The oligopolistic or future of the cement industry

Due to overcapacity, energy and environmental issues, the merger and reorganization drama has been staged in the cement industry since 2008. The "Guidance on Accelerating the Merger and Restructuring of Enterprises in Key Industries" (hereinafter referred to as the "Opinion") recently released has cast a mysterious veil over the merger and reorganization of the cement industry.

Will the cement industry, which is one of the nine industries identified in this document, set off a new wave of reorganization due to the release of the “Opinions”? Does this indicate that the oligarchic age of the cement industry is approaching?

Uneven development of industry concentration

According to relevant data, in 2011, the industry concentration of the top 10 cement companies in the country was only 26%. According to the Opinions, by 2015, the industry concentration of the top 10 cement companies will reach 35%. In this regard, an analyst from Changjiang Securities analyzed that this is not a very reasonable indicator. The past 10 years have been the golden period for the development of the cement industry. With the competition and restructuring of enterprises, the regional structure of the domestic cement industry has become very obvious. High degree of concentration.

At present, judging from the distribution of the domestic cement market, in East China, Conch Cement and CNBM are leading, in North China are Jidong Cement and Jinyu Cement, in Northeast China, Yatai Cement and Northern Cement are leading, and in the Western Region, Tianshan shares and Qilianshan shares are the leading companies. The southwest region is dominated by China National Building Materials, Conch Cement, and Taiwan Cement. The concentration rate of domestic cement companies is between 30% and 40%. The concentration of cement companies in East China is the highest, and the industry concentration of two leading companies, Conch and China Building Materials, has reached nearly 50%. Then subdivided the market, only Conch Cement or a building material company, in a certain area of ​​Zhejiang Province, the concentration reached 50%.

The analysts also told reporters that the regional concentration of domestic cement companies in the 30% to 40%, the cement industry in East China, the highest degree of concentration of the industry, Conch, China Building Materials two leading companies in the industry concentration of nearly 50%. Then subdivided the market, only Conch Cement or a building material company, in a certain area of ​​Zhejiang Province, the concentration reached 50%. “The proposal for this national indicator is mainly to promote large enterprises not only to develop within the region, but also to gradually expand the development region,” he explained.

The cement industry, like other industries in the country, also has a phenomenon of unbalanced development. This can be demonstrated by the regional concentration of companies. According to the above analysts, at present, the concentration of cement companies in the southwestern region of China is relatively low, mainly local small and medium-sized private enterprises, and the development of the cement industry in the entire region is slow. At present, China Building Materials, Conch Cement and Taiwan Cement are undergoing M&A integration in the western region.

East reorganization boom

At present, potential risks such as overcapacity and energy environment have become a stumbling block to the healthy development of the industry.

In an interview with the reporter, Kong Xiangzhong, executive vice chairman and secretary-general of the China Cement Association, said that the background of mergers and reorganizations is that the industry has encountered a development bottleneck, and overcapacity is the biggest bottleneck. As of the end of last year, China's cement production accounted for 60% of the world's total. Calculated in terms of per capita consumption, it exceeded the cement consumption per capita at the highest rate in any country.

"To truly resolve excess production capacity is only through mergers and reorganizations, and this requires large enterprise groups to dominate the market, eliminate backwardness, and maintain balance between supply and demand in the market," Kong Xiangzhong said.

However, due to the different urbanization processes in various regions of China, the merger and reorganization of the cement industry also has a certain emphasis. Wang Zhenhu believes that the consolidation of the cement industry in the eastern region is greater.

He analyzed that from a nationwide perspective, Shenzhen, Shanghai, Beijing and other places are relatively economically developed and urbanization rates are high, so the demand for cement is relatively small. At the same time, the development of the cement industry chain is relatively complete. Therefore, the development of the entire industry has encountered bottlenecks. From the perspective of manpower and other aspects, cement companies need to expand in an extension.

The cement industry in the western region, driven by the post-disaster reconstruction in Wenchuan, has achieved rapid development. However, at present, the rate of urbanization in the west is low, and the country has continuously introduced relevant policies to guide the development of urbanization. Affected by this, in the next 10 years, the increase in the demand for cement and other infrastructure materials will mainly be driven by the central and western regions. At the same time, the competitive landscape of the cement industry in the region is not yet obvious. Many companies do not have much pressure on mergers and acquisitions, and there is still much room for survival.

Is the oligarchy time coming?

The "Opinions" just announced that Huaxin Cement has taken the lead in order to purchase a 70% stake in Hubei Huaxiang Cement Co., Ltd. and its related party, Hubei Huaxiang Cement Ezhou Co., Ltd., for a total of 519 million yuan. According to incomplete statistics, since the parent company of China National Building Materials acquired Chuankui Cement and Pangang Cement at the beginning of 2012, there have been as many as 23 acquisition integration cases in the cement industry in just over a year.

In 2009, it was known as the merger and reorganization year of the cement industry. This year, the release of the "Opinions" undoubtedly cast a mysterious veil over the cement industry's next merger and reorganization. People in and outside the industry have commented that according to the development of other industries in the country, does the merger and restructuring mean the advent of the cement industry oligarchs?

In response, both analysts said otherwise. According to Wang Zhenhu, the cement industry is different from other industries in that its entry threshold is low and there is a typical sales radius. In general, the sales of cement radiates about 200 kilometers around, and beyond this radius, the increase in transportation costs will greatly reduce its sales advantage. Therefore, the current situation should be more multi-scope and multi-environment coexist.

In fact, the regional oligarchs have already formed. For example, in Anhui, Conch Cement is the leader, Hebei is the Jidong Cement, and Xinjiang is the Tianshan Group. Due to the constraints of the national economic development structure, the advent of the oligarchic era in the domestic cement industry will take some time.

Many people have questioned whether this restructuring will set off a wave of people in the cement industry. Who will be the main force in this merger and reorganization? In this regard, Wang Zhenhu stated that the integration of the cement industry is still a matter of “big fish eat fish”. With the advantages of capital, management experience, and scale, large-scale cement groups, especially cement listed companies, will become the main force of mergers and acquisitions.

For the development of the cement industry in the future, Wang Zhenhu said that from the perspective of the stock market, the cement industry first saw the bottom of the market in November last year. Afterwards, with the development of urbanization, the cement sector has been on the rise, which is an inflection point for the development of the industry. In the past two years, the performance of listed companies in the cement industry has declined rapidly. After going through inventory, companies will usher in the sales season in March. In addition, with the increase of fixed investment, the cement industry will develop steadily in 2013.