Cement giants aim for global ranking
The central government's 12th five-year plan for 2011 to 2015 covering building materials envisages much slower growth but aims to have one or two companies big enough to enter the Fortune Global 500 list.
The two most likely to join this list by 2015 are Anhui Conch Cement and China National Building Material (CNBM), the nation's two largest cement producers, says SinoPac Securities analyst Zhou Yu.
CNBM, which is listed in Hong Kong and plans to list in Shanghai, wants to raise its annual cement production from the current 200 million tonnes to 300 million tonnes in five years or less, while Conch, listed in Hong Kong and Shanghai, plans to raise its annual cement production from 170 million tonnes to 300 million tonnes by 2015, said Zhou.
'The government's policy of shrinking capacity is good for large companies like China Resources Cement because they use advanced technology while smaller producers tend to use obsolete technology,' Zhou said.
In the five-year span, Beijing plans to eliminate 250 million tonnes of obsolete cement production capacity, according to the Ministry of Industry and Information Technology (MIIT) website. The government also aims to reduce the number of mainland cement companies by a third by 2015 and increase the proportion of the nation's cement production capacity by the 10 biggest producers from 25 per cent to 35 per cent in 2015.
Next year will see record-high mergers and acquisitions in the cement industry, driven by restrictions on cement production, tight credit and slower demand, which will make it difficult for small producers to be profitable, says a JPMorgan report. 'This will open the M&A door for larger ones who want to consolidate the market.'
The plan anticipates a much slower annual growth rate of cement demand, at 3.3 per cent, from this year to 2015, compared with 11.9 per cent in the past five years.
The plan also forecasts a slower annual growth rate of demand for glass sheets at 2.6 per cent compared with 10.5 per cent in the past five years and a slower annual growth rate of demand for construction ceramics at 4 per cent compared with 13.2 per cent in the past five years.
However, the value-added output of the nation's leading materials companies is expected to grow at a faster rate of 10 per cent every year from now until 2015. In the next five years, the proportion of domestic investment will fall, says the MIIT. 'Changes in the structure of investment and consumption will bring about a deep impact. The focus of the construction materials industry will shift from expanding quantity to raising quality and efficiency, from rapid growth to stable development.'
The plan also calls for the elimination of 50 million cartons of obsolete glass sheet production capacity and raising the proportion of national glass production by the top 10 producers to 75 per cent in 2015.
The plan also seeks a reduction of pollution in the nation's building materials industry by 8 to 10 per cent by 2015.
The amount of cement, in tonnes, that will be needed to meet mainland demands by 2015, according to the 12th five-year plan