Government to consolidate cement industry

Government to consolidate cement industry
Published: 11 January 2007

Sixty key cement companies will become the industry leaders under a fresh consolidation, according to the National Development and Reform Commission (NDRC).  
 
The 60 will enjoy government support in terms of approval for new projects, mergers and acquisitions, land use and credit, the NDRC, the nation’s top economic planning body, said on its website.  
 
The list includes 12 national cement manufacturers and another 48 local firms, including the country’s biggest cement company, China Anhui Conch Group Co Ltd.  
 
"The consolidation aims to develop China’s cement companies into world cement giants," said Hong Liang, an analyst with China Galaxy Securities.  
 
Although China is the world’s largest cement producer, there are currently too many small manufacturers, said Hong, adding that most of them use outdated equipment.  
 
The 10 biggest cement companies in the world currently control about 80 percent of the industry, while the 10 biggest Chinese companies only account for 20 to 30 percent of the Chinese market, he said.  
 
"China’s cement industry will see more mergers and acquisitions, and an increasing number of foreign companies have their eyes on the market," said Hong.  
 
The world’s largest cement manufacturer Lafarge and Southwest China’s top cement producer, Shui On Construction and Materials Ltd (SOCAM), merged their operations in China in 2005. 
 
The joint venture, Lafarge Shui On Cement, which is 55 percent owned by Lafarge and 45 per cent by SOCAM, established a new cement leader in Southwest China.  
 
Meanwhile the nation’s largest cement maker Anhui Conch has agreed with Morgan Stanley Asia Investment Ltd, a subsidiary of US investment bank Morgan Stanley and the World Bank Group’s private-sector arm, the International Finance Corporation, to buy stakes in the firm.  
 
"Facing these mergers and acquisitions, domestic companies need to increase their capacity in order to compete with foreign enterprises," said Hong. 
 
Some of China’s big cement makers have already started expanding. China’s largest building materials manufacturer, China National Building Material Group Corp, last year raised $150 million from its initial public offering on the Hong Kong stock exchange.  
 
Attempting to adjust the cement industry’s structure, China will continue macroeconomic control measures focused on cement manufacturing, said the NDRC earlier.  
 
The nation will accelerate the elimination of small-capacity cement production lines and outdated technology.