Since last year, domestic cement clinker production lines have gradually resumed capacity expansion.

Latest statistics show that as of December 16, over 240 clinker lines nationwide have completed capacity expansion, collectively phasing out 134 million tons of capacity while adding over 87.2 million tons. Regionally, Anhui imported the largest amount of capacity from other provinces at 8.913 million tons, followed by Guangdong with 6.355 million tons.

The data shows that while 134 million tons of capacity were withdrawn and replaced with 87.2 million tons of new capacity, theoretically achieving a net reduction of 46.8 million tons of clinker capacity, this should have alleviated the industry's overcapacity crisis. However, the reality is that this capacity expansion has not addressed the core issue. Instead, it may exacerbate the overcapacity situation and further amplify the volatility risks in the cement market next year.

Prior to this capacity replenishment, while overproduction had long persisted in the industry, the completion of the replenishment has effectively removed the existing constraints on capacity. Overproduction is no longer an unspoken, implicit practice within the industry; cement companies can now operate at full capacity without restraint. This has led to a significant increase in actual capacity deployment, directly intensifying the real pressure of overcapacity.

Cross-regional Capacity Shifts Exacerbate Overcapacity in Recipient Regions

Some enterprises view this capacity expansion as an opportunity for regional capacity adjustment, relocating excess capacity from areas with severe overcapacity and bleak market prospects to regions with relatively lighter overcapacity or more favorable market conditions. This transfer further intensifies overcapacity pressures in recipient areas, with the Yangtze River Delta and Pearl River Delta serving as the primary destinations. As mentioned earlier, Anhui received the largest influx of capacity from other provinces, totaling 8.913 million tons, followed closely by Guangdong with 6.355 million tons.

Taking Anhui as an example, the majority of transferred capacity originated from regions with severe overcapacity, such as Guizhou. After capacity supplementation, Anhui's cement clinker production capacity increased by nearly 9 million tons on paper. The local market clearly cannot absorb such a large increment, which will inevitably impact the Yangtze River and coastal cement markets, exacerbating overcapacity issues in these regions. Meanwhile, transfer-out regions like Guizhou, even without implementing capacity replacement, are largely unable to utilize their existing capacity due to severe overcapacity.

In economically developed regions like the Yangtze River Delta and Pearl River Delta, where cement demand remains relatively robust, the influx of external capacity risks dragging these markets into a quagmire of low-price competition.

Absence of Standardized Capacity Calculation Standards Persists, Creating Overproduction Risks

During this round of capacity supplementation, the lack of unified standards for capacity calculation has led to widespread irregularities. Even kilns with identical 4.8-meter diameters saw vastly different capacity additions across production lines—ranging from 500 t/d to 2,500 t/d, a gap of 2,000 t/d. More unusually, additions of 666 t/d, 1,066 t/d, and 333 t/d also occurred.

Overall, the cement industry's overcapacity issue remains unresolved.

What warrants greater vigilance is that capacity expansion fundamentally constitutes reinvestment. For cement companies, the core objective is rapid recovery of investment costs, implying a high probability of significantly boosting capacity utilization rates next year. Conversely, enterprises with no room for overproduction or no capacity to expand will be compelled to strictly adhere to their approved production quotas.

It is foreseeable that following this round of capacity expansion, a new phase of market competition within the cement industry may soon unfold.

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