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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