A Chinese official warned here on Monday that the nation’s cement producers would face tough competition from foreign counterparts if they do not step up mergers and acquisitions (M&As). Niu Jianguo, deputy director of the Economic Operation Department of the National Development and Reform Commission (NDRC), the country’s leading industrial watchdog, told a press conference that the cement industry was facing "severe competition" as foreign investors are quickening the pace in regrouping China’s cement market.
Too many cement enterprises with small-scale production capacity and low industrial centralization are major issues facing the industry, he said. He also noted the market share of China’s 10 biggest cement producers was only 15 per cent of the country’s total.
NDRC statistics showed that in 2005, many Chinese cement enterprises reported bad performance. China’s cement output stood at 1.06bn tonnes last year, up 10 per cent from the previous year, while profits for the cement industry fell by 38.7 per cent on 2004. Among the country’s 5149 cement enterprises, 1851, or 35.9 per cent, reported losses last year which totaled 4.89 billion yuan (US$610m), a year on year rise of 74 per cent.
A recent circular jointly issued by the NDRC and seven other central departments said China will step up the restructuring of the cement industry in the next five years to realize the goal of increasing the country’s cement output capacity to 1.25 billion tons by 2010. By then, the annual average output capacity of cement producers will increase from the present 200,000t to around 400,000t and the number of cement producers will be trimmed to 3500. The NDRC will phase out cement production lines with small capacity and outdated technology during the country’s 11th Five-Year (2006-2010) plan period.