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The oligopolistic or future of the cement industry
The cement industry has been going through a series of mergers and reorganizations since 2008, driven by overcapacity and environmental concerns. Recently, the release of the "Guidance on Accelerating the Merger and Restructuring of Enterprises in Key Industries" (referred to as the "Opinions") has added a layer of uncertainty to the ongoing transformation in the sector. As one of the nine key industries outlined in the document, will the cement industry now experience a new wave of consolidation? Could this signal the beginning of an oligarchic era?
Currently, the industry's concentration is uneven. According to data from 2011, the top 10 cement companies accounted for only 26% of the market. The "Opinions" aim to raise this figure to 35% by 2015. However, analysts from Changjiang Securities argue that this target may not be entirely realistic. Over the past decade, the industry has seen significant growth, with regional structures becoming more defined. Some areas have already achieved high levels of concentration.
Today, the domestic cement market shows varying degrees of concentration across regions. In East China, Conch Cement and CNBM lead the market, while Jidong Cement and Jinyu Cement dominate in North China. In the Northeast, Yatai Cement and Northern Cement are the main players, and in the West, Tianshan and Qilianshan hold strong positions. In the Southwest, China National Building Materials, Conch Cement, and Taiwan Cement are the major players. Overall, the national concentration rate stands between 30% and 40%, with East China being the most concentrated, where two leading firms—Conch and China Building Materials—have reached nearly 50% market share in some areas, such as Zhejiang Province, where one company alone holds 50% of the local market.
According to analysts, the goal of the national indicator is to encourage large enterprises to expand beyond their current regions and establish a broader presence. However, the western region still lags behind, with many small and medium-sized private companies dominating the market. The development there is slower, but recent M&A activities by China National Building Materials, Conch Cement, and Taiwan Cement suggest that change is on the horizon.
Overcapacity and environmental pressures remain key challenges for the industry. Kong Xiangzhong, Executive Vice Chairman of the China Cement Association, pointed out that the biggest obstacle to healthy development is overproduction. With China accounting for 60% of global cement output, per capita consumption is already extremely high. To address this, he emphasized that mergers and reorganizations are essential to eliminate inefficiencies and balance supply and demand.
Regional differences also play a role in the pace of consolidation. Wang Zhenhu noted that the eastern region is seeing more active reorganization due to its high urbanization rates and mature infrastructure, which have led to lower demand for cement. Meanwhile, the western region, driven by post-disaster reconstruction and government policies promoting urbanization, is expected to see increased demand in the coming years. However, the competitive landscape there is less developed, leaving room for smaller players to survive.
The recent announcement of Huaxin Cement acquiring a 70% stake in Hubei Huaxiang Cement for 519 million yuan signals a growing trend. Since early 2012, there have been over 23 major acquisitions in the sector. While 2009 was dubbed the "year of mergers," the new "Opinions" have reignited speculation about whether the cement industry is moving toward an oligopolistic structure.
However, analysts believe that true oligopoly may take time. The low entry barriers and the nature of cement sales—limited to a 200-kilometer radius due to transportation costs—mean that the industry will likely remain fragmented in many regions. Regional leaders like Conch in Anhui, Jidong in Hebei, and Tianshan in Xinjiang have already established dominance.
Looking ahead, large cement groups, especially listed companies, are expected to lead future consolidations. With their financial strength, management expertise, and scale, they are well-positioned to drive the next phase of industry transformation. From a market perspective, the cement sector saw a bottom in late 2012, followed by a recovery linked to urbanization. As fixed investment grows, the industry is expected to stabilize and grow steadily in 2013.