Tougher Emissions Standards Aimed At China's Cement Industry


Updated Thu, 02 Feb 2012 00:00:00 GMT

China's Ministry of Environmental Protection is working on far stricter emission standards for the country's cement industry, and if implemented, the new rules will sharply eat into its profitability, an executive of Anhui Conch Cement Co (SHA: 600585, HKG: 0914) – the nation's biggest cement producer by output – told

The source cited Zhang Lijun, vice environment minister, who recently visited the company to review its emissions reduction operations and revealed that the ministry was mulling over tougher standards.

China's cement industry, which accounts for 80% of aggregate increment in the world's cement output last year, will be closely watched for reductions in nitrogen oxide emissions between 2011 and 2015, Zhang noted.

The current nitrogen oxide emission allowance for cement makers is 800mg/m3, and it will likely be changed to 400mg/m3, or even 300mg/m3, learned from both the Conch Cement executive and Kong Xiangzhong, director of the China Cement Association. "The existing highest standard across the globe is 400mg/m3."

Raising the standard from 800mg/m3 to 400mg/m3 will increase cement manufacturing costs in China by RMB 15 to  RMB 20 per ton, while gross profit per ton is RMB 80 to  RMB 100 for cement makers in eastern and southern China and RMB 50 for those in western and northwestern China, according to Kong. "They may pass on the increase in costs to downstream firms," Kong argued.

China's cement output expanded 16.1% to 2.06 billion tons in 2011, and cement factory prices averaged RMB 407.5/ton in December, National Development and Reform Commission figures show. Industry profit is projected to exceed RMB 100 billion, or RMB 50 per ton.

Tougher emission standards will also kick out less competitive firms to make the industry more consolidated, the Conch Cement executive said.

The number of Chinese cement producers has fallen to 3,000, down from 5,000 five years ago, and is expected to diminish further by a third through the end of 2015.

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