Displaying items by tag: Jidong Cement

The publication of CNBM’s financial results presents a good opportunity to take stock of the Chinese cement industry in the first half of 2019. Looking at the big picture first, cement sales rose by 5% year-on-year to 1.03Bnt in the first half of 2019 from 0.98Bnt in the same period in 2018. Graph 1 below shows the sales over the last five years since 2014. Generally, sales are decreasing each year but there has been some variation in the half-year periods.

Graph 1: Cement sales in China, 2014 – 2019. Source: National Bureau of Statistics of China.

As the China Cement Association (CCA) pointed out in its summary for the first half of 2019, the cement industry ‘swelled in volume and price’ as industry efficiency grew but that the growth rate dropped ‘significantly’ compared in 2018. By region, as Graph 2 shows, variation can be seen between the south-east of the country where growth was slow or even fell compared to stronger performance elsewhere. Cement production increased by above 20% in Jilin, Shanxi, Shandong, Tibet and Heilongjiang and by over 10% in Hebei, Gansu, Tianjin, and Liaoning. However, it fell in Hainan, Beijing, Qinghai, Guizhou, Guangxi, Hunan, Guangdong and Ningxia. Most of these changes were attributed to either rising or falling demand for cement, except for Jilin where reduced imports from neighbouring provinces pushed up its demand. In most of these latter regions it attribute the decline to falling demand for cement.

Graph 2: Cement production growth by province in first half of 2019. Source: China Cement Association.

Other points of note from the CCA include the surge in imports to China. Imports of cement and clinker rose by 149% year-on-year to 8.97Mt in the five months from January to May 2019. Vietnam supplied 68% of this followed by 11% from Thailand. On the production side, 10 new production lines with a total capacity of 15.5Mt/yr were commissioned in the period. These were fairly scattered across nine provinces, in Shanxi, Anhui, Hubei, Fujian, Guangxi, Hunan, Guizhou, Gansu and Yunnan respectively.

Sales and profits were supported by growing demand and prices on the corporate side. CNBM’s operating income for its cement businesses grew by 16% to US$8.14bn from US$7.04bn. Its adjusted profit increased by 40% to US$2.76bn from US$1.98bn. Anhui Conch’s sales rose by 17.9% to US$2.15bn from US$2.11bn. It blamed poorer profits in the south of the country on adverse weather leading to weakened demand.

The weaker sales in the south could be seen in China Resources Cement’s (CRC) results with its turnover down by 6% to US$2.22bn from US$2.36bn. Likewise, its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 8.5% to US$820m from US$896m. The majority of its cement plants are based in Guangxi, Guangdong and Fujian. Jidong Cement was also reported as having received US$30m in subsidies from the government during the first half of 2019 in relation to its ‘daily activities.’

As is usual for these kinds of roundups the dynamic in China is between government industrial policies, like peak shifting and pollution mitigation, and local demand and price trends. One of the latest spins on peak shifting, for example, is a rating system that is being considered to decide which companies should be subject to production limits and for how long. General cement sales are slowly falling each year but the rise of imports into the word’s biggest cement producing nation (!) mark an interesting trend. Also, it may not be connected, but lots of those provinces with falling demand so far in 2019 are those on the south coast facing the heavy clinker exporting nations of South-East Asia. Given the decisiveness with which the Chinese government dispensed with imports of waste materials under its National Sword initiative since 2017, those countries importing cement to China should beware. It could change very quickly. The Chinese cement market is never dull.

China: BBMG has agreed to sell its stake in seven cement companies to Jidong Cement for US$227m. It has also arranged with Jidong Cement to contribute nearly US$150m into BBMG Jidong Cement (Tangshan), a joint venture owned by the two companies. Both companies will also inject capital into each other’s subsidiaries. BBMG owns a 7% stake in Jidong Cement. Both agreements have been set up to resolve the issues of competing business between BBMG and Jidong Cement.

The seven companies that BBMG is selling to Jidong Cement are Zhuoquan BBMG Cement, Lingchuan BBMG Cement, Baoding Taihang Heyi Cement, Handan Shexian BBMG Cement, Qinyang BBMG Cement, Lanxian BBMG Cement and Xuanhua BBMG Cement. BBMG owns a 100% or majority stake in each of these companies.

China: Russia’s Mechel says it has prolonged a coal supply contract with Jidong Cement until the end of 2019. The mining and steel company will supply 2Mt/yr of thermal coal mined at the company’s Elga and Yakutugol mines in South Yakutia. Monthly supplies will vary from 100,000 to 150,000t of coal products. Prices will be adjusted on a monthly basis following negotiations and on the basis of index rates.

“This is a third major contract signed by Mechel and Jidong Cement. I am sure that our ties will continue to develop in a constructive manner in the future. It is also important to note that Jidong Cement is a key customer of Elga’s thermal coal in Asia. In 2017 we supplied our Chinese partners with 1.9Mt and another 1.4Mt in 2018. In 2019 we plan to export thermal coal from Elga in comparable volumes,” said Mechel Mining Management’s chief executive officer (CEO) Pavel Shtark.

China/Russia: Mechel has signed a memorandum for coal supply with China’s Jidong Cement. The Russian mining and metals company will supply the Jidong Cement with up to 3Mt of steam coal mined at Elgaugol’s Elga Open Pit and Yakutugol’s Neryungrinsky Open Pit. Prices will be adjusted on a monthly basis following negotiations and on the basis of index rates.

“Jidong Cement is our longstanding and strategic partner in Asia, and we aim to continue our long-term and mutually profitable partnership. Mechel’s mining division has met all its obligations on our prior agreement. Today, Jidong Cement is the chief foreign consumer of Elga’s steam coal,” said Mechel chief executive officer (CEO) Oleg Korzhov.

China: A new special economic development zone in the north of Hebei province is expected to significantly boost demand for cement in the region. President Xi Jinping announced that that the new development named Xiongan New Area would be built southwest of Beijing, according to the ET Net News Agency. The development will be on the same scale as Shenzhen and Shanghai Pudong. Using these previous projects as a benchmark HSBC Global Research estimated that Shanghai Pudong uses around 6Mt/yr and that the region had used 133Mt since its creation in the early 1990s.

BBMG’s shares spiked following the announcement. The largest cement producer in the Beijing-Tianjing-Hebei area is widely expected to benefit from the project. After its restructuring with Jidong Cement it will hold 57% of cement production capacity in the region.

China: Tangshan Jidong Cement plans to acquire about 108.48 million additional shares in Jilin Yatai Group for US$60.3m, at US$0.56/share. After that, Jidong Cement will hold less than a 5% stake in Jilin Yatai. Jidong Cement said that the capital source of the external investment was a self-owned one and that the deal would not affect its 2014 operations.