2023, the domestic real estate market was still in a downward cycle, the sales side had not yet reached the bottom, the financial pressure of real estate enterprises did not decrease, and the volume of land transactions and project construction continued to shrink compared with the same period last year. In terms of infrastructure, due to the impact of government debt risk control, it also faces the problem of tight funds, the release of new projects is not as expected, and the supporting role of concrete demand is weak. In this context, the year-on-year decline in domestic ready-mixed concrete production and sales continued to widen, and the cumulative decline in production and sales in the first half of 2023 was estimated to be more than 10%.
At the same time, some leading enterprises represented by listed companies began to expand in the downward period, and the sales of commercial concrete increased against the market. In 2023, a total of 12 listed companies published semi-annual commercial mixed sales data, totaling 115 million square meters, an increase of 11.56% over the same period last year, accounting for about 9.15% of the total national commercial mixed sales in the first half of the year, an increase of 1.98 percentage points over the same period in 2022.
Figure 1: In the first half of 2023, the commercial mixed sales volume of listed companies increased against the market (Wanfang,
Data source: Cement Big Data (https://data.ccement.com/)
The concrete business of listed companies achieved growth against the market trend, mainly relying on the low-price competition strategy. In the first half of the year, the sales price of commercial concrete generally decreased by 10% -15%. The average price decline in the industry is only about 8%. Among the listed companies that disclose mixed price and sales data, more than half of them show the characteristics of price-for-volume. In addition, due to the shortage of downstream funds this year and the more stringent payment conditions than in previous years, many small and medium-sized concrete enterprises have taken the initiative to reduce the number of orders and control financial risks, while large enterprises, rel Ying on their financial strength and negotiation ability, have more competitive advantages in the current market environment, and there are expansion opportunities objectively. This is also an important reason for the overall growth of sales of listed companies this year.
Second, more than 60% of the listed companies have increased their commercial mixed sales, while Huaxin and Conch have expanded rapidly
. Considering the increase in commercial mixed sales and the actual growth, the typical growth enterprises are Shanghai Construction Engineering, Huaxin Cement and BBMG Group. In addition to the above enterprises, although Conch Cement did not publish the semi-annual commercial mixing sales data, it can be seen from the commercial mixing capacity and revenue data that the growth of Conch Cement commercial mixing business is also more obvious.
Table 2: Sales Volume of Commercial Mixtures of 12 Listed Companies in the First Half of 2021-2023 (Unit: Wanfang,%)
Data Source: Cement Big Data (https://data.ccement.com/)
Take these four listed companies as an example. Enterprises with mixed sales growth in the first half of the year can be divided into two categories, one is recovery growth enterprises, the other is expansion growth enterprises.
Shanghai Construction Engineering and BBMG Group belong to recovery growth enterprises. Due to the impact of epidemic control in the region last year, the business scale of these enterprises is relatively low compared with the same period last year. With the disappearance of external interference factors this year, their mixed business volume has gradually returned to normal. Therefore, although the mixed sales of such enterprises have increased significantly this year, the growth rate is often limited compared with the same period in 2021. For example, the compound annual growth rate of Shanghai Construction Engineering is only 3.67%, while that of Jinyu Group is-2.32%.
Expansionary growth enterprises are represented by Huaxin Cement and Conch Cement, and the growth of commercial mixed sales of such enterprises mainly comes from the increase of production capacity and market share. In the first half of 2023, the sales volume of Huaxin Cement's commercial mixing reached 10.9497 million m3, with a year-on-year increase of 82.31% and a two-year CAGR of 80.52%; the revenue of Conch Cement's commercial mixing business reached 977 million yuan, with a year-on-year increase of 21.80% and a two-year CAGR of 167.05%. Market competition in the middle and lower reaches of
the Yangtze River intensifies
. Huaxin Cement and Conch Cement are listed companies with sales of cement clinker as their main business. The main reason for their business expansion in the field of commercial mixing is that the cement industry has entered a period of downward demand. The company intends to establish the sales advantage of cement clinker business by controlling downstream channels. The current round of industrial chain integration expansion
of Huaxin Cement began in 2020, requiring its grinding stations along the Yangtze River to be equipped with mixing stations. Initially, Huaxin Cement expanded its concrete production capacity mainly through self-construction. After 2022, the operation mode of light assets has become the core idea of the integration of Huaxin cement industry chain, and the expansion of concrete production capacity is mainly through commissioned processing, leasing and acquisition. As of the first half of 2023, the concrete production capacity of Huaxin Cement has reached 89.9 million cubic meters per year, an increase of 67.55 million cubic meters compared with the same period in 2020, with a compound annual growth rate of nearly 60%. From the perspective of regional distribution, the new concrete production capacity of Huaxin Cement is mainly in Hubei, Hunan, Jiangsu, Hainan and Yunnan, which has a greater impact on the market in the middle and lower reaches of the Yangtze River. Since
2021, Conch Cement has significantly accelerated the pace of improving the layout of commercial concrete industry, and achieved substantial growth in concrete production capacity by means of new construction, mergers and acquisitions, and leasing. As of the first half of 2023, the concrete production capacity of Conch Cement increased to 33.3 million cubic meters per year, an increase of 30.3 million cubic meters compared with the same period in 2020, with a compound annual growth rate of 123%. From the perspective of regional distribution, the new concrete production capacity of Conch Cement is mainly in Anhui, Hunan, Jiangsu, Gansu, Guangdong, Jiangxi and Guizhou. Conch Cement also has more distribution in the region along the Yangtze River, but compared with Huaxin Cement, the new production capacity is more widely distributed.
Figure 2: Rapid growth of concrete production capacity of Huaxin Cement and Conch Cement (10,000 square meters,%)
Data source: Cement Big Data (https://data.ccement.com/)
From the perspective of the source of new production capacity, There is a slight difference between Huaxin Cement and Conch Cement. Huaxin Cement mainly focuses on self-built projects in the early stage, accounting for about 44%, and leasing in the later stage has become the mainstream, accounting for more than 46%. At the same time, Conch Cement's current round of concrete production capacity expansion mainly relies on the acquisition of existing mixing stations, the number of projects accounted for more than 55%, self-built and leasing projects are relatively small, each accounting for about 22%.
Figure 3: Proportion of new production capacity of Huaxin Cement and Conch Cement in 2020-2023 (%)
Data source: Cement big data (https://data.ccement.com/)
Cement enterprises have their own resources, Logistics and other advantages, and with the cash flow brought by cement business, the capital strength is far stronger than that of small and medium-sized concrete enterprises. Huaxin, Conch and other cement giants lay out the concrete industry, which has a more obvious impact on the market. According to the survey, cement enterprises compete for the market share of concrete, which brings more intense price competition, especially in the middle and lower reaches of the Yangtze River, such as Hubei, Hunan and Jiangsu, where the living space of small and medium-sized mixing stations is obviously squeezed. In the long run, the concrete market along the middle and lower reaches of the Yangtze River will accelerate the survival of the fittest, the industry will face a reshuffle, and the concentration of concrete production capacity may increase significantly in the future.
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