Cement Net Comments: What is the impact of the construction of hydropower projects in the lower reaches of the Yarlung Zangbo River on the cement market in the Xizang?

Recently, the world's largest hydropower project in the lower reaches of the Yarlung Zangbo River, which has been planned for decades, was officially announced to start construction. The project mainly adopts the development mode of straightening bends and diverting water through tunnels to build five cascade hydropower stations, with a total investment of about 1.2 trillion yuan. The external power transmission and consumption of the project is the main part, taking into account the local self-use demand of Xizang. As soon as the news came out, many industries reacted strongly, and related concept stocks set off a rising tide. Cement is one of the indispensable raw materials for the construction of hydropower projects, so how will the hydropower projects affect the cement market trend in the Xizang in this century? According to the big data of

China Cement Network, there are 15 clinker production lines in the Xizang, with a total capacity of 14.622 million tons. Among them, the local enterprise Xizang Tianlu clinker production capacity is the largest, accounting for 33.9%; Huaxin Cement accounts for 23.7%, ranking second; China Building Materials ranks third, accounting for 19.1%; Yaqu New Building Materials accounts for 10.6%, ranking fourth; Xizang Development Investment Group and Conch Cement are tied for fifth, both accounting for 6.4%. Generally speaking, there are fewer players participating in the cement market in Xizang areas, and the competition pattern is relatively good.

Figure 1: Competition Pattern

of Cement Market in Xizang Data Source: Cement Big Data (https://data.ccement.com/)

From the perspective of regional distribution, Xizang's clinker production capacity is mainly divided into Lhasa (4.34 million tons), Changdu (3.72 million tons), Shannan (3.462 million tons) and Xigaze (3.1 million tons), with little difference in the scale of production capacity among the four places, while Xizang's Tianlu clinker production capacity is mainly in Lhasa (3.1 million tons) and Changdu (1.86 million tons). Huaxin Cement is mainly distributed in Shigatse (1.55 million tons) and Shannan (1.91 million tons), while Chinese building materials are distributed in Lhasa (1.24 million tons) and Shannan (1.55 million tons). The hydropower project in the lower reaches of the Yarlung Zangbo River is mainly located in the Mêdog County area of Nyingchi City, and there is no clinker production line in Nyingchi City at present. However, Xizang Tianlu plans to build a 4000t/d production line in Long County, Nyingchi City through capacity replacement, which is expected to be put into operation by the end of 2026, when the competition pattern in Nyingchi is expected to be reshaped.

Figure 2: Distribution Map

of Clinker Production Capacity in Xizang Area Data Source: Cement Big Data (https://data.ccement.com/)

How much cement demand can Yaxia Hydropower Project bring to the Xizang?

Generally speaking, in the construction of hydropower projects, cement is mainly consumed in the three major concrete projects of dam, diversion tunnel and powerhouse, accounting for about 90% of the total, while the remaining 10% is scattered in the auxiliary parts of grouting, slope protection and roads, of which 50% -70% is for the dam and 15% -25% is for the diversion tunnel. Both of them are the main links of cement consumption. According to the plan, the Yarlung Zangbo River Hydropower Project has a total investment of 1.2 trillion yuan and an installed capacity of 60-81 million kilowatts. It is planned that some units will generate electricity in 2030 and put into full operation in 2035. The construction period is expected to exceed 10 years. Unlike the Three Gorges and other large hydropower stations, which build dams, block water and take electricity, the project adopts the development mode of cutting bends and straightening and tunnel diversion, which is similar to Jinping I and Jinping II hydropower stations on the Yalong River. Tunnel construction will be the core part of the project, so most of the cement consumption will be used for tunnel lining and other links. By comparing with Jinping Hydropower Station and combining with the characteristics of difficult construction in Xizang area, it is estimated that the total cement consumption of Yarlung Zangbo River Hydropower Project will be 30-35 million tons, with an average annual cement consumption increment of 3-3.5 million tons, based on the cement consumption of 13.33 million tons in Xizang area in 2024, accounting for about 22% -26%, at least in the future. The demand for cement in Xizang areas will be firmly guaranteed.

Table 1: Part of the hydropower station construction information

Data source: Cement big data (https://data.ccement.com/)

The market is bullish and the future can be expected

from the demand side. With the construction of Yaxia Hydropower Super Project and the continuous promotion of Yalin Section of Sichuan-Xizang Railway, the demand for cement in the medium and long-term Xizang areas, especially in eastern Xizang, will be strongly supported. From the supply side, the Xizang region forbids the placement of production capacity in other places, and at the same time forbids the addition of new production capacity. In addition, the enterprises have to stagger the peak and shut down the kiln for a long time, and the supply pressure is controllable. Under the situation of increasing supply, it is expected that the overall cement price in the Xizang region will have a strong driving force to rise. From the perspective of different regions, the situation of oversupply in central Xizang is difficult to change, enterprises have a long off-peak period, and the space for price increase is limited; the demand in eastern Xizang (Qamdo) and southern Xizang (Nyingchi) is strong, the supply of cement is insufficient, the pattern of tight supply and demand will continue, and it is expected that the space for price increase will be larger in the next few years. However, it can not be ignored that with the start-up of large projects driving up demand, the inflow of cement from surrounding Sichuan, Yunnan and other places may increase, and the market competition will intensify, which may bring some pressure to the cement market in eastern Xizang.

Figure 3: Price Trend

of Cement in Xizang Data Source: Cement Big Data (https://data.ccement.com/)