Suggestions on promoting the integration and development of China's cement industry through mergers and acquisitions

Abstract: Since 2000, China's cement industry has made remarkable achievements after more than 20 years of development. However, in recent years, it is facing a difficult situation of continuous decline in demand, serious overcapacity and intensification of industry involution. In 2025, the cement output was 1.693 billion tons, a 16-year low;

Key words: overcapacity, concentration of mergers and acquisitions, stable

profits I. Industry status: The historical window of integration has been opened

1. In 2025, cement output was 1.693 billion tons, down 6 from the same period last year. Real estate has entered the era of stock housing, the urbanization rate has slowed down, and real estate has become the core factor that drags down demand; infrastructure planning mainly focuses on old renovation and new infrastructure, and the construction space of traditional "iron public infrastructure" projects has been reduced, and the support strength has declined. Cement demand will continue to decline from 2026 to 2030, and is expected to drop to 1.0-1.2 billion tons by 2030, with an average annual decline of 6% -10%. In the cement market in the downward period, each enterprise re-divides its market share in the process of reduction, and internal and external integration becomes an inevitable trend.

Figure 1 Trend

of cement production 2. Overcapacity and price collapse: the underlying cause

of integration After the demand entered the downward period in 2022, the overcapacity became more and more serious, and the utilization rate of clinker production capacity continued to decline, which was only 48 in 2025. In 2025 , the price of cement dropped to 341. Under the influence of both volume and price, the industry's profits shrank rapidly, with only 29 billion yuan in 2025, a sharp decline

from 186.7 billion yuan in 2019. The willingness of large enterprises to integrate the market is not strong, and the industry concentration has declined. On the whole, the concentration of China's cement industry has not changed much in the past decade. In 2025, the concentration of TOP10 clinker production capacity is about 57%, about 93% in Germany and about 80% in the United States. There is a big gap between China and the mature markets of developed countries in Europe and the United States.

Figure 2 Trend of

clinker production capacity concentration in 2016-2025 II. Overseas downward period and subsequent mature market integration experience

1. Intense market competition forced the industry to integrate, and mergers and acquisitions accelerated significantly. The number of Japanese cement enterprise groups has been reduced from 22 to 18, eventually forming three leading groups of Pacific Cement, Ube Mitsubishi and Sumitomo Osaka Cement, shaping the overall pattern of the Japanese cement industry. The production capacity of the three head groups accounted for 80%, and the concentration was significantly improved, which laid the foundation for the subsequent capacity reduction and profit restoration. Since 1998, the decline of cement demand and production capacity has been basically synchronized, and the relative stability of capacity utilization has promoted the restoration of price and industry efficiency.

Main experience: Industry integration must be coordinated with the substantial reduction of production capacity, and simple mergers and acquisitions without closure can not completely solve the imbalance between supply and demand.

2. After 2020, Holcim will adopt the strategy of "preferential acquisition + inefficient liquidation", acquire high-quality assets in Latin America, Australia and other places, divest inefficient assets in Brazil and Africa, complete the spin-off and listing of North American business in 2025, and optimize the global asset structure. After 2020, Heidelberg Materials will continue to acquire aggregate and commercial concrete supporting assets in Europe, America and Australia, cultivate the dominant markets in Europe, Africa and the Middle East, shrink the loss-making capacity in the Asia-Pacific region and optimize the regional capacity ratio.

of the trend of mergers and acquisitions in

China's cement industry Trend 1: Focus on horizontal integration and increase

the proportion of vertical extension mergers and acquisitions. Production lines with self-owned mine resources, obvious location advantages and certain market competitiveness will become the main targets of mergers and acquisitions of leading enterprises. Through mergers and acquisitions, we can expand the market scale, enhance the control of the terminal market, improve the industry concentration of the regional market, and increase the profit base. At the same time, the target of mergers and acquisitions is not limited to cement assets, but the proportion of vertical mergers and acquisitions such as downstream co-disposal of environmental protection business, aggregates, commercial mixing and new materials will increase, so as to build a closed system of the whole industrial chain, widen the moat and thicken the firewall. The second

trend is the diversification of integration modes and the coexistence

of various modes. The integration means of the cement industry will tend to be diversified. In addition to the traditional equity acquisition, it also includes a variety of flexible modes: First, stock exchange mergers and acquisitions, which can reduce the pressure of cash expenditure; The second is asset leasing and entrusted trusteeship, so as to revitalize the inefficient production capacity in the region at a lower cost and avoid the risk of large-scale acquisition. The third is joint venture to establish a joint company, in which the partners jointly hold shares and operate, coordinate the pricing of production and marketing, and share risks and benefits. Groups can also cross-participate in small shares, establish a community of interests, and jointly safeguard the industry ecology. Various modes are used in combination according to local conditions, adapting to different scenarios of mergers and acquisitions, and jointly promoting the improvement of industry concentration.

Trend 3: "Domestic integration + overseas expansion" is driven by two wheels, and overseas mergers and acquisitions are accelerating

. Under the background that domestic demand is facing a long-term downturn, outward breakthrough has become one of the important ways for Chinese cement enterprises to save themselves. Leading enterprises expand overseas markets through "the Belt and Road", enter the local market by acquiring local cement enterprises, technological transformation and new production lines, and digest domestic excess capacity. In recent years, leading enterprises such as Huaxin Building Materials, Western Cement, China Building Materials and Jinyu Jidong have accelerated the pace of overseas mergers and acquisitions, and overseas markets have gradually become an important source of profits. In the future, domestic mergers and acquisitions will be used to resolve internal contradictions, overseas mergers and acquisitions will open up growth space, and two-wheel drive will become the long-term strategic layout direction of leading enterprises. Risks

of M & a and Restructuring and Suggestions

(I) Risks

1. The seller may be unwilling to sell at a low price because of its high book assets based on production capacity, mine resources, location advantages and other assets; the buyer will lower the acquisition price based on industry prospects, overcapacity and other conditions. In addition, most of the purchasers are state-owned enterprises, and the acquisition involves the assessment constraints of preventing the loss of state-owned assets, facing the problems of complex approval procedures and long time limit, so it is difficult to reach an agreement on the transaction consideration.

2. The increase of regional market concentration after acquisition makes M & a transactions more likely to attract the attention of regulatory authorities and anti-monopoly review, which greatly improves the compliance of M & a, the uncertainty of transactions, and the hidden costs of enterprises, which constitutes a certain constraint on the speed and effectiveness of M & a integration in the industry.

3.Closure after acquisition leads to a series of problems, such as loss of tax sources, difficulty in coordinating the placement of workers, and great obstacles to cross-provincial acquisition, which drags down the overall efficiency of M & a integration at the national level.

4. It is difficult for the buyer to thoroughly investigate all risks, and it is very easy for the acquirer to passively undertake contingent liabilities and rectification investment after delivery, which erodes the M & a income and reduces the willingness of the leader to acquire small private factories.

(II) Suggestions

for response 1. It is suggested that the government should, first, do a good job in top-level design, introduce policies to encourage mergers and acquisitions in the cement industry as soon as possible, and set the direction; second, break down cross-provincial barriers, simplify the approval process, and establish supporting mechanisms for tax sharing and employment placement; third, set up a capacity reduction fund to reward the voluntary withdrawal of production capacity; Fourthly, we should carry out anti-monopoly review differently, distinguish between enterprise integration and market monopoly, and moderately liberalize the examination and approval of cross-provincial mergers and acquisitions.

2. It is suggested that firstly, we should cooperate with the government to do a good job in policy publicity, promote the implementation of relevant policies, and do a good job in supervision; secondly, we should arrange the national clinker production capacity account, distinguish the list of zombie production capacity and inefficient production capacity, publicize regularly, and build a supply and demand docking platform; thirdly, we should promote the implementation of peak staggering and production restriction, investigate the production cost of enterprises, and resist the vicious competition of sales below cost.

2. It is suggested that firstly, we should adhere to the strategy of "regional deep cultivation + industrial chain extension", do what we are good at, and avoid blind cross-border mergers and acquisitions; secondly, we should do a good job of due diligence, investigate the market position, location, mine resources, debt situation, management mode, business culture, sales channels of the enterprises to be acquired, carefully evaluate and select high-quality targets; Third, for overseas mergers and acquisitions, we should do what we can according to our own reality.

5. Conclusion

At present, China's cement industry is falling into the most severe industry dilemma since the beginning of this century, and merger and reorganization is an important measure to solve the situation of "downward demand, overcapacity and involution losses". Based on the current situation of China's cement industry and the experience of overseas mature market integration, this paper prospects the trend, path and mode of China's cement market integration in the future, and analyzes the potential risks that may arise, and puts forward reasonable suggestions from the three levels of government, association and enterprise.