Serious market decline, seven measures taken by the Ministry of Industry and Information Technology to stimulate positive energy in the cement industry
Faced with the severe situation of the economic operation of the cement industry, in order to resolve the contradiction of serious overcapacity in the cement industry and promote the stable operation and transformation of the industry economy, the Raw Materials Industry Department of the Ministry of Industry and Information Technology recently held a symposium for the heads of some key enterprises in the cement industry in Beijing.
Mao Weiming, a member of the Party Leadership Group and Vice Minister of the Ministry of Industry and Information Technology, pointed out that China's economy has entered a "new normal", and the industrial economy has shown a new trend. On the whole, there are three characteristics of the current industrial economy. There are more signs of stabilization and improvement, polarization of the operation trend, and still great downward pressure. We should strengthen confidence in development, take effective measures, and stimulate endogenous momentum. We should both stabilize the current situation and benefit the long-term, Enhance the "positive energy" of industry development.
Seven measures to stimulate positive energy of cement industry
Mao Weiming stressed that, in the face of the current extremely complex operation situation, to promote the smooth operation and transformation of the cement industry, it is necessary to accurately grasp the development trend, strengthen development confidence, take effective measures, stimulate endogenous power, both to stabilize the current and benefit the long-term, and enhance the "positive energy" of the industry development. In the future, the ICT system will focus on seven major tasks.
First, we will work hard to resolve the problem of overcapacity and resolutely curb new capacity. The key is to strictly control new capacity. Second, we will continue to vigorously eliminate backward industries. We will step up efforts to eliminate them according to mandatory standards such as pollutant emissions and energy consumption per unit product, so as to make room for development of advanced production capacity and optimize the stock. Third, encourage enterprises to carry out technological innovation, business type innovation and model innovation, extend the industrial chain, correctly handle the relationship between resolving overcapacity and stable growth, and enhance the driving force for development. Fourth, support enterprises to promote merger and reorganization, improve production concentration, optimize the supply side, promote intelligent, green and service-oriented manufacturing, and develop special cement. Fifth, we will take appropriate measures to limit production and ease the problem of overcapacity. The key point is to guide the northern heating areas to continue to carry out cement peak shift production in winter. Sixthly, standardize the market order, strictly enforce the law, and create a fair competition market environment. Seventh, study major industrial policies, promote the revision of cement product standards, implement the supporting policies for collaborative disposal of cement kilns, and promote international production capacity cooperation.
The price war is getting fiercer and fiercer
At present, the outlook of the cement manufacturing industry continues to decline, and the low market demand leads to the increasingly fierce price war among cement enterprises.
The cement market in the Yangtze River Delta, the Pearl River Delta, Hunan and Hubei, Yunnan, Guizhou and Sichuan, and Shaanxi and Gansu is full of smoke. At present, the price of cement has dropped to near the cost line, and many enterprises have even lost money. By the end of June, the average price of P.O42.5 bulk cement in China had dropped to the low price of 263 yuan/ton, with a price difference of 40 yuan/ton and 60 yuan/ton respectively compared with the beginning of the year and the same period last year, which was the lowest level after the financial crisis in 2008.
Limiting production was once an expedient measure to maintain the balance of the cement market. It has achieved good results in dealing with overcapacity, weak demand, environmental pressure and many other problems. However, under the continuous downturn of the market, this weak balance is easy to be broken.
At the beginning of the year, Northeast China and Pan North China carried out peak shift kiln shutdown for 3 or 4 months, during which the cement price in the region was still stable, which once became a model for maintaining the price and profit in the national cement market. However, after the kiln shutdown, the cement price still fell rapidly.
Since 2015, the market demand has reversed, and the cement output in the first five months of the country has decreased by 5.1% year on year. The market trend has changed. As a demand sensitive industry, the operating mentality of cement enterprises has changed accordingly. When market demand is limited and benefits are greatly reduced, the previously relatively balanced competition pattern has been broken. Large enterprises, in order to ensure the profit level of enterprises, have implemented the business strategy of small profits but quick turnover and expanding market share by virtue of the advantages of scale and cost, while taking advantage of the downturn in the market to carry out industry integration.
Faced with the pressure of large enterprises step by step, small and medium-sized enterprises can not wait to die. They can only follow the pace of price reduction to defend the market share, even lower than their own cost line, and also try to ensure the cash flow of enterprises. Once the cash flow is endangered by unsalable products, enterprises will be faced with an exit. There was a fierce competition among enterprises, and many markets across the country staged a wave of price reduction in turn.
The contradiction between supply and demand continues to intensify
At the end of May this year, there were six provinces in China where the cement price was lower than 240 yuan/ton, including Shanxi, Anhui, Shaanxi, Inner Mongolia, Guizhou and Jiangsu. Among them, Shanxi and Inner Mongolia accounted for 40.01% and 44.91% of the new dry process clinker production capacity in 2014, respectively, ranking first and third from the bottom of the country, indicating that the capacity utilization rate of the two places was seriously insufficient and the situation of overcapacity was severe. The prices of cement in Anhui and Jiangsu fell 36.13% and 28.1% year on year, ranking the first and fourth in the country. The leading enterprise Conch adopted the strategy of reducing prices and volume due to the decline in demand this year, and kept driving down regional prices with its low cost advantage. The Yangtze River Delta became the region with the largest drop in cement prices this year. The growth rate of fixed asset investment in Shaanxi in the first four months was 4.2%, 12.9 percentage points lower than that in the same period of last year. The decline in the growth rate of fixed investment ranked among the top in the country, which led to a significant decline in cement demand this year compared with last year, and a year-on-year decline of 11.97% in cement output in the first four months. Guizhou's cement output in the first four months fell 2.15% year on year, with a growth rate of 21.68 percentage points lower than that of the same period last year. In addition to the impact of peripheral markets and the launch of new production capacity, the price of the province fell under pressure.
From the total profit of cement industry in each province last year, Shanxi ranked first in the country with a loss of 1.15 billion yuan. Inner Mongolia made a small profit, with a sales profit margin of only 0.51%, closely following Xinjiang. Although prices in Jiangsu and Anhui fell sharply year on year, it was mainly due to the initiative of enterprises to reduce prices. There was a large price reduction space for enterprises with low production costs, so local enterprises still maintained a certain profit, From their respective capacity utilization rates, Anhui's capacity utilization is good, with the new dry process output to capacity ratio exceeding 90%, and Jiangsu's also exceeding 70%; Last year, the utilization ratio of sales volume in Shaanxi and Guizhou was relatively above the middle level, and the two places also had a high ratio of new dry process output to production capacity.
Industry experts believe that the degree of market downturn is not closely related to the scientific and technological level of the regional cement market, but rather to the level of production capacity and concentration. Although low price can affect the efficiency, low cost advantage and high market concentration can prevent some enterprises from losing money. In the context of declining demand, only low capacity concentration is the root cause of poor efficiency.
Merger and reorganization become the market choice
At this stage, the strict control of new additions, elimination of backwardness and moderate production restriction are mainly aimed at improving the supply level. However, the decline in demand has little effect on the improvement of supply. Although it is beneficial, it is not the fundamental way out. Innovation in technology and products cannot change the characteristics of low added value and homogeneity of cement. It will become the theme of the cement market characterized by perfect competition that the cement industry gets rid of the industry predicament, the survival of the fittest, and joint reorganization. The market integration of large enterprises has become the key, and the transformation and upgrading of the cement industry will also start from the reorganization and integration.
Lv Guixin, deputy inspector of the Department of Raw Materials of the Ministry of Industry and Information Technology, said in May this year that the key to the transformation and upgrading of the cement industry is to achieve 24 words: strictly control new growth, eliminate backwardness, moderately limit production, merge and restructure, encourage innovation, and regulate competition.
In 2014, the China Building Materials Federation issued the Implementation Opinions on Promoting Merger and Reorganization of the Cement Industry, in which the first article pointed out that "accelerating the merger and reorganization of the cement industry is an inevitable choice for the transformation and upgrading of the industry".
The transformation and upgrading of the industry is not the transformation and upgrading of individual enterprises, but the overall transformation of the development mode of the whole industry. At this stage, there are many enterprises. Under the situation of declining demand, enterprises have been too busy to maintain normal operation.
Experts believe that the withdrawal of enterprises with weak production and operation, and the integration of large and competitive enterprises can lay the foundation for the transformation and upgrading of the entire industry. He who does not plan for the long run cannot plan for the short run. The era of economic growth driven by strong investment alone has passed. When the economy has entered the new normal, the industry can only enter the battle light through integration. Only in this way can the industry go further.
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In the middle of November, the heating season in the north is coming, and cement enterprises around the country are also welcoming the winter peak shift. Recently, Henan, Shandong and other major cement production and marketing provinces have successively issued notices on off peak production of the cement industry, and the industry supply reduction is expected to increase again.
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