At present, cement grinding stations are the largest component of cement enterprises in terms of quantity and production capacity. Among them, the third-party social grinding station with the largest number faces three severe challenges at the policy, enterprise and market levels, and its living space is constantly being squeezed. The author believes that for a large number of social grinding stations, there may be three paths of active upgrading and transformation, mergers and reorganizations, and forced withdrawal from the market in the future. If you do not want to be eliminated under the pressure of policy and market competition, you should be forward-looking Layout.

  1. Overview of the current status of licensed operation grinding stations nationwide

In 2010, the State Council issued the "Notice on Further Strengthening the Elimination of Outdated Production Capacity" to accelerate the elimination of outdated production capacity. Between 2010 and 2012, a total of 260 million tons of cement kiln capacity was eliminated, and many mechanical shaft kilns were eliminated, but the grinding system was retained. Become a grinding station. In 2012, the number of grinding stations exceeded the number of clinker companies for the first time. At the end of 2013, the number of grinding stations reached 2,165. As of the end of May 2018, there were 2,317 cement grinding stations with production licenses across the country, an increase of 152 from the end of 2013. According to the business model of the grinding station, the author divides the grinding station into two categories: one is the grinding station under the cement enterprise (group). This type of grinding station is a link in the cement production chain of the cement enterprise. Group enterprises are deployed in a unified manner; the second is the third-party social grinding station that does not have a large-scale enterprise group background and does not have a clinker production line, which is also the largest category. According to statistics, the current grinding station has the following characteristics:

 　 1. There are a large number of grinding stations, which is the largest component of cement enterprises

  In terms of quantity, grinding stations account for 64% of all cement companies in my country. In terms of production capacity, the total cement production capacity of the grinding station is 1.86 billion tons, accounting for 54% of the country's total production capacity. It can be said that the grinding station is the largest component of the cement enterprise.

  Figure 1: Components of cement companies (3,623 in total)

 Data source: China Cement Network, Cement Big Data Research Institute

2. Concentrated distribution, mainly in the central and eastern regions

  Grinding stations are mainly distributed around cities along the coast and along the river. In terms of regions, East China and Central South accounted for 60.5%. Shandong Province has the largest number of grinding stations with a total of 279, accounting for 12.33% of the country's total; Hebei, Jiangsu and Henan also have more than 150 grinding stations; the total number of grinding stations in TOP5 provinces accounts for 40%. The least is Tibet, with only one; there are also fewer grinding stations in Shanghai, with three in total.

  Figure 2: Regional distribution of grinding stations

  Data source: China Cement Network, Cement Big Data Research Institute

3. Small-scale, private enterprise grinding stations are the mainstream

  Most of the independent grinding stations are private enterprises, accounting for about 85%. The total production capacity of private grinding stations is 1.41 billion tons, accounting for 76% of all grinding stations, and is the most important form of grinding stations.

  Figure 3: 85% of independent grinding stations are private enterprises

  Data source: China Cement Network, Cement Big Data Research Institute

  From the perspective of cement production capacity, small-scale grinding stations with an annual capacity of less than 600,000 tons (usually a mill) are the mainstream, accounting for about 55%, and grinding stations with a scale of 1 million tons and below account for 78 %, the number of grinding stations with a capacity of more than 2 million tons is relatively small, most of which are owned by large cement groups. The average scale of private grinding stations is small, about 720,000 tons/unit, which is lower than the average level (the average scale of central enterprises, state-owned enterprises, and foreign-funded enterprises is above 1 million tons/unit).

  Figure 4: Production capacity of grinding station (unit: 10,000 tons/year)

  Data source: China Cement Network, Cement Big Data Research Institute

4. Most of them are social independent grinding stations, and clinker needs to be purchased from a third party

  In 2017, the clinker production capacity of TOP10 clinker production companies accounted for 56% of the country’s total clinker production, but so far the number of grinding stations owned by TOP10 companies is only 284, accounting for less than 13%. Although the concentration of the cement industry is increasing, it is only the concentration of clinker production that has increased, but the concentration of grinding stations has not followed. The top ten cement companies account for much higher clinker production capacity than the top ten companies. Proportion of cement production capacity of grinding station.

  Figure 5: Concentration of clinker production capacity Figure 6: Concentration of grinding station

  Data source: China Cement Network, Cement Big Data Research Institute

  Most of the grinding stations are socially independent grinding stations, relying on purchased clinker for production and operation.

  Table 1: Situation of grinding stations under TOP10 companies

  Data source: China Cement Network, Cement Big Data Research Institute

  2. The current challenges facing the social grinding station

1. Policy level: overcapacity reduction and high pressure on environmental protection

  Currently, the cement industry is facing great pressure to reduce production capacity, and social grinding stations bear the brunt. According to the "Cement Industry Capacity Reduction Action Plan (2018～2020)" issued by the China Cement Association, it is required to close 540 cement grinding stations, 210 cement grinding stations in 2018, and 150 grinding stations in 2019, 2020 Close 180 grinding stations each year, and strive to stop the production of 32.5 strength grade cement in the first half of 2018. All provinces and regions will eliminate 25% of the existing cement grinding station enterprises. On May 7, 2018, the National Standardization Management Committee publicly solicited opinions on the "General Portland Cement" mandatory national standard (GB175-2007) No. 3 amendment (draft for approval), requiring the cancellation of 32.R strength grade composite cement . As a large number of social grinding stations mainly produce 32.5 cement, the implementation of this policy will have a great impact on the grinding stations, posing new challenges to their cost, technology, marketing, management and other capabilities. Grinding stations adapted to the new environment will be eliminated.

  Environmental protection policies are becoming more and more stringent: in the event of orange and red warning weather, the grinding station is under pressure to stop production and limit production. Recently, Premier Li Keqiang deployed and implemented a three-year action plan to defend the blue sky at the executive meeting of the State Council, which will continue to improve air quality. The Ministry of Ecology and Environment issued the "2018-2019 Blue Sky Defense War Key Regions Enhanced Inspection Plan". The enhanced inspection started on June 11, 2018 and lasted until April 28, 2019, focusing on Beijing, Tianjin, Hebei and surrounding areas. "2+26" cities, 11 cities in the Fenwei Plain, and key areas such as the Yangtze River Delta region continue to carry out intensified inspections of air pollution prevention and control. The suspension of production and production restriction has a direct impact on the normal and continuous operation of the grinding station.

  Table 2: Timetable for the suspension of production in various regions during the Blue Sky Defense War

 Data source: China Cement Network, Cement Big Data Research Institute

In the future, environmental protection standards will inevitably be higher and higher. For example, the scope of application of special emission limits for particulate matter, increase in electricity prices for individual grinding stations, noise pollution (disturbing the residents), vibration and other aspects of environmental protection are likely to be introduced. . With the expansion of the depth and breadth of environmental protection supervision, penalties will also be strengthened, increasing the environmental protection costs of the grinding station.

  2. Enterprise level: the supply of raw materials is reduced, and the market share of social grinding stations is eroded

With the increase in the concentration of cement clinker and the implementation of the staggered production policy in the past two years, the era of controlled clinker sales has quietly arrived. For example, in the Yangtze River Delta market, Conch and Southern Cement have jointly established a clinker export platform to strengthen the regional Joint cooperation for clinker supply. On the one hand, the supply of clinker companies has decreased, and there is no clinker available in the market. On the other hand, the tacit cooperation between large companies is also a disaster for grinding companies, and clinker sales, sales prices, and sales targets are all restricted. Last year, the export rate of clinker of several large cement companies dropped to a certain extent. Compared with the previous year, the total amount of clinker supplied was reduced by more than 1,000 tons, which had a greater impact on the grinding market.

  In addition, large companies such as Conch and China National Building Materials are still putting into production new grinding stations, including the ongoing capacity replacements in various regions, which will increase their own grinding capacity to a certain extent. The concentration of cement production capacity will continue to increase, gradually eroding the market share of social grinding stations.

  Table 3: Clinker export rate of major enterprises

 Data source: annual reports of listed companies, China Cement Net, Cement Big Data Research Institute

3. Market demand level: investment slows down, cement demand drops

  Since 2010, the growth rate of solid investment in the whole society has continued to slow down, and the peak demand for cement in 2014 was 2.49 billion tons. According to the experience of developed countries, between 5 to 35 years after the peak of cement, cement demand will have a trough in a certain year, only 50% of the peak. It is estimated that by 2020, cement demand may drop to around 1.9 billion tons. Not only will the market share of social grinding stations shrink, but the size of the entire market will also shrink, which will further reduce the living space of social grinding stations.

  Figure 7: National cement output and fixed asset investment from 2004 to 2018.05

 Data source: National Bureau of Statistics, China Cement Network, Cement Big Data Research Institute

  3. The future way out of cement grinding station

Three major challenges at the policy, corporate, and market levels. At present, where is the future of the social grinding station? The author believes that there are several possibilities:

  1, upgrade and transformation

  Under the pressure of policy and supervision, the 32.5 cement requirement is completely canceled to increase the consumption of clinker in the cement. Environmental protection increases the production cost of the grinding station. If the grinding station does not want to be eliminated from the competition, it must:

  On the one hand, improve the company’s technology, product quality, production process, etc., and strive to meet standards in environmental protection and energy consumption. On the other hand, to strengthen the raw material management ability, through the coordination and cooperation between grinding stations, promote the prohibition of new grinding station projects in the region, and jointly purchase clinker from clinker companies to improve bargaining power.

  2, merger and reorganization

  The merger and reorganization under the leadership of the government, associations and industry self-discipline is also a general direction in the future. On May 24 this year, the Xuzhou City Government issued the "Xuzhou Cement Industry Layout Optimization and Transformation and Upgrade Plan", which requires that 14 enterprises in Tongshan District be integrated into 2 large-scale grinding companies by the end of September 2018. Jia 26 enterprises in Wang District were integrated into 2 leading large-scale grinding enterprises. Conditional grinding stations may wish to seek opportunities to be acquired by clinker companies.

  3, exit the market

  If none of the above paths work, some grinding stations must be forced out of the market:

  (1) From a national perspective, the survival pressure of grinding stations in areas with high clinker concentration and high capacity utilization is prominent, and the pressure on grinding stations in the south is much higher than that in the north;

(2) Grinding stations that violate laws and regulations and do not comply with local industrial policy standards, the "Industrial Structure Adjustment Guidance Catalogue (2011)" issued by the National Development and Reform Commission specifies that cement grinding stations with an annual output of less than 600,000 tons are restricted , The survival pressure of small-scale grinding stations is higher than that of larger ones;

  (3) Uncompetitive grinding station (increasing production costs, no stable source of clinker).

  Figure 8: Clinker concentration & capacity utilization rate in each province

This article is transferred from China Cement Network

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