Policies seen curbing cement output

PUBLISHED : Thursday, 07 April, 2011, 12:00am
UPDATED : Thursday, 07 April, 2011, 12:00am

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The mainland's cement production capacity for the first time in decades may shift from a net increase to a net decrease next year for the first time in decades.

While this year will see a net increase of cement production capacity of 50 million tonnes, next year might witness a net drop by a similar amount, said Zhang Mingjing, deputy general manager of Anhui Conch Cement, the nation's second-biggest cement producer.

Zhang was citing figures from the National Bureau of Statistics.

He said it was the result of the central government's policy of eliminating 300 million tonnes of obsolete annual cement production capacity from 2010 to 2012. The aim of the policy is to reduce oversupply.

The mainland's annual cement production has enjoyed unbroken growth from 210 million tonnes in 1990 to 1.63 billion tonnes in 2009, according to the China Building Materials Academy.

'The net decrease in supply will improve the balance of supply and demand, which will benefit us, said the Hong Kong-listed firm's executive director Guo Jingbin.

'China National Building Material (the mainland's biggest cement producer) and we are of the same mind on China's cement market. Both companies are confident profitability will increase, because supply and demand will improve and increasing concentration will raise profitability substantially.'

Because of the central government's policy of encouraging consolidation, the top 10 cement producers will account for more than 35 per cent of mainland production by 2015, said Zhang.

Their market share rose from 24 per cent in 2009 to 29 per cent last year.

For this year, Anhui Conch expects a gross profit of 120 yuan per tonne of cement sold, Zhang said. 'We are bullish about our profits for the whole of this year.'

Anhui Conch plans to have capital expenditure of nine billion yuan (HK$10.68 billion) this year to expand production capacity of clinker and cement by 31.8 million tonnes and 26.9 million tonnes respectively, slightly lower than the 9.3 billion yuan spent last year, Zhang said.

Last year, its clinker capacity was 130 million tonnes and for cement it was 150 million tonnes.

The firm expects to increase sales by 15 per cent this year, said chairman Guo Wensan. Last year, sales rose 15.9 per cent to 137 million tonnes. Guo hopes sales will exceed 200 million tonnes within five years.

He said the sales would be driven by the central government's plans to build economical housing and infrastructure projects like high speed railway.

Yesterday, the company announced it expects net profit to jump 150 per cent in the first quarter from 792.32 million yuan in the period last year. Net profit soared 75.8 per cent to 6.16 billion yuan last year. Turnover grew 38 per cent to 34.51 billion yuan.

The share price of Anhui Conch rose 3.5 per cent to HK$48.85 yesterday.

Solid base

The country's output of cement has grown every year since 1990

The mainland's annual cement production capacity is forecast to see a net tonnage decrease of: 50m