company." Kong Xiangzhong said that in the face of demand growth, the efficiency growth and technological transformation of cement enterprises are synchronized.

In terms of technological transformation, Song Zhiping, Chairman of China National Building Materials Group Co., Ltd., recently stated at the 3rd China Enterprise Reform and Development Forum that cement can achieve low energy consumption and low pollution, making traditional industries high-end and green. Green mountains and clear waters are not about shutting down the real economy, but about using technology to create green mountains and clear waters under normal circumstances.

According to Kong Xiangzhong, in recent years, cement listed companies have adhered to investment in energy-saving and emission reduction technology transformation and management level improvement, continuously reducing operating costs and increasing profit margins. However, the bottleneck that hinders further growth of industry efficiency is still severe overcapacity. Kong Xiangzhong stated that improving industrial concentration and regional market concentration is currently the investment focus of leading enterprises. Only by increasing the proportion of reduction and replacement can we accelerate the elimination of outdated production capacity, achieve total production capacity compression, and optimize market layout. Meanwhile, the extension of the industrial chain and overseas investment will also be the focus of investment for cement listed companies in the future.

Expected annual profit is considerable

"The forecast for the cement industry's benefits this year is expected to reach 180 billion yuan, which is both positive and negative." Kong Xiangzhong said, "What is positive is that the overall demand in the cement market is relatively stable this year, especially in the northern region where demand has increased compared to last year.". With the promotion and strengthening of industry self-discipline, the increase in the efficiency of cement enterprises in North China and Northwest China is the main reason for the stable growth of the entire industry.

Unfortunately, there are still three regions in China with low prices. Kong Xiangzhong stated that firstly, the Pan Northeast region, especially Liaoning Province; The second is Guizhou Province; Thirdly, Ningxia in the northwest region has the lowest price.

Kong Xiangzhong believes that the current stable growth of industry benefits has three meanings. One is to control the total profit index of the industry to reach a high point; The second is that the efficiency of enterprises in areas with losses or low profits has improved; Thirdly, the cement price index in various regional markets has reduced volatility, and the price system has transitioned smoothly.

"The development of an industry should take into account the affordability of downstream markets. With the continuous increase in production and operating costs, as well as the need for future development investment, it is necessary for the cement industry to maintain sustained and stable growth in efficiency." Kong Xiangzhong said that cement enterprises need to have a sense of market crisis. When market demand drops significantly, price reduction cannot solve the problem, integrate the market, eliminate outdated production capacity, and... " Improving industrial concentration is the fundamental task of supply side structural reform in the cement industry.

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