Although plagued by archaic technology, cement production in China is far ahead of any other country in terms of sheer volume of output. China's cement factories churn out over a third of the world supply, while the next three largest suppliers combined produce less than one-fifth.
China has held the top position since the mid-1980s, but the industry has continued to grow at a phenomenal pace. In the last five years alone the sector has boomed, with annual production accelerating from almost 600 million tonnes in 2000 to more than 1 billion tonnes last year. In comparison, 25 years ago China only produced around 100 million tonnes per year.
But as is the case in many other industries, China's gargantuan cement output is largely the sum of thousands of small-scale operations. This was a direct result of the underdeveloped transport infrastructure of the 1970s and 1980s, which encouraged local areas to aim for self-sufficiency in cement production.
China now has more than 6,000 cement enterprises. The scale of each is so small that Conch, the biggest cement producer in China, accounts for around 25% of the total national capacity on its own. In recent years, the government has pursued a policy of mergers and rationalization to consolidate the sector. However, despite the completion of a number of high profile mergers in 2005, progress has been slow, mostly due to conflict with local interests. Closing down poorly performing enterprises can involve high numbers of layoffs.
Cement production in China employs a disproportionately high amount of labor compared with the international norm. Operations are targeted for elimination based on low cement quality, low output capacity, and low efficiency. About 70% of China's 6,000 cement producers do not meet minimum standards and have been earmarked for eventual closure.
Vertical kilns and other outdated processing methods are incapable of producing high-quality cement but are still widely used. Cement production is an energy intensive industry, and outdated equipment results in losses from energy-waste.
Improved technology is needed not only to raise efficiency and product quality, but also to curtail excessive environmental impact. Dust emissions can be serious, and carbon dioxide released as a byproduct of the calcination process inherent in cement making, accounts for as much as 8% of China's carbon dioxide emissions.
Cement production is concentrated mostly in coastal regions, paralleling economic and urbanization activity. The major cement provinces are Shandong and Guangdong, although the government has indicated an interest in developing the industry in western and central regions to support their lagging economic growth.
Improving infrastructure in recent years has facilitated consolidation and allowed many cement factories to be moved away from populated centers and closer to raw materials sources, reducing transport and pollution problems. But there is still scope for further development of bulk cement transport and storage facilities.
China is also an exporter of cement, mostly from the coastal regions and often from stocks produced by foreign-invested firms. Key importers of Chinese cement include the US, Spain and many Asian countries, most notably South Korea. China has limited need for cement imports, but the industry is looking abroad for related products like new equipment and infrastructure technology. Regulatory conditions governing outside investment in the sector are favorable, and many foreign investors have moved in.
One of the most notable deals in 2005 was French cement giant Lafarge teaming up with Shui On Construction and Materials Ltd to form a new joint venture, Lafarge Shui On Cement. The JV company is now the largest cement producer in Southwest China, and the third-largest in the country overall. The world's fourth-largest cement producer, Heidelberg Cement, has also entered China, forming a joint venture with top five domestic producer Tangshang Jidong Cement.
Cement production in China is largely absorbed by booming domestic construction demand. Moreover, the country's building projects tend to be biased towards the heavy incorporation of concrete, of which cement is a major component. Roads in China, for example, are usually constructed of concrete rather than asphalt. Likewise, Chinese skyscrapers often favor concrete over steel.
The surge in economic growth in the first years of the 21st century raised demand above supply levels, which induced a wave of new cement-production projects. In 2004, the central government responded with a clampdown on over-investment by raising interest rates, putting a slight downward pressure on escalating growth. Despite these efforts, though, forecasters expect growth to continue, particularly in the high quality cement sector. But this will most likely at a slower rate than seen in the recent past.
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