China's Cement Industry Expected to Continue Bottoming Out Amid Supply-Demand Challenges

First Capital Securities predicts that China's cement industry will continue to face significant market pressures in 2024, with no substantial improvement in supply and demand.

China's Cement Industry Expected to Continue Bottoming Out Amid Supply-Demand Challenges
Photo by 郑 无忌 / Unsplash

According to a research report released by First Capital Securities, the cement industry in China is currently grappling with severe overcapacity issues, including supply-demand conflicts and insufficient downstream demand, leading to intensified industry competition. As of now, there are no significant signs of improvement in either supply or demand, and the industry is expected to continue its bottoming-out phase.

In 2023, China's cement clinker production capacity slightly contracted. The "2023 China Cement Clinker Capacity Top 100 List" released by China Cement Network showed that there were 1,569 clinker production lines nationwide, with a combined capacity of 18.03 billion tons per year. The year saw 16 new production lines with a capacity of 23.53 million tons per year and 64 overseas investment lines with a capacity of 63.41 million tons per year. In comparison, 2022 had 1,598 clinker production lines with a total capacity of 18.23 billion tons per year. Despite a slight reduction in capacity, the pace of eliminating outdated capacity is slow.

The competitive landscape of the industry remains relatively stable, with little change over the year. The top six companies in terms of global and domestic capacity - Xintianshan Cement, Conch Cement, Jinyu Jidong Group, Red Lion Group, China Resources Cement, and Huaxin Cement - remained the same as in 2022. The overall industry structure is stable, with little change in the competitive landscape across regions and provinces.

Looking at overseas production, Conch Cement and Huaxin Cement are leading in overseas operational capacity, with Western Cement accelerating its catch-up in 2023. In terms of overseas clinker capacity, Conch Cement and Huaxin Cement are at the forefront, with operational capacities of 13.89 million tons per year and 12.50 million tons per year, respectively. In 2023, Western Cement is expected to build 10.54 million tons per year of new capacity overseas, far exceeding other companies.

Risk factors include rising coal prices, weak demand in construction and real estate, and intensified industry competition.