Following discussions with the China Cement Association, Deutsche Bank now expect capacity growth of 7.5% and 3.4% in 2012 and 2013 versus its previous expectations of 4.1% and 2.2%.

Deutsche forecast national demand to grow 3.3% in 2012 compared to its previous forecast of 4.1%. This could prove conservative if property stabilizes and the economy recovers in 2H12, the bank notes. Nevertheless, it expects 2012 to be the year when supply pressure on producers is the greatest over the past five years. In order to better control the effective supply demand balance, particularly in Eastern China, producers will likely increase production halts.

Essentially, with slower demand growth and greater-than-expected supply growth in 2012, nationwide utilisation should drop three percentage points to 77% in 2012.