China Cement Association urges consolidation

The China Cement Association has petitioned policymakers to speed up consolidation in the cement sector, which currently has 3500 producers. The consolidation aims to concentrate at least 60 per cent of national capacity into 10 top producers by 2020.

According to proposals by the association, the process is likely to involve many mergers and plant closures, reports the South China Post. To achieve a basic balance between demand and supply, the sector will need to reduce production capacity by 390Mt and jobs by 130,000 in the next five years. In an ideal situation, around 20 per cent of capacity would be idle and 15 per cent of cement producers would operate at a loss.

In a first step every mainland province is expected to have 2-3 leading players that have a combined capacity share of 70 per cent. Big plant would be encouraged to swap production quotas and seek cross holdings in equity stakes.

Current cement producers will create a CNY20bn restructuring fund to help the process, a move that will see large companies such as Anhui Conch, Huaxin Cement, Qilianshan Cement and Sichuan Shuangma Cement benefit.

However, the predicted short-term recovery in demand volumes and price levels is expected to further complicate the consolidation process.