Center

Solid growth in building material industry

By Xiao Wan (China Daily)
Updated: 2007-04-17 09:30

With active investment in the cement industry over the past few years, overcapacity has become a pressing issue. As the growth rate slowed down, many cement enterprises have suffered losses.

China will continue its macroeconomic control measures for cement manufacturing to adjust the industrial structure, said the NDRC. It will speed up elimination of cement production lines with small capacity and outdated technology, and order any new project with less than 2,000 tons of daily capacity to apply to the State Council - rather than the provincial authorities - for approval.

"By 2010 the number of cement enterprises will drop to 3,500, while average annual production will amount to 400,000 tons," said a NDRC statement.

Mergers and acquisitions

Mergers and acquisitions (M&A) were among the top issues in the industry last year. Anhui Conch decided to buy seven units from its parent firm and an affiliate for 4.1 billion yuan.

The company earlier signed an agreement with Morgan Stanley Asia Investment Ltd, a subsidiary of US investment bank Morgan Stanley and theWorld BankGroup's private-sector arm, theInternational Finance Corporation(IFC), to buy stakes in the firm.

Other sectors have also seen a number of mergers and acquisitions.

China's largest building material manufacturer, China National Building Material Group (CNBM), last year agreed to take control of Luoyang Glass Co, one of China's largest glass makers.

"More acquisitions should be undertaken in the building material industry to enhance the companies' capacity. It is the high-end, high-quality niche market where foreign building materials have found the most success," said Hong.

International building material majors have been eyeing China's booming market. In November 2005, Lafarge, the world leader, and Shui On Construction and Materials Ltd (SOCAM), the top cement producer in Southwest China, merged their cement operations in China.

The joint venture Lafarge Shui On Cement is 55 per cent owned by Lafarge. The strategic alliance established a new cement leader in Southwest China.

(China Daily 04/17/2007 page15)