China Resources Cement Holdings will continue to invest in cement production in the next three year although there is downward pressure on cement price.
The company believes enhancing production capacity for long term benefit is crucial. In the next three years, it plans to enhance annual production capacity from 7.7Mt to 15Mt. The expansion involves an investment of RMB1bn.
China Resources Cement deputy-chairman Shi Xan-bo forecasts that in the next two year, cement price will drop by 10% more. However, in the Eleventh Five-Year Plan, the demand for cement for construction and infrastructure projects will increase at an annual rate of 8%. This will lend support to the cement industry.
China Resources Cement had production output of 7.7Mt in 2005. China Resources Cement believes the best time to invest is the trough time where raw material prices will be low. Apart from cement business, China Resources Cement is planning to produce downstream products like concrete. Since the Chinese government forbids mixing of concrete on building sites in cities starting from 2006, China Resources Cement spots this opportunity and believes producing concrete will be another business for the company. In 2006, China Resources Cement will focus on cost control and enhancing production competitiveness.
In 2005, Shi believes the cement industry in China had total earnings of RMB7bn, down by 52% from that of 2004. Total output of cement, however, had increased by 10% to 1.1 billion tons. In the first ten months of 2005, a rise in coal, petrol, electricity and transportation cost had hurt the cement industry. The industry had seen an increase of RMB15bn in costing, equivalent to an increase of RMB15 per ton. Cement price in China had also dropped by 8% in 2005.
