Conch eyes faster China cement consolidation

China’s largest cement maker, Anhui Conch Cement Co, said Beijing’s efforts to cool its economy have curbed demand but will help to speed consolidation of the highly fragmented cement market.

Conch aims to increase its market share to 40 per cent from 12 percent in its eastern China market over the next five years as it expands at the expense of smaller, inefficient rivals, Executive Director Guo Jingbin said in an interview in Hong Kong. Conch’s targeted 40 percent market share in eastern China in five years translates to capacity of 100Mta. This year’s capacity is about 40Mt

"China’s economy is not going downhill. We are still in an up cycle, but need fine-tuning to ensure long-term and stable growth," said Guo, a trained engineer who has worked at the state-controlled firm for nearly 24 years.

To prevent the economy from overheating, Beijing early this year curbed lending and investment in industries including cement and aluminium. The government has also sought to curb growth in the cement-hungry property and infrastructure sectors.

The moves have lower cement prices. Demand growth is expected to slow to about 5 percent in 2004 from about 17 percent a year ago, Guo said. He expects industry growth of more than 5 percent next year.  However, the pain should only be short-term, with large cement makers like Conch - with 11 clinker plants and 21 cement grinding mills across eastern China - gaining in the long run, he said.

Beijing’s measures are speeding the closure of less-competitive players. Conch has said that in Shanghai alone, 20 small cement makers with annual production capacity of 1 million tonnes will be closed by 2006.  China’s cement industry is highly fragmented, with over 4,000 makers accounting for nearly 75 percent of the country’s total capacity, Guo said. The average annual production of a Chinese cement marker is about 200,000t, compared with 1.5Mt in India, he said.