cement enterprises to increase market share by reducing prices? Cement Big Data Research Institute believes that this depends on the growth of the industry. Obviously, the cement industry should have a consensus, that is, in the medium and long term, the cement market demand continues to shrink.
On Wednesday, Zheng Jianhui, a senior analyst and director of Cement Big Data Research Institute, made an in-depth analysis of the future development trend of cement market demand and discussed the impact on the benefits of cement enterprises in this context.
The details are as follows:
Last week, we released the list of the top ten cement and clinker sales of China's cement enterprises in 2022. In this list, if the trade part is deducted, the total sales volume of cement and clinker of the top ten enterprises is about 1.08 billion tons, down 12% from the same period last year, while that of Conch Cement , Red Lion Group and Asian Cement is 5% -7%, which is significantly lower than that of the other seven enterprises. Huaxin Cement has the largest decline.
Obviously , Red Lion Group, Conch Cement and Asia Cement have increased their market share in 2022. The unit price of cement and clinker sales of the three enterprises has dropped by more than 9%, and the action of gaining market share through price reduction is more obvious.
In the medium and long term, is it a correct way for cement enterprises to increase their market share by reducing prices? We believe that this depends on the growth of the industry. Obviously, the cement industry should have a consensus, that is, in the medium and long term, the cement market demand continues to shrink.
First, the industry demand platform period will probably be broken
in three years. The reason why the current cement industry is still in the platform period is that the East China and Central South markets are still in the demand platform period.
In fact, we see that the northern and southwestern regions have broken the plateau. In Northeast China, cement demand has shrunk by 47%, in North China, cement demand has shrunk by 30%, in Northwest China, it has shrunk by 26%, and in Southwest China, it has shrunk by 23%. The long-term demand for
cement depends on both the maturity of urban development and the population.
North China and Northeast China will reach the peak of population in 2014, Southwest China and Northwest China will reach the peak of population in 2020, and then East China and Central South China will enter the peak of population one after another.
The National Bureau of Statistics predicts that the population will peak between 2025 and 2030, but it is likely that the peak will come earlier. Moreover, the Chinese Academy of Social Sciences believes that population decline is not a phased trend, but a long-term trend. The population peak will significantly affect real estate, local finance and related infrastructure investment.
Secondly, the overdraft
of demand, the traditional "iron bus" infrastructure construction investment as a counter-cyclical adjustment tool has played an important role in the past few years, but there are also overdrafts, and in the process, a very complex and huge debt has been formed. If this traditional way continues, it will lead to further enlargement of debt until it breaks down.
Investment does not match income, investment does not match demand, and the result is unsustainable.
Even if the whole demand for building materials is stimulated by the economy this year, it is only an overdraft of future demand. While the
industry enjoys this overdraft, it must also bear the disaster brought by this overdraft.
In 2018, the concept of new infrastructure has been put forward in China, and the pull of new infrastructure on our cement industry is very limited.
Therefore, in the medium and long term, under the shrinking demand for cement, enterprises reduce prices to increase market share or blindly pursue market share maximization, which we believe is not in line with the overall interests of the industry, nor with the interests of enterprises themselves.
In a market that continues to shrink, any price decline means that both short-term and long-term profits will shrink for enterprises. At present, enterprises should maximize their benefits under the condition of relatively reasonable market share.
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