Cement Industry Trends in Recent Years

  In recent years, due to the ongoing adjustment in the real estate sector and insufficient funding for infrastructure, cement demand dropped significantly, competition among companies intensified, and industry profitability continued to decline. Our predictions of declining cement demand, increased surplus issues, greater overseas contributions, and more companies exiting the industry have all come true, but the market has also seen some unexpected new changes.

  Real estate has continued to stabilize and recover under a series of support measures, but front-end investments such as new construction are unlikely to rebound in the short term, and cement demand in the real estate sector will continue to decline. Benefiting from a more proactive fiscal policy, infrastructure growth is expected to accelerate, but considering the pressure on local governments to reduce debt and changes in the structure of infrastructure investment, cement demand in the infrastructure sector is unlikely to increase. We expect that cement production in 2025 will decrease by 5% to 8% compared to the previous year, with the decline rate narrowing somewhat.

  According to incomplete statistics, there are 5 proposed new capacity replacement projects in 2024, a 50% decrease compared to the previous year, with a planned capacity of 7.307 million tons. Most of the replacement projects involve technical upgrades or relocation. National policy documents have been issued one after another to guide enterprises in compliant production. It is expected that new construction and replacement projects will continue to decrease in 2025, with an increase in capacity replenishment cases, but they will also face issues such as limited quotas and increased difficulties across provinces.

  After three years of industry downturn and a period of significant consolidation, many businesses with poor competitiveness and low efficiency have suffered severe losses, lack development confidence, and the calls to exit the market are growing day by day, making it a relatively ripe time for large enterprises to take action Recently, Jidong Cement fired the "first shot" in domestic market mergers in the Northeast, sparking a strong response within the industry. It is expected that there will be an increase in cement industry merger projects in 2025, leading to a temporary peak.

  A highly concentrated market and a healthy competitive landscape are essential prerequisites for the cement industry to achieve high-quality development. In recent years, the cement industry has made little progress in increasing concentration levels; currently, the top ten companies account for about 56% of clinker production capacity, which is significantly lower than that of developed countries in Europe and the United States. As leading enterprises accelerate their mergers and acquisitions, low-efficiency companies are rapidly exiting the market, which will increase industry concentration.

  The cement industry is the third largest carbon emitter after the power and steel industries, and reducing carbon emissions in the cement industry is crucial for achieving the "carbon peak" and "carbon neutrality" goals. Currently, the "National Carbon Emissions Trading Market Coverage Plan for the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Public Comments)" has been released, marking a significant step in including the cement industry in the carbon market. It is expected to be officially included in the carbon trading market this year, with far-reaching impacts on the industry.