Cement Industry Will Face A Reshuffle In 2021

Facing the dual pressure of capacity replacement and environmental protection, how will the cement industry go in 2021?

Recently, the Ministry of ecology and environment issued the "carbon emission trading management measures (Trial)", which will be implemented from February 1, 2021. For a long time, industry is an important field of carbon emission, and low-carbon emission reduction of industry is very important to achieve the goal of carbon peak in China. At the same time, the Ministry of industry and information technology will implement the industrial low-carbon action and green manufacturing project this year, and formulate the action plan and roadmap for carbon peak in steel, cement and other key industries. At present, carbon dioxide emissions from related industries account for about 80% of China's total emissions.

Before that, China Building Materials Federation, together with 15 professional associations, jointly formulated the "Guiding Catalogue for eliminating backward production capacity in building materials industry". It was proposed that by the end of 2020, cement industry should eliminate cement clinker production lines with a daily output of less than 2000 tons (including) in regions with a cement clinker capacity utilization rate of less than 70%, and phase out cement clinker production lines of less than 2500 tons / day (including) by the end of 2021 。 This is also interpreted by the industry as the threshold to enter the cement industry will be greatly improved.

On January 21, Wei Yu, industry researcher of Cement Research Institute of China cement network, pointed out in an interview with 21st century economic reporter, "under such strict environmental protection supervision, many cement enterprises will have the possibility of loss. At present, the environmental protection investment of cement enterprises is very large. For a production line of 4500 tons, the investment in environmental protection is about 100 million yuan, which is not enough for capital strength The pressure is huge, so relatively speaking, large enterprises will have more advantages. "

Only the successful transformation enterprises can survive in the future competition due to overcapacity and declining demand in the cement industry. IC photo

Long term battle of environmental protection transformation

Since the implementation of the new environmental protection law on January 1, 2015, environmental protection supervision of energy and building materials enterprises has become more and more strict. In late September 2020, two cement companies under China building materials were criticized by the Ministry of ecological environment.

For a long time, the cement industry has been regarded as a high emission, high pollution, overcapacity industry, pollution prevention and control need to fight a "protracted war". And industrial low-carbon emission reduction for cement enterprises, no doubt represents the need to invest more costs. Moreover, environmental protection improvement often has a long investment period and slow benefit.

In this case, in the next 5-10 years, China's cement industry will face a situation of serious overcapacity and declining demand. Only the successful transformation enterprises can survive in the future competition.

At present, the three technical routes of conch cement, China building materials and Huaxin Cement are recommended by the China Building Materials Federation to the national development and Reform Commission, becoming three major low-carbon demonstration engineering technologies.

Taking Huaxin Cement as an example, its technical route features that the pretreatment plant can be separated from the cement plant, and the company will make the original ecological domestic waste into alternative fuel (an industrial product) and then transport or sell it to other cement plants. According to the relevant policies and standards issued by the Ministry of environmental protection, the original ecological domestic waste can not be transported across the border, but the RDF (refuse derived fuel) generated after pretreatment can be transported across the border. At present, Huaxin has realized cross-border transportation. For example, alternative fuels produced by its two factories in Wuhan and Fengjie in Chongqing are transported by water to the cement plants of the company.

However, Huaxin Cement also faces many difficulties in environmental protection investment. Previously, the Director Secretary of Huaxin Cement said: "at present, Huaxin environmental protection business is divided into six categories: domestic waste, municipal sludge, contaminated soil, hazardous waste, floating objects on the water surface and medical waste, of which the" volume "of domestic waste is the largest. The profitability of the six types of business mainly depends on the disposal price of their respective categories. Some of them are profitable and some are not yet profitable, but the unprofitable business can basically guarantee its cash flow. The relationship between incineration power generation and cement kiln collaborative disposal technology is first in and second in. The main reason why Huaxin failed to make profits in the domestic waste disposal business is that it does not enjoy the same subsidy policy as the incineration power generation. The central finance will give corresponding subsidies to the incineration power generation for treating one ton of garbage, but there is no relevant policy for the cement kiln collaborative disposal technology for the same disposal of domestic waste. "

Capacity replacement is imminent

In January 2020, after the Ministry of industry and information technology issued the Q & A on the implementation measures of production capacity replacement in the cement glass industry, in the middle of December of that year, the Ministry of industry and information technology issued the opinions on soliciting the implementation measures of production capacity replacement in the cement and glass industry (Revised Draft), and put forward the cement clinker construction projects with capacity replacement in the key areas of prevention and control of air pollution stipulated by the state, and the proportion of capacity replacement For cement clinker construction projects located in non air pollution prevention and control key areas, the production capacity replacement ratio is 1.5:1 and 1:1, respectively. Since 2013, cement clinker and flat glass production lines which have been shut down for two years or more can not be used for capacity replacement.

Under the background of forbidding new production capacity, the only way for cement industry to build new capacity is capacity replacement. But at the same time, in the context of high profit in the cement industry, capacity replacement index is relatively scarce.

Under the new rules, there is no doubt that "catalyst" has been injected into enterprises who want to exit the market but are reluctant to integrate the market by taking advantage of the opportunity of capacity replacement. Especially for the large enterprises that take the opportunity of capacity replacement to eliminate backward production lines and lay out the future market, it is undoubtedly an excellent opportunity to speed up the "exchange of blood" to build a more competitive production line with its own clinker production line as the clinker replacement index.

China building materials is a successful example of capacity replacement. In view of the fact that most production lines in the history of building materials in China were acquired through acquisition and integration, it is generally believed in the industry that the historical factors such as non standardization, decentralization and single line scale of production lines make them have strong willingness and ability to do internal optimization, while competitors have insufficient willingness or ability to replace capacity. Therefore, capacity replacement policy has become a help to continuously improve the cost and cost of building materials in China "Policy moat".

According to Feng Chenyang, an analyst at Haitong Securities Research Institute, in the future, China's building materials can save about 500 million yuan annually through capacity replacement. But at the same time, there is still much room for improvement in the cost and cost control of building materials in China.

Feng Chenyang pointed out that affected by many factors, China's building materials used to have a certain gap compared with other enterprises in the cost of cement clinker and the three fees per ton (i.e., sales, management and financial expenses). "The main reasons are: first, the average single line production capacity scale of the company's clinker production line is relatively small. Although the single line scale has increased slightly since 2011, there is still a certain gap between conch cement with strong cost control ability; second, due to the large capacity of the company obtained through acquisition in the past, the equipment standardization and management differences between different acquired enterprises are relatively low, compared with self built As for the standardized production line, it is difficult to control the cost and expense. "

Industry reshuffle in the near future

With the introduction of the plan to eliminate the cement clinker production line with a capacity of less than 2500 tons / day (including) by the end of 2021, it means that many small and medium-sized enterprises will face the trend of acquisition or elimination, and the cement industry will have to reshuffle in 2021.

In 2020, China building materials will sell shares of Zoomlion cement, Nanfang cement, southwest cement and Sinoma cement to Tianshan shares, making the latter a veritable "giant" in the cement industry. This also opened the prelude to accelerate the integration of the industry.

Wei Yu told the 21st century economic reporter that "the two giants of China's cement are China building materials and conch cement, which will not change much in the long run. Tianshan itself is a subsidiary of China building materials. The acquisition of Tianshan is essentially a move from Hong Kong shares to China's a shares. It is the integration of the internal business of China building materials. It can strengthen its synergy effect and will not have a great impact on the whole industry. "

According to public data, the overcapacity of China's cement industry is still very serious. By the end of 2019, there are 1624 new dry process cement production lines in China, with the designed clinker capacity of about 1.82 billion tons, and the actual clinker output in 2019 is 1.52 billion tons. In 2019, the output of cement industry will reach 2.33 billion tons. If the population of 1.4 billion is calculated, the per capita production capacity can reach 1.66 tons, which is far higher than that of developed countries such as Europe and the United States. Among them, 2.33 billion tons of cement production is still under the strict control of peak load production. If domestic cement enterprises are allowed to produce at full capacity, China's cement production capacity will be seriously surplus, and even lead to "price war" in the industry.

Wei Yu put forward different opinions. In Wei Yu's view, the current cement production capacity is a relatively balanced state, and there is not much overcapacity. "Due to the implementation of the policy of peak shifting production, production will be stopped in the off-season. The policy of shifting peak production has compressed a lot of capacity in disguise, so the overcapacity is not very obvious now. Moreover, there are certain differences in the amount and use of cement in China compared with those in Europe and the United States. The demand for infrastructure in Europe and the United States is weak, while China still has huge demand for infrastructure construction. The construction of houses in China is mainly based on cement. The structure of cement use in China is quite different from that in Europe and the United States. Therefore, we should not simply compare the cement production capacity of China with that of Europe and the United States by combining the national conditions. "

Whether the epidemic prevention and control will have an impact on the cement industry is also one of the issues worthy of attention in 2021. Wei Yu said that the overall impact of the epidemic on the cement industry is not too big. "The impact of the new crown pneumonia epidemic in 2020 on cement is mainly in the first quarter, but has recovered since May. The cement industry restructuring in 2020 is more based on the industry's own steps. The national policy has always encouraged mergers and acquisitions to improve the industry concentration. In fact, it has little to do with the epidemic situation. The data also shows that the cement turnover in 2020 has a slight increase compared with that in 2019. "