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On April 24, 2007, the special issue of "2007 China Cement Industry Overview" of China Building Materials Newspaper published the article "Discussion on the Capacity of China's Cement Industry". Two years later, some of the views in the article have now reached consensus, and the profitability of the cement industry has reached a new level. The total profit in 2008 reached about twice that of 2006, and the profit per ton of cement increased by nearly 70% compared with 2006. But currently, due to the occurrence of a global economic crisis that has not been seen in decades, our country's economic development is facing severe tests and challenges. The profitability and economic benefits of the cement industry will undoubtedly be affected by the economic environment, but the development of things always has its two sides, with benefits and risks coexisting, and challenges and opportunities coexisting. In 2009, when many economists believe that China's economy will hit its bottom, what will be the prospects for the cyclical cement industry? Can the steady development trend of the previous year be continued? Can the cement industry resolve the impact of another round of concentrated release of new production capacity and maintain a moderate level of profitability? These questions once again bring us into the discussion of cement industry profitability. In 2008, the profits of the cement industry bucked the trend. In 2008, the subprime mortgage crisis in the United States has evolved into a financial tsunami that has affected the world. * * , developing * * Almost no emerging economies are spared. For our country, we are currently facing not only the strong impact of the financial tsunami, but also the pressure on economic adjustment from some medium- and long-term factors after years of rapid development. However, the rapid development over the past 30 years of reform and opening up has significantly enhanced my country’s economic strength. * * “A series of powerful policy responses to ensure growth, adjust structure, and promote development. Therefore, even in the second half of 2008, when the economy experienced a significant decline, there were still many new highlights that we were proud of. Among them, the cement industry has maintained high growth in efficiency despite the decline in demand growth, and has stood proudly in the storm. From January to November 2008, the total industry profit reached 26.135 billion yuan, a year-on-year increase of 30.8%, exceeding the level of the whole year of 2007. In 2008, cement production maintained moderate growth, reaching 1.39 billion tons. Despite the decline in demand growth, the economic benefits of the cement industry exceeded that of 2003 and reached the best level in this century. The cement industry has not only achieved a new high in total profits, but also has the highest growth rate among all raw material industries. This has not only never happened in recent decades, but is also rare in the history of cement development. Cement prices are stronger than steel prices * * The development of cement and steel, the two most widely used basic raw materials in infrastructure construction, has many similarities but also obvious differences. In terms of production and sales volume, China has already become the largest in the world. In 2007, my country's cement output was 1.36 million tons, accounting for 49.1% of the world's total cement output. ； Steel production was 489.66 million tons, accounting for 36.4% of the world's total steel production. Both industries are cyclical industries driven by fixed asset investment. Due to overcapacity in recent years, they have become * * Key industries for macro-control. However, the price of cement and the efficiency of the industry are far from being comparable to that of steel. The price ratio of steel and cement in the world is about 5, while in my country in the 1980s, the price ratio of steel and cement exceeded 10 and has been rising, reaching 16 in 2006 and 23 in May 2008. As cement prices have been hovering at low levels for a long time, the gap between its economic benefits and steel is getting wider and wider. In 2007, after two years of recovery growth in cement prices, the average profit per ton only reached 6% of that of steel in the same year. However, in the second half of 2008, when my country's economic adjustment showed a downward trend and the international financial crisis deepened its impact on my country's real economy, the situation changed greatly. Steel production fell sharply for five consecutive months from July to November, with crude steel production falling by 25%. At the same time, steel prices have fallen even more sharply. By the end of November, domestic steel prices had dropped by 40% from the end of June. In November, steel companies were in an industry-wide loss-making situation. In contrast, cement, which has been in a weak position, is much stronger. Although the demand growth rate has declined and the peak season is not booming, production and sales have still maintained a slight growth. Except for the normal seasonal fluctuations in February and March, the trend has been basically stable. What is even more rare is that the cement industry has changed from the passive position that was completely controlled by the upstream and downstream industries in previous years, and has achieved good economic benefits in the face of adversity. Profitability is in the recovery growth stage. The profitability of the cement industry began to decline sharply in 1994 and began to recover after hitting the bottom in 1997. After getting rid of the industry-wide loss-making situation in 2000, the profit per ton of cement showed a gradual upward trend. Since the beginning of this century, on the one hand, the demand for cement has increased significantly due to the rapid economic development; on the other hand, due to technological progress and structural adjustment of the cement industry, the production cost of the cement industry has been reduced and labor productivity has been greatly improved. Under such conditions, it is logical to improve the efficiency of the cement industry. However, the contribution of the above two major positive factors to efficiency has mostly been absorbed by the upstream and downstream industries, and has not improved the profitability of the cement industry as much as it should. Therefore, when the market situation fluctuated in 2005, the profitability of the cement industry immediately declined significantly, with total profits for the year falling by 38.7%. After 2006, the profit level of the cement industry has entered a gradual upward trajectory. First, the total profit and profit per ton have gradually increased for three consecutive years. ； Secondly, more and more entrepreneurs have formed a certain consensus on the reasons and countermeasures for the long-term low prices and low profits of cement. The awareness of maintaining the stable development of the market has increased, and the cement industry's ability to pass on rising prices of upstream products has increased. ； Finally, under the dual pressure of the international economic recession and my country's economic adjustment and downward pressure in 2008, the demand growth rate of the cement industry declined while total profits and average ton cement profits continued to rise. This was in sharp contrast to 2005, when cement demand increased by nearly 10% but cement profit growth rate dropped sharply. The above situation shows that the profitability of the cement industry has entered the stage of restorative growth. Regional differences and changes From January to November 2008, the national average profit per ton of cement reached 20.63 yuan, a year-on-year increase of 23%. Among all provinces and autonomous regions in the country, 14 provinces and autonomous regions have profits per ton above the national average, including Hebei and Inner Mongolia in North China. ； Jilin in Northeast China ； Anhui and Shandong in East China ； Henan and Hainan in Central South ； Chongqing, Sichuan and the * * ； Gansu, Qinghai, Ningxia and Xinjiang in the northwest. The profit per ton level in Jiangxi, Hubei, and Guangxi provinces in 2008 was similar to the level in the region in 2007. However, as the national level improved, it has fallen below the average. The profit per ton level of the four provinces and cities of Chongqing, Sichuan, Gansu and Qinghai was still below the national average in 2007, but in 2008 it exceeded the national average by a large margin. The profits per ton in Anhui and Jilin provinces were close to the high levels in 2007, but both fell slightly. If we compare it with 2006, the most obvious difference is that Yunnan Province, which ranked first in terms of profit per ton that year, dropped sharply to the bottom in the country in 2007. In 2008, it further fell to an industry-wide loss, and profit per ton became negative. Secondly, the profit per ton level in Jiangsu Province in 2006 was higher than the national average, which was no longer the case in 2007 and 2008. Anhui, Henan, and Jilin have moved backward in terms of profit per ton. Discussion on the room for increasing profitability Entering this century, my country's new dry process cement production has developed very rapidly. In 2001, new dry process cement accounted for only 14.1% of total cement production, and in 2008 it had reached 61.8%. The advancement of technology and optimization of structure have greatly reduced investment and operating costs, providing enterprises with very large room for profit growth. However, most of this space has not been utilized by the cement industry, but has been occupied by upstream and downstream industries due to internal disordered competition. This situation improved slightly in 2008, allowing the cement industry to maintain efficiency improvements despite the very unfavorable external environment. But we have to note that the average profit per ton in 2008 was still less than 70% of that in 1993. Such a profit level is extremely disproportionate to the progress of society and the industry. Compared with the steel industry, in addition to the small proportion of cement exports (only 1.88% in 2008) and the rapid decline in foreign demand that has had a smaller impact on my country's cement industry, there are several points worthy of our discussion. First of all, steel has to digest a large amount of iron ore stocks purchased at high prices, so the benefits have also fallen sharply with the fluctuations in demand. The main raw materials for cement companies such as limestone and clay are all solved when building the factory. There is no problem of purchasing bulk raw materials at high prices. On the contrary, the appreciation of resources is not fully reflected in the cost. Secondly, steel prices rise quickly and will naturally fall quickly after encountering shocks. There are reports that the market price of a certain type of steel in July 2008 increased by 1,300 yuan per ton compared with early February, a rate of up to 28%. The price of cement has been at a low level for a long time, and profits are much thinner than those in the upstream and downstream industries, leaving almost no room for further compression. Thirdly, and a very important point, the cement industry has witnessed the rapid rise of large enterprises through structural adjustment, integration and reorganization. Especially in recent years, the industrial concentration has greatly improved. In 2001, the concentration ratio of the top 10 large cement enterprises was only 4.0%. In 2008, it had risen to 21.5%. For the cement market of regional products, the influence and control of large enterprises will undoubtedly increase significantly. Under such circumstances, the cement industry has gradually gained the ability to transmit price increases to upstream industries downwards, and has begun to have a certain degree of say in the value transmission of the industrial chain. The differences in regional profits and changes in fluctuations in various regions can be summarized and extracted into such rules.: First, the demand and development of regional cement are affected by the overall national economic situation, that is, the economic cycle. Second, the demand and development of regional cement are also restricted by the rhythm of regional economic development. According to local resources, financial resources and other conditions and planning requirements, in different years, the economic development, especially the scale of fixed asset investment, in each region will often vary greatly. For example, the growth rate of fixed asset investment in Zhejiang increased from 22.7% in 2002 to 36.3% in 2003, driving the rapid growth of cement demand, rising cement prices, and rapid construction of production lines. However, the growth rate of fixed asset investment in 2005 was only 12.8%, a drop of 23.5 percentage points in two years. The construction of cement production lines and the release of production capacity are still rising. As a result, the structure was adjusted, but supply exceeded demand, which ruined the market. Zhejiang's profit per ton of cement fell from 36.3 yuan in 2003 to 1.18 yuan in 2005. The same is true in Yunnan. The growth rate of fixed asset investment has declined, but cement investment is still increasing, and finally the entire industry is losing money. Therefore, if the development of cement is synchronized with the development of the local economy, there will be a lot of room for profit, but if it is not the case, it will be counterproductive. Faced with the pressure of rising prices for resources and energy, as my country's reform and opening up and the cement industry gradually integrate with international standards, as the concentration of the cement industry continues to increase and the business community's awareness of maintaining stable market development increases, it is expected that the pace of restorative growth in cement prices and benefits will accelerate. according to * * According to the general requirements for cement investment profit rate in the "Construction Project Economic Evaluation Methods and Parameters" organized by the National Development and Reform Commission and the current efficiency situation of the cement industry, the total profit of the cement industry should have room to double. Of course, the space for profitability development and the actual profitability level achieved are two different concepts. In 2009, there is still a certain degree of uncertainty in my country's economic development, and the cement industry is facing the pressure of excessive investment growth. But in any case, the prospect of profitability in the cement industry is bright, it just comes sooner or later - and this, it should be said, is in our own hands. (Please indicate the source when reprinted by China Cement Network)