Zhang Xiaohua: "Rational Capacity Reduction" Is an Important Strategy for the Cement Industry to Get Out of the Dilemma

2024-01-04 10:35:09

Through fierce market competition, most enterprises will realize the importance of "rational capacity removal" to the industry and jointly promote "rational capacity removal".

Famous experts and experts gathered to express their views from different perspectives. China Cement Network has opened a column entitled "Talking about Cement Cold and Warm", interviewing many enterprise leaders and industry experts in the cement industry. Zhang Xiaohua, chairman and general manager of Red Lion Holding Group, was interviewed in this issue. Zhang Xiaohua, Chairman and General Manager of

Red Lion Holding Group (Data Map)

At present, the cement industry is facing a complex situation of declining demand and low prices. Over the past few years, through peak staggering production to "reduce production", the efficiency of the industry has been greatly improved, most cement enterprises have benefited, while a large amount of capital has entered the industry, aggravating the degree of overcapacity.

Zhang Xiaohua said that in the face of increased overcapacity, the cement industry should shift from "de-production" to "de-capacity".

"Capacity" is divided into two kinds, one is competitive capacity , when demand goes down, through market competition to remove part of the excess capacity, but this way of capacity will damage the efficiency of the industry; The other is to rationally remove production capacity and unify our understanding so that those who withdraw from production capacity can withdraw in return, which can not only improve the concentration but also make the industry achieve good benefits. Since

this year, the cement industry has shifted from "peak staggering to production" to "competition to production capacity" , cement prices in most regions have dropped to a very low level, and 30-40% of production capacity has been shut down due to cash flow losses. The cement market is in the doldrums and the benefits of the industry have dropped dramatically.

Zhang Xiaohua believes that "rational capacity removal" may be an important strategy for the cement industry to get out of the predicament in the future. The main reasons are as follows:

First, "competition to reduce production capacity" is to make high-cost production capacity completely withdraw from the market through at least three to five years of fierce market competition, and the enterprises that withdraw will face debt, shareholders'rights and interests and employees' interests. At this stage, the price of cement is bound to be low, and the benefits of the industry will be discounted; low-cost enterprises are not necessarily winners, and their interests will be damaged.

Second, in the stage of "competition to reduce production capacity", the value of cement enterprises has shifted from the scale of assets to the ability to create cash flow. Assets that do not create cash flow are the burden of enterprises, and the brand premium and cost of enterprises are the decisive factors for the start and stop of production capacity. As the demand for cement continues to decline, more production capacity is needed to withdraw from the market, and the price and industry efficiency will be even lower.

Third, "Rational capacity reduction" requires more than 90% of the enterprises in the industry to reach such a consensus: demand determines that 30-40% of the capacity must be withdrawn, and the voluntary withdrawal of excess capacity is conducive to the industry and most enterprises, while the remaining enterprises jointly purchase high-cost capacity and share the purchase cost. These capacities are not used for upgrading or replacement and reconstruction, but for write-off, so that high-cost capacity can be withdrawn in return. In this way, the price of cement can be maintained at a high level to achieve a win-win situation for the industry and most enterprises.

Through fierce market competition, most enterprises will realize the importance of "rational capacity removal" to the industry and jointly promote "rational capacity removal". Therefore, "rational capacity removal" may be the only strategy to achieve win-win situation for the industry and most enterprises in the downward stage of demand.

But from now on, the possibility of "capacity removal" through competition is far greater than that of rational "capacity removal".

To achieve rational "capacity removal", industry peers need to have a profound understanding of the general trend of the industry, but also need a big pattern and great wisdom. It is believed that the leaders of the cement industry and enterprises have the pattern and wisdom to jointly promote "rational capacity removal", resolve overcapacity, improve industry efficiency and achieve high-quality development of the cement industry.

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Correlation

Ma Zhifeng said that the cement industry has been overcapacity for a long time, and off-peak production is the only feasible way for the cement industry to explore for many years. If the off-peak production policy can not be effectively implemented, many enterprises will not survive.

2024-01-25 10:37:28

Through policy support and administrative coordination, we will support 1 to 3 large enterprises of 10 million tons in each province, guide other enterprises to share the market and benefits according to their generating capacity, and then eliminate 1/3 of the production capacity by the large enterprises in a unified and balanced manner, so as to reduce the losses of the eliminated enterprises.

2024-01-24 09:36:27

Zhang Baogui said that the reason why the cement industry in Tibet can still develop well at present is that Tibet can strictly implement the development plan of the cement industry, strictly control the total production capacity of cement clinker, avoid blind expansion, and prevent Tibet from going to the road of serious overcapacity in the region.

2024-01-23 15:01:20

The price of Yueyang Cement in Hunan and Chengdu-Deyang-Mianyang Cement in Sichuan has dropped; recognizing the situation is the first barrier for Henan Cement in the new year; 28 production lines will be put into production in 2024.

2024-01-19 13:11:00

The person in charge: "Large enterprises also have to survive, stop too many kilns, the loss is too great, large enterprises can not stand, has been unable to retreat, continue to go on like this, the market environment in 2024 will only be worse.". The person in charge also pointed out that the downward trend of cement demand is inevitable, and it is impossible to return to the past in the future. Overcapacity will only become more and more serious, which is the basic aspect of the current cement industry.

2024-01-19 09:18:51

Talking about the situation of Henan cement market in 2024, Wang Aizhen said that due to the drag of real estate, the contradiction between supply and demand is likely to further intensify in the new year, and the price competition among enterprises may be unavoidable. If the industry can not reach a consensus on steady growth, the Henan cement market will remain difficult in the new year, and the loss may be more serious.

2024-01-16 20:10:05

The survival of the fittest and the elimination of uncompetitive production capacity by market competition.

2024-01-16 14:24:36

Although the industry has created brilliance during the ten years of capacity removal, it has not really solved the problem of overcapacity in the end.

2024-01-15 11:05:10

In the long run, Zhang Zhenkun believes that the cement industry will be in a difficult period in the next ten years, and the demand for cement will drop from 2.04 billion tons to 1.4 billion tons or even less in ten years.

2024-01-12 09:27:58

It is precisely because the industry once "indulged" in high investment stimulated by high profits that it can be said that it has lost a good opportunity to resolve the serious overcapacity.

2024-01-11 14:26:07

Yang Dan believes that the fundamental reason for capacity removal is not "rational capacity removal", but "rigid capacity removal".

2024-01-10 13:53:30

Staggered peak production of cement, only reduce the output, not reduce production capacity.

2024-01-08 15:12:46

How should cement enterprises deal with this industry situation or continue to continue in 2024?

2024-01-08 09:27:17

Through fierce market competition, most enterprises will realize the importance of "rational capacity removal" to the industry and jointly promote "rational capacity removal".

2024-01-04 10:35:09

Bright Future of Cement Industry in 2024; Tu Shunzu: There Is No Winner in "Price War"

2024-01-03 14:09:40

Heidelberg subsidiary CEMENCO plans to raise cement prices by 0.25% from July 7, 2025, according to leaked internal instructions. But a senior official, speaking on condition of anonymity, said the price hike had not been officially approved by the Liberian Ministry of Commerce and Industry. This shows that the company's price increase plan is facing legitimacy problems, and whether the subsequent price increase can be achieved depends on whether official permission can be obtained, which also reflects the interaction between enterprise pricing and official regulation.