Cement industry: One hundred years of agitation, who master ups and downs

2. Tracing the history of a hundred years of development, competitive price stability is the main theme

American market: A hundred years of industrial history records industrial changes

The American cement industry originated in the 19th century, and the introduction of rotary kilns in the early 20th century really accelerated the take-off of the American cement industry, and the American Cement Industry Association was also produced in this period. In 1916, the Portland Cement Manufacturers Association of the United States was renamed the Portland Cement Association, and the development of industry regulations accelerated the market competition. Relative to the UK, higher labor costs are the driving force for continued technological innovation in the US cement industry, including improvements in rotary kilns and fuel costs. The increase in the concentration of the US cement industry mainly experienced two periods from 1976-1983 and 1990-2007. The scale advantage brought by technological innovation accelerated the continuous integration of the leading companies in the industry in the 20 years after 1990, and the cement price was relatively stable and the overall supply and demand of the industry was relatively stable. Leading companies based on efficiency advantages, fuel cost advantages to start the journey of mergers and acquisitions, industry concentration enhancement into the fast lane.

The U.S. cement industry is monopolized by the global cement leaders, and the fully competitive market highlights the value of scale advantages, which is further conducive to technological progress and industry restructuring. According to incomplete statistics, in the past decade, the proportion of overseas cement leaders in the US cement market has further increased; As the third largest cement market in the world, leading enterprises rely on scale advantages to have large cost advantages, efficiency advantages and industrial chain advantages of small and medium-sized enterprises, and the highly market-oriented and highly concentrated cement industry has become the result of market selection, which is similar to the continuous improvement of the voice and development rights of domestic leaders. Through comparison, it is found that the world's leading cement LafargeHolcim, Heidelberg, CRH and Cemx have expanded rapidly from 1997 to 2007, and the accelerated pace of mergers and acquisitions during the stable period of industry demand is an important strategy for the sustainable development of leading enterprises.

After nearly 100 years of integrated development, the global cement market has been highly concentrated; Especially in the developed markets of Europe and the United States, the high concentration of the industry is especially obvious. In 2018, the top ten production capacity of the global cement industry accounted for 41.8%. China is the world's largest cement consumer, with domestic market leaders such as China National Building Materials, Conch Cement, China Resources Cement and Taiwan Cement accounting for as much as 22.4% of production capacity. Excluding 3.8 billion tons of production capacity in the Chinese market, the European and American cement leaders LafargeHolcim, Heidelberg, Cemex, UltraTech, CRH and Votorantim together account for 84.46% of the global cement production capacity (excluding China); Relatively speaking, the North American market is more globalized. In 2014, the sales of cement by the TOP5 cement companies in the United States reached 62% of the regional market share, and the global cement leader firmly occupied the industry position of the TOP4 cement market in the United States (among the TOP5, only Buzzi Unicem is a local cement company in the United States with an annual capacity of 8 million tons. Only 2.25% of Lafarge Holcim's capacity).

3. Cement ups and downs: century-old building materials giant

3.1. Industrial structure: Leading integration shows strong anti-cyclical characteristics

Looking at overseas mature markets, the increase in housing and infrastructure demand driven by urbanization promotes the boom cycle of the cement market; However, with the gradual completion of the pace of urbanization, the process of technological innovation relying on cost control, industry mergers and acquisitions and active capacity reduction in the process of cement demand has accelerated, and the oligopoly trend of the cement industry is more obvious. From the perspective of industry integration and concentration, in the past decade, the per capita cement consumption in mainstream developed countries has declined, and the cement revenue is still growing rapidly due to the continuous merger and acquisition expansion of leading companies. The further improvement of industry concentration is conducive to the price stability driven by the industry.

With the decline in cement demand, accelerating integration to the downstream has become a consistent choice for leading companies, which is consistent with the domestic leading companies mentioned in our last series of reports on the strengthening of pricing power and development rights to the downstream aggregate and concrete layout. Take CRH, the world's largest building materials company, as an example. Since 1985, the company has improved the building materials industry chain through continuous mergers and acquisitions. At present, it has formed a Heavyside business module covering cement, aggregate lime, concrete and asphalt, a Lightside business module covering decorative building materials such as blinds and awnings, and a distribution business covering various building materials.