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Mainland Cement Makers Seek Higher Prices, Technology Upgrades

Kandy Wong in Shanghai – Updated on Apr 07, 2008 – SCMP

For cement makers, it’s all about price and pollution. The mainland is experiencing surging steel and coal prices. But cement industry executives who met in Shanghai last week said the price of the basic raw material for buildings and toll-roads was only half that of international prices.

“A higher price will give investors a fair return,” said Tom Clough, a member of the executive committee of Switzerland’s Holcim, one of the world’s largest cement producers with a 40 per cent stake in A-share listed Huaxin Cement.

The average price for thermal coal rose 20 per cent last year and analysts said steel prices would increase 25 per cent this year on soaring demand for iron ore. But the average price for cement only rose 7 per cent last year to 600 yuan (HK$667) per tonne.

Industry executives said they needed higher prices, and not just for shareholders.

“Many Chinese cement companies need funds to upgrade their technology and enhance environmental protection,” said Mr Clough.

The cleaner way of making cement is the modern dry process. Limestone and other materials, such as sand, iron ore and clay, are put in a rotary kiln at temperatures as high as 1,450 degrees Celsius to produce black and nodular clinker, the precursor of cement.

The central government is encouraging mainland cement companies to adopt the dry process because it can be upgraded to reduce carbon dioxide emissions, which contribute to global warming.

But only about 55 percent of the industry uses this technology. The rest use a much older, cheaper technology, heating up limestone and coal in a simple big burner to producing cement, releasing sulphur and carbon dioxide into the air.

“Cement companies should always be aware of energy efficiency and emission reductions,” said National Development and Reform Commission official Jia Yinsong.

“The 59 low-temperature, heat-saving electricity generating machines used for the cement companies last year saved 1.4 million tonnes of coal and reduced carbon dioxide emissions by 3.64 million tonnes.”

One way Beijing is attacking the pollution problem is consolidation.

The State-owned Assets Supervision and Administration Commission suggested early last year that the cement industry should be led by 12 pillar companies. It is a policy that would require industry consolidation to eliminate small, polluting companies.

But Huaxin Cement chief executive Li Yeqing has a different goal.

“The top 12 are already here in terms of capacity, but not in terms of performance and profitability,” he said. “What we need is modern ideas from global players by transforming technology into quality and performance because big cement companies should aim to be national brands.”

Mr Clough agreed. “China should have a slight change in mentality about big being impressive,” he said. “They should be concerned about profitability.”

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