Cement Energy and Environment

., be close to 2 bnt, an increase of about seven per cent. We estimate that in 2011 demand will be highest in Jiangsu, Shandong, Sichuan, Hebei, Guangdong, Henan, Zhejiang and Anhui provinces -each of them consuming in excess of 100 Mt. Meanwhile, cement demand in Tibet, Qinghai, Ningxia will be the smallest, because of their smaller populations. ICR: Some analyst believe cement consumption in China will peak in. 2015 - do you agree? CCA: China's total cumulative cement consumption per capita (CCPC) in 2010 was about 14t. By comparison , industrialized countries can achieve a CCPC of 25t. Even if total annual consumption of cement rises to 2.4 bnt, China still has another 10 years of high consumption ahead. Therefore, it is difficult to say that cement consumption will peak in 2015. Cement supply ICR: What volume of cement was produced in China in 2010? CCA: According to the number of the National Bureau of Statistics, China's cement output was 1.868 bnt in 2010, with an increase of 15.5 per cement. According to the CCA, the clinker production was 1.152 bnt in 2010. Regarding regional markets, cement production accounts for the following share of national output: • Northeast 6.5 per cent • North 2.38 per cent • East 33.31 per cent • South 26.46 per cent • Southwest 14.64 per cent • North west 6.65 per cent Table 1. Chin,1 monthly C£'mcnt production (201 0) 174 174 1:6s--l68--17.D_l20~7 174 200 180 - r---"' - - - -- 136 160 140 115 ~~ ~ r-- ~ I"~ r-- ~ :- r-- r- - . ~ r- ~ r-- r-- ~ ,--g.r-; :--- r-- r-- r-- r-- ~ t-- r-- r-- f- 120 ; 100 ! 80 60 . 40 20 Jan Feb Mar Apr May Jun Jul Aua Sep Oct Nov Dec ICR: What is the estimated level of surplus capacity in China? CCA: The indicators of overcapacity are: low capacity utilization, decline in profitability, increase .in the number of loss– making enterprises, surplus inventory, and low ratio of accounts receivable to turnover. In recent years, China's cement capacity and demand has generally balanced, but there is overcapacity in some areas. In those regions where investment growth is too fast, with centralized distribution, the price remains low over the long- term and the market is characterized by vicious competition and serious business losses. This is especially true for companies with a capacity utilization below 70 per cent, accounts receivable turnover ratios below 70 per cent, and the product backlog rate is over five per cent. In fact, the overcapacity is the problem of an irrational industrial structure. How to control the effective supply and balance market demand to ensure profits from·cement sales is the key point. If small enterprises with backward capacity will not close, the market . situation of v1c1ous competition will not change. Moreover, it is difficult to control the balance between supply and demand and to maintain price stability if there are no large companies playing a leading role in regional market. ICR: How much old/obsolete cement capacity was eliminated from the industry in 2010? How much will be eliminated in 2011 ? CCA: During 2010 China eliminated 100 Mt of backward cement capacity. There will be another 250 Mt eliminated in 2011. Elimination of backward cement capacity has been an. assessment indicator of regional governments. The government offers financial compensation to the companies that close, and properly arranges the re– employment of employees to make it a smooth process. ICR: How much new capacity will be built in China in 2011 ? Which regions will see major growth in cement capacity? CCA: I estimate that by 2011 China will also have approved construction of new lines, amounting to about 200 Mt of cement capacity. Considering that at the same time 100 Mt of backward capacity will be eliminated, the influence of new capacity is limited. But some areas it will have greater impact. 35