According to data from the Bureau of Statistics, from January to December 2022, the national cement production reached 2117.95 million tons, a year-on-year decrease of 10.5%, reaching a new low in 11 years.
Against the backdrop of a significant decline in demand, the domestic cement market remains sluggish in 2022. According to data from China Cement Network, from the beginning to the end of last year, the National Cement Price Index (CEMPI) fell by 40 points, a decrease of more than 20%. The market for the whole year was "not strong in the peak season, but even weaker in the off-season".
China Cement Network predicts that the total profit of the domestic cement industry will drop by over 60% in 2022, with a drop reaching a new high in recent years and even exceeding that of 2015.
At the corporate level, among cement listed companies that have released performance forecasts, net profit has significantly decreased. Among them, Tabai Group's performance has experienced the largest decline, expected to reach 83% -88%; The industry's "gold sucking king" Conch Cement is expected to experience a 50% -58% decline in performance.
In 2022, the cement industry experienced its coldest year since 2016, with both volume and price declining. Faced with a 60% drop in industry profits, we cannot help but ask, "How did all this happen?
Natural disaster: declining demand combined with high costs, making it difficult for cement companies to survive
As a commodity with a high degree of marketization, the price changes in the cement market are easily affected by the demand side. In addition, coal prices remain high in 2022, and the cost side continues to be under pressure. Cement enterprises are struggling to survive in the cracks.
1. The downturn in the real estate industry has seriously dragged down cement demand
The prosperity of the real estate industry over the past 20 years has strongly supported the domestic cement market demand, driving cement demand to account for about 35% of the total domestic cement demand, with some regions even exceeding 50%.
The growth rate of real estate investment in the past decade has basically synchronized with cement production
In 2022, the real estate industry will completely end its "sprint" model and all data will decline comprehensively.
According to data from the National Bureau of Statistics, in 2022, the national investment in real estate development reached 13289.5 billion yuan, a decrease of 10.0% compared to the previous year; The construction area of real estate development enterprises' houses is 9049.99 million square meters, a decrease of 7.2% compared to the previous year. The newly constructed area of houses is 1205.87 million square meters, a decrease of 39.4%. The completed area of houses is 862.22 million square meters, a decrease of 15.0%. The sales area of commercial housing is 1358.37 million square meters, a decrease of 24.3% compared to the previous year, and the sales revenue of commercial housing is 13330.8 billion yuan, a decrease of 26.7%.
The downward trend in the real estate industry directly leads to a decline in cement demand.
In recent performance forecasts of major cement listed companies, it has been clearly pointed out that the decline in real estate development investment growth rate is an important reason for the decrease in market demand, cement production and sales prices, and sales volume. Coincidentally, in 2015, the domestic cement production decreased by 4.9% year-on-year. When the industry entered a great trough, the performance of real estate investment was also poor. The growth rate of real estate investment that year was only 1.0%, a sharp drop of 9.5 percentage points compared to 2014.
Of course, in addition to the decline in real estate investment, the impact of the epidemic on the cement market last year cannot be ignored. The two outbreaks at the beginning and end of the year not only affected the start-up speed of the cement market, but also restricted the development of the traditional peak season at the end of the year, greatly affecting the demand for cement.
For example, at the beginning of last year, after the outbreak of the epidemic in Shanghai, engineering projects stagnated, gradually affecting the effective recovery of demand in the entire Yangtze River Delta market, directly causing the cement market in the Yangtze River Delta to fall into a quagmire, and even breaking out in local price wars. In addition, according to data from the Shanghai Cement Association, the cement consumption in Shanghai was 22.5815 million tons in the first half of last year, a significant decrease of 18.68% year-on-year.
2. High coal prices exacerbate the situation for cement enterprises
Coal is the main cost source of cement clinker, accounting for 50% -70% of cement production costs. Based on the energy consumption of 150kg of physical coal per ton of clinker, for every 100 yuan increase in coal price, the clinker cost will increase by about 15 yuan.
In 2022, due to the imbalance between supply and demand in the market, coal prices experienced two high points. One was the sustained rebound in coal prices from January to March, which reached an annual high of 1669 yuan/ton; The other is at the end of October, with a price of 1620 yuan/ton. The average annual coal price in China is around 1280 yuan/ton, and based on this calculation, the cost of coal per ton of clinker is close to 200 yuan.
Industry giants such as Conch Cement, Tianshan Shares, Jidong Cement, Huaxin Cement, etc. all said in their performance forecasts that the cost of cement and clinker increased year on year due to the sharp rise in the price of coal and other major raw materials.
In 2022, the cement industry continued the high costs of 2021, but the market did not perform as a "roller coaster" like in 2021. At the same time as the overall decline in cement demand in 2022, coal prices have significantly increased year-on-year, and the high cost of cement production has "eaten away" cement
However, in the first half of last year, some enterprises in regional markets such as the Yangtze River market and the Pearl River Delta market faced a downward trend in the market, competing with each other and seizing the market. The original competitive and cooperative relationship had already appeared cracks.
On the one hand, in the face of declining market demand, companies lack expectations and confidence, leading to a certain degree of panic and "stampede"; On the other hand, some enterprises have gradually overlooked the crucial role of good competitive and cooperative relationships in maintaining market stability. In the face of declining demand, "small actions" continue to occur, and the execution of staggered production has decreased, leading to a decrease in market trust between enterprises.
The decline in demand was the trigger for the decline in the cement industry market in 2022, and the changes in industry competition and cooperation have greatly amplified the impact of the decline in demand on the cement market.
The current domestic cement industry has entered a new development cycle, and market demand is difficult to recover from its previous high levels. Against the backdrop of severe overcapacity, there is a high probability that the industry will continue to face enormous pressure from the supply side in 2023. Given the lessons learned in 2022, if the cement industry cannot rebuild industry mutual trust and repair cracks in competition and cooperation relationships, the industry situation may further deteriorate.
On the afternoon of March 14th, China Cement Network will hold the "Cement Economy 50 Person Roundtable Forum" in Hangzhou, inviting more than 50 leaders to participate in the discussion, hoping to form a consensus, promote the industry economy to get on track, and achieve high-quality development.
Can the cement industry regain its momentum in 2023? Can the cycle be restarted? We will wait and see.
(Editor in charge: Anonymous)
Article source: China Cement Network
