Cement prices in several Chinese provinces have soared as a
campaign to close inefficient facilities has eliminated capacity
before it can be replaced, causing shortages, China Cement Net said
on Thursday.
The retail price of portland cement 32.5 (a grade of cement) in
the southern coastal Hainan Province was 500-580 yuan/ton
(67.86-78.71 US dollar) this week after more than three months of
sharp fluctuations. Although prices have fallen from a peak of 700
yuan/ton in August, they are still high from 270-280 yuan/ton last
year.
In response, Hainan authorities imposed emergency price ceilings
in late November, setting a maximum ex-factory price at 380
yuan/ton. Also, 200,000 tons of bulk cement from Guangxi were
shipped into Hainan earlier this month. Still, some projects in
Hainan were suspended due to the price hikes.
Hainan's situation is not an isolated case. Market data showed
that Xinjiang Uygur Autonomous Region in the north and Yunan,
Sichuan and Guangdong provinces in the south are suffering the same
pain.
"The price hikes are short term. The main reason for shortage is
that obsolete production facilities have been eliminated while the
construction of new facilities failed to keep up," said Zeng
Xuemin, vice chairperson with the standing committee of the China
Cement Industry Association.
Under the 11th Five-Year Development Plan (2006-10), 250 billion
tons of obsolete facilities are to be phased out before 2010, and
20 percent of that total must be closed this year alone.
Experts said it was not difficult to close outmoded factories.
However, the earliest new facilities could only open next year,
restricted by the state policy of "new production capacity shall be
constructed after and in proportion with the elimination".
In other words, old factories must close before new ones can be
built or operate. As a result, shortfalls are hard to make up.
Zeng also warned against a possible round of investment fever
fueled by the price hikes, which might lead to oversupplies and
more fluctuations in cement prices.
"It will be better if we put construction before elimination. We
construct some new capacity first, then eliminate the obsolete
facilities gradually. Overheated investment can be curbed by
comparatively stable supply. After all, cement prices bear a direct
influence on construction costs and downstream industries," Zeng
suggested.
(Xinhua News Agency December 21, 2007)
