GF SEC released a research report stating that, according to data from Digital Cement Network and the National Bureau of Statistics, the capacity utilization rate for cement clinker is projected to be 53%/50% in 2024/2025, indicating severe overcapacity. After two years of policy deliberation and promotion, the period 2026-2027 will see the implementation of supply-side policy controls dominated by "overproduction control + carbon market," which is expected to lead to the gradual exit of excess and outdated cement production capacity. The optimization of cement supply will consequently elevate the industry's profit center. In the medium to long term, the cement industry's supply is expected to be continuously optimized, and it is advisable to focus on bottom-feeding cement assets. GF Securities' main views are as follows:
Overproduction Control: Substantial capacity clearance has already commenced. On September 24, 2025, the Ministry of Industry and Information Technology, jointly with six other departments, issued the "Work Plan for Steady Growth in the Building Materials Industry (2025-2026)," which explicitly requires cement enterprises to formulate capacity replacement plans for production exceeding project filings by the end of 2025, aiming to align actual capacity with registered capacity. According to statistics from Digital Cement Network, by the end of 2025, the national cement industry had retired a total of 160 million tons of clinker capacity through replacement (estimated actual exit is about 200 million tons considering overproduction). Given that the announcement deadline for the 2025 edition of supplementary capacity rules has been delayed to March 31, 2026, the total retired clinker capacity is expected to reach 200 million tons by the end of Q1 2026 (estimated actual exit is about 250 million tons considering overproduction). This implies that by the end of Q1 2026, actual capacity is expected to drop from 2.1 billion tons to 1.8 billion tons, which will lead to an increase in the capacity utilization rate in 2026.
Carbon Market: Post-2027 will enter a phase of deep emission reductions, with dual control over total volume and intensity, expected to force out outdated capacity. The years 2025-2026 mark the initiation and implementation phase of the carbon market. The carbon quota policy currently has a minor impact on cement costs. According to the "National Carbon Emission Trading Market Quota Total and Allocation Plan for the Steel, Cement, and Aluminum Smelting Industries for 2024 and 2025," the 2024 carbon quota equals the verified carbon emissions for that year. The 2025 carbon quota equals the verified carbon emissions for that year multiplied by (1 + carbon emission intensity coefficient α), where α = ±3%. Enterprises with emission intensity 20% higher/lower than the benchmark level will have a quota surplus/shortfall rate of ±3%. Based on direct carbon emissions from the cement clinker process being approximately 0.87t CO2/t and the latest carbon price of 82 yuan/t, the maximum estimated surplus/shortfall for cement enterprises in 2025 is about ±2 yuan/ton. After 2027, dual control over total carbon emissions and intensity will be implemented. It is anticipated that carbon quotas will significantly contract, and carbon prices will rise (theoretically, the difference in carbon emissions between leading and trailing enterprises could be at least 10%, with international carbon prices reaching several hundred yuan/ton). By then, smaller enterprises are expected to purchase more carbon quotas at higher prices (far exceeding current levels), which will increase their environmental costs, widen the cost gap with leading enterprises, and thereby force the exit of outdated capacity.
Investment Recommendation: Domestic cement profits are expected to bottom out in 2024, fluctuate at low levels overall in 2025, with capacity utilization likely to improve and the profit center expected to rise year-on-year in 2026. The "overproduction control + carbon market" measures from 2026-2027 will lead to the exit of excess and outdated capacity. In the medium to long term, the cement industry's supply is expected to be continuously optimized. It is advisable to focus on bottom-feeding cement assets, such as Anhui Conch Cement (600585.SH), Huaxin Cement Co.,Ltd(600801.SH), CR BLDG MAT TEC (01313), CNBM (03323), Shangfeng Cement (000672.SZ), Tapai Group (002233.SZ), and West China Cement (02233).
Risk Warning: Risks include continued macroeconomic downturn, significant fluctuations in monetary and real estate policies, risks of new capacity investments exceeding expectations, and risks of excessively rapid increases in raw material costs.
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