Cement industry reduction and strategic restructuring

On August 8, the Ministry of Industry and Information Technology announced the list of 18 companies that have eliminated backward production capacity. Among them, the cement industry involves 762 companies in 28 provinces, and the backward production capacity to be eliminated before the end of September is nearly 107 million tons. Elimination exceeds market expectations, and the announcement of the list has become the focus of media attention, causing hot debate in the industry. What impact will the elimination of backwardness have on the cement industry and what direction will the cement industry develop in the future? As the leading large-scale building materials enterprises and industry leaders who lead the large-scale joint restructuring of the Chinese cement industry, the China National Building Materials Corporation (CPB) has what kind of view it will have, and what new measures will it take for its joint reorganization? With these problems, on August 13, Song Zhiping, chairman of China National Building Materials Group and director of China Building Materials Board, accepted an interview with Shao Jun, CEO of China Cement Network.

In the interview, Song Zhiping talked about his views on the backward elimination of cement. He explained to us profoundly the judgment of the development prospects of China's building materials industry and China's cement industry, and introduced how China National Building Materials can achieve its own development and growth in the industry reform. The entire interview time was nearly three hours. Song Zhiping carried out an analysis of his industry, the leading company, and his role. This demonstrated the unique strategic vision and strong control ability of the leaders of the central SOEs.

“This policy is very timely and necessary. The social and industry response is also very positive and positive. We hope that we can further accelerate the pace of elimination and increase the elimination.” Song Zhiping commented on the announcement of the elimination of the backward list.

He said that in the past, China's policy to eliminate backward production capacity was often caused by thunder and rain, and there were countermeasures under the policy. Therefore, some investors are worried about the effectiveness of this policy. This time, it is not the same, because governments at all levels and the majority of companies have a deep understanding of environmental protection, energy conservation, and emission reduction during the implementation of the scientific concept of development. Therefore, for this elimination task, the central government is an iron fist and local governments are very serious.

“The elimination of 762 backward cement production companies and the release of a detailed list highlights the government’s determination and efforts. Not to say it, but to implement an iron fist, which has released a very clear signal – there is a policy Some countermeasures do not work, and there is no chance for backward production capacity to re-emerge. Second, it reflects that the task of eliminating backward production capacity in China's cement industry is still very arduous, and the workload is still very heavy. Third, it also reflects the new dry methods in these years. Cement has already covered the market with backward production capacity, and after the outdated production capacity is eliminated, the new dry process can still guarantee market supply and will not cause the shortage of cement supply. It is precisely because the cement industry has vigorously promoted structural adjustment in these years that it has become today. Eliminating the basis of backward production capacity.” Song Zhiping gave Shao Jun a detailed analysis of the significance behind the list.

"From today's development of the cement industry, whether from the state's economic and technological development status or from the completion of energy-saving and emission-reduction tasks, these backward production capacities have no longer existed in most regions of China."

Speaking of what kind of elimination should be carried out, Song Zhiping believes that the government must close the gap of new production capacity, give the cement industry time to digest the existing new production line, and also eliminate the enthusiasm of some local governments to build new cement lines. "We must change from the previous isometric elimination to the reduction, and do not have the idea of ​​how much we can eliminate. Because the cement itself is already surplus, the eliminated production capacity can digest the added capacity."

If cement is not used enough in the future, the cement industry can increase the cement number and concrete grade to meet potential cement incremental demand instead of directly adding low-grade cement.

“The goal of eliminating backward production capacity is to resolutely eliminate backwardness, and second, to resolutely restrict new additions. Otherwise, we must use advanced surpluses to replace backward surpluses. In this sense, it is not only the backwardness but also the excess amount that is eliminated. Therefore, the cement industry has to forget to say that it is equivalent to phase out, what we want is the elimination of pure reduction. The cement industry should think about the elimination of backward content in the new stage of transformation and upgrading, and can not take the same old path of elimination.” Song Zhiping This summary.

From "shock therapy" to "golden decade"

In April of last year, during an exclusive interview with China Cement Network, Song Zhiping thought that cement companies should be more rational and mature, and suggested that the overheated cement industry needs “shock therapy”. This caused intense debates both inside and outside the industry and sparked the development of cement companies. Great discussion of ideas. The situation at that time was that the cement industry was in a critical period of structural adjustment. The task of energy saving and emission reduction was heavy and the pressure on enterprises was great. Song Zhiping proposed "shock therapy," that is, he hopes that the entire industry will stop and think carefully, plan it carefully, and think clearly about whether or not it needs to be increased and where it needs to be increased. Do not construct new lines before thinking clearly, and do not waste industry power. .

Song Zhiping believes that judging the direction of the industry mainly depends on three points: First, the law of the development of the industry, the second is the national macroeconomic policies and industrial policies, and the third is the common problems encountered by the company. If you look at these three points clearly, you can basically think about how the whole industry will go next.

“Cement is a resource industry, not an ordinary processing and manufacturing industry. We cannot simply use the methods of market competition to eliminate backwardness, but we must have certain government intervention. The resources of our industry are not very abundant, and it is a huge drain on the industry for the market. This will create a bigger burden. We should preserve the strength of the industry, use the major energy and resources in the industry transformation and upgrading, and make the industry more lean. This is my original intention."

Over the past year or so, the government has introduced a series of industrial policies that promote structural adjustment, limit new production capacity, support joint reorganization, and the increasingly turbulent restructuring tide in the cement industry. All of these are a good example of the accuracy of Song Zhiping’s initial judgment on the situation. .

This retelling of old sayings again led Song Zhiping to a new conclusion: The cement industry will enter the golden decade in the future.

China's cement industry has made great achievements, but economic benefits are not matched

In Song Zhiping's view, the past decade has witnessed a rapid growth of new dry-process cement for ten years. This is reflected in the rapid growth of total cement production and total usage, and the development of new dry process cement. New technologies such as waste heat power generation have resulted in Great popularity. The rapid development of the cement industry has strongly supported the country’s economic development. At present, China does not have to worry about cement supply no matter what it is built. Large-scale hydropower projects, airports, high-speed railways, nuclear power stations and other constructions have never been used for cement. This is a huge contribution made by the cement industry.

But behind this beautiful report card, the overall efficiency of the cement industry is not ideal. The reason is simple: supply exceeds demand. Except in some regions or due to special reasons such as earthquakes and other natural disasters, resulting in unbalanced supply and demand in certain periods, resulting in a rise in prices within a certain range, the cement price as a whole is low overall, and this low level is structurally low. . So will this situation change in the future?

Three characteristics determine the overall economic situation in China

Song Zhiping believes that China is currently undergoing a phased adjustment period, and everyone has many different opinions on adjusting real estate. In fact, over the past many years, China's phased adjustments have been carried out many times, and the success or failure will have to be looked at in a larger context.

So what kind of background did the economic restructuring take place? The first is that China is in the mid-stage of industrialization. Over the past decade, China has started a large-scale industrialization process. Now it has reached the middle stage, which determines that we have to do a lot of things. Compared with our international infrastructure, we still have a long way to go. The second is the acceleration of urbanization. The level of urbanization in China is now about 45%, and it will reach over 60% in the next decade. The accelerating process of urbanization contains enormous market potential. The government has accelerated the basic construction of the transformation of old cities, infrastructure construction, road traffic improvement, and created a huge space for development for the cement industry. The third is the demographic dividend. China is in the stage of demographic dividend, and it is a golden period of relatively abundant labor resources, light support burden, strong consumer demand, and favorable economic development. After the younger generation grew up, they demanded to change their living conditions, require a house to live in, and have a car to drive. They have strong consumer demand and become the mainstream of consumption. This has also increased the demand for housing and created a huge construction gap, which has promoted China's economic development.

Three factors determine the development of cement industry into a golden age

Song Zhiping told the China Cement Network that when the government's national housing price restraint policy was just introduced, a lot of capital was withdrawn from the real estate and building materials sectors. However, he did not worry, on the contrary, he believes that the cement industry has reached a good time never before. There are three reasons:

First of all, there is a rigid demand. "The long-term trend of China's economic trend just mentioned, the accelerating urbanization process and China's demographic dividend will form a strong demand for cement and other building materials products." Song Zhiping further analyzed that high housing prices are regional and viewed from across the country. In fact, the contradiction between the supply and demand of housing is still very prominent, a large number of low-income people do not have a suitable house to live. To solve this problem, it is necessary to expand the supply of housing, speed up the construction of affordable housing, and accelerate the development of public rental housing. In this way, the demand for building materials products will not decrease but will increase. This is the rigid demand.

Second, supply and demand tend to balance. Not only did the country attach great importance to the “two high and one surplus” industries, but it also issued a series of sustainable development policies for energy conservation, emission reduction, and low carbonization to limit new growth and eliminate backwardness. The cement industry itself is also controlling output. On the one hand, the reduction is on the one hand, while the control on the other side is new, and the buyer and seller markets begin to change. From the total supply and demand relationship, the cement industry will show a completely different development trend from the previous decade.

Third, large companies dominate the market. While promoting the adjustment of industrial structure, the state is also promoting the adjustment of the organizational structure. Through large-scale joint reorganization, the degree of corporate concentration has increased. Large companies began to dominate the market and become active defenders of the health market. This changed the market's competition rules and market concepts, accelerated the orderly development of the market, and promoted the health and value of the industry.

Therefore, judging from the characteristics of the times, such as rigid demand, structural adjustment, and large enterprise orientation, Song Zhiping said that for so many years, the building materials industry has never been full of hope for the future like today.

Emission reduction of carbon dioxide is the most powerful boosting force of the cement industry's “**”

When talking about the factors that restrict the growth of cement in the future, Song Zhiping analyzed the impact of carbon dioxide emission reduction on the cement industry, which aroused the great interest of reporters. He said that the future carbon dioxide emission limit will be the most powerful boosting force for the cement industry. “We know that the bottleneck that restricts steel production is iron ore. While raw materials for cement, such as limestone and coal, are relatively abundant in China, the country's restrictions on carbon dioxide emissions have restricted the expansion of cement production capacity. The real constraint on cement production in the future is carbon dioxide."

Song Zhiping said that low-carbon production and living patterns will play a crucial role in the adjustment of cement structure. In the production process, cement emits large quantities of carbon dioxide. The state's limitation on carbon dioxide emissions is that companies reduce their emissions, and cement prices increase. If the carbon dioxide emissions and output value do not match, even if the cement price does not increase, it will promote other aspects of technology, such as high-grade cement, product, or the government will not allow companies to blindly emit carbon dioxide, and will certainly limit the production.

The cement industry will develop towards "four modernizations" in the future

In the past, the development of cement companies was always linked to quantity. Without quantity, there was no way out. Now everyone has a general consensus that cement production in China cannot grow indefinitely, peaking at 20-22 billion tons. Song Zhiping hopes that the peak value is 20 Billion tons or so.

He said that in the past decade, the development of the cement industry has always attached importance to the increase in volume, but this increase has not brought about reasonable profits for the industry. Now the country advocates transforming the mode of economic growth and developing a low-carbon economy. The cement industry has to bear the brunt of emission reductions due to large amounts of carbon dioxide emissions. Therefore, from the perspective of the development of the cement industry itself, we should not go past the old path of simply expanding the scale.

So, how should cement companies develop in the future? Song Zhiping gave the "Sihua" suggestion:

Higher Marking: Improve Cement Product Performance

At present, China's 32.5 cement consumption accounts for 60% to 70% of the total, and 42.5 cement accounts for only about 30%. This is inconsistent with China's economic development and construction quality requirements. More importantly, the national energy conservation and emission reduction policy is not match. The grade of concrete is also very low. At present, China is mainly based on C30, but the developed countries are basically C50. When concrete is raised one grade, it can reduce the consumption of cement and steel by 10-15%. In this regard, the promotion of high performance concrete is not only It will bring ** to the construction industry, and it will also bring profound changes to the building materials industry. Therefore, our cement companies must implement high standards to meet this change. This is the only choice for the cement industry to meet the low-carbon economy.

Specialization: Diversification of product varieties

Policy restrictions have prevented companies from expanding production. What do companies do after not expanding production? Enterprises should intensify their innovation and vigorously develop special cements to diversify their products.

Sumitomo, Japan, has more than 100 specialty cements. This segmented product structure will give cement companies huge profits. The amount of special cement in China is gradually increasing, such as bridges, nuclear power plants, high-speed railways, and dams. Different construction environments require different types of cement. Therefore, cement companies should further increase their technological content, segment their markets, develop various specialty cements, and increase the added value of their products.

Commercial Mixing: Integration of Grinding Stations and Mixing Plants

Large cement companies all over the world are doing commercial mixing of aggregates and sand aggregates. Generally, the company mixes and consumes 30% to 40% of the cement supply, while cement companies in China do very little business and have fewer scales. If the grinding station can be integrated with the mixing station, it will not only extend the industrial chain, allow the cement plant to enter into commercial mix on a large scale, but also be able to directly face end customers and ensure the quality of concrete.

While rectifying the cement industry, the country has also found that the commercial and industrial industries are disrupting the embarrassment. Therefore, after eliminating small cement, it is also necessary to integrate large-scale cement, commercial blends, reorganization, and transformation so that the final product of the cement enterprise can appear as a final product. , reduce intermediate links, save production costs, and ensure product quality. This is a step that the cement industry must take.

Product Componentization: Promoting the Combination of Cement and Construction

The componentization of cement products is the direction for cement companies to extend the industrial chain. Large-scale component, integration, and modelling of cement products can greatly increase the added value of cement products. Prefabricated components have developed in large scale in developed countries and regions such as the United States, Japan and Europe. Thirty years ago we also made prefabricated components, but it was very rough due to the limitations of the technical conditions at the time. Nowadays, with rapid technological development, prefabricated components can be made seamless, finished products can be beautiful without painting, and some components can even be machined. Recently, the Beijing Municipal Government has sought to provide prefabricated components for affordable housing, and many local governments have also asked us for the need to do a "house factory."

“In short, the adjustment of industrial structure and the transformation and upgrading of cement should be to the development of high-standardization, specialization, commercial mixing and product componentization.” Song Zhiping said, “Before the old line was acquired and a new line was built, the new line was acquired. It is a nightmare to build more new lines and loops without borders, and now I finally see the goal and see where our asymptotes are. This asymptotical line is the peak of 2 billion tons of cement annual production. As we approach this line, there are many things waiting for our cement companies to do. For example, Japan’s cement production has dropped from 120 million tons at the peak to 45 million tons, but Japanese cement companies are developing special cement and cement products. , And to increase cement prices, cement companies live well."

China National Building Materials should give full play to the influence of large enterprises and lead the healthy development of the industry.

Through merger and reorganization and rational distribution, the concentration of the cement industry has been significantly improved. The large-scale intensive business model has achieved remarkable results in the past few years. The future industrial development environment will continue to improve. Among them, large companies like China Building Materials have a clear influence on the healthy development of the industry.

Song Zhiping believes that as a central state-owned enterprise, China Building Materials must demonstrate control, influence, and motivation, especially in the industry. In addition to good economic benefits, China Building Materials Co., Ltd. also has structural adjustment, technological innovation, and transformation and upgrading. To take the lead.

Development Strategy: Follow the Law of Industry Development

Cement as a basic raw material, its own characteristics determine the scale of economic properties of the cement industry. China National Building Materials Co., Ltd. to do cement to take a large-scale road, but not blindly expand. Cement is a regional "short leg" product, so China Building Materials is taking a regional development path.

After the listing of China National Building Materials, it seized the opportunity of industrial restructuring to quickly lay out three strategic regions for cement, making SinoCement cement bigger, Southern Cement and Northern Cement from scratch, and the total size will reach 200 million tons by the end of this year. The growth pattern of the reorganization of China's building materials has been widely recognized since its inception. The objective development of China's building materials has verified the success of the company's development model, and this success is based on a correct understanding and understanding of the industry's development laws.

Management integration: the fundamental to enhance comprehensive competitiveness

"When Nanfang Cement was established, everyone was concerned about whether the joint reorganization model would work. Now, the focus of everyone's attention has shifted to how effective and comprehensive competitiveness comes after reorganization. Our answer is through in-depth, Extensive and continuous management integration will promote efficiency."

Song Zhiping said that China National Building Materials had long recognized the importance of management integration. It was listed in March 2006 and acquired Xuzhou Conch in July. It soon held a management integration meeting and began to promote management integration. We recognize that our own development will always be accompanied by management integration. Over the past few years, the development of China's building materials has been rapid and steady. Its culture has been recognized, its efficiency has been rapidly improved, and its management has been integrated. In the integration, China National Building Materials summarized a series of successful experiences and formed a more systematic management thought and methodology. The director Rong Rong praised the management integration of China National Building Materials at the semi-annual work meeting of the responsible person of the central enterprises, and affirmed that management integration is a guarantee for the sound development of the joint reorganization enterprises.

The management integration we promote is, first and foremost, the reorganization of corporate organizations, namely organization theory. It addresses the issues of what kind of organizational model and organizational structure companies face in the development of the market. I summed it up as "big five": First, standardize governance. It belongs to the scope of corporate governance, including the establishment of a standardized corporate governance structure such as the board of directors, board of supervisors, and professional managers. It also includes the establishment of a comprehensive system of risk control, human resources, incentives, and constraints; second, it is a functional hierarchy. This is a classic and effective management model adopted internationally. By clarifying the key tasks and tasks of the company's headquarters, business boards, and grassroots factories, it ensures the standardization and smoothness of exercise rights. For example, we have acquired many companies. In the past, each company had a board of directors and had investment rights. Now we have a clear division of functions. The stock company is an investment center and is responsible for formulating strategies, investment decisions, cultural management and control, etc. The business segments such as Southern Cement and China United Cement are profit centers and are responsible for market development, market synergy and unified procurement. The matters under the investment do not have the right to decide; and the factory is a cost center, responsible for cost control, safety production, and so on. After such a division, the functions of each level are clear and clear, and they do not disrupt the function. There is a cost killer in the cost center and a market expert in the profit center, and then the above investment level cultivates decision makers. Third, the business platform. According to different business divisions of different platforms, each platform is independent of each other for professional management; Fourth, digital management. It has three meanings: One is to thoroughly change the management thinking of management cadres used to thinking in the past; the other is centralized management of funds to reduce the pressure on the disorder; the last is based on information. Fifth, cultural integration. We take the principle of "utilizing resources and building services" as the core concept, and taking "performance, harmony, and responsibility" as the code of conduct, as well as "three widths and three strengths" (treat people's generosity, work tolerance, relaxed environment, cohesion, centripetal force, and affinity). The principle of ideology is consistent throughout the entire group.

Second, it is a systematic theory because China National Building Materials Corporation has nearly 200 cement companies and is a cluster of companies. How do we manage so many enterprises? We focus on system improvement, which is to increase the motivation of the entire system. The “standard”, “optimization” and “core profit zone” are the three basic pillars of China's building materials system management and system improvement. "Targeting" is aimed at excellent companies at home and abroad, learning from and drawing on their experience, and learning from each other. "Optimization" is to refine and promote the experience of outstanding companies in the system. The "core profit zone" is to cultivate a large number of companies with market discourse rights and create high profits through management integration and market synergy. At the same time, it also has a "cooperative profit zone" that creates general profits, and can neither carry out high profits nor carry out. In areas with effective market synergy, China National Building Materials is not a target area for development.

The third is methodology, that is, what methods are used to make the system effective. We have two basic methods, that is, the “Three-Five” management model and the instructor system. "3rd Five-Year Plan" includes Xiao Wu Hua (Integration, Modeling, Institutionalization, Process, Digitalization), and Five Concentrations (Marketing Concentration, Purchasing Concentration, Financial Concentration, Technology Concentration, Investment Decision Concentration), and Five Kinds of KPIs (Five Key business indicators). The tutor system is to study the Toyota management model in Japan, assign counselors to companies, establish reasonable and effective standards, and optimize management methods. For example, Taishan Zhonglian lost money in the first half of 2007 when it acquired the company. In the second half of the year, after China Construction Materials entered only a few counselors, it made profits of 50-60 million yuan. In addition, Wulan Cement, which was just acquired, was entered by counselors. Later, when the month turned profitable, it now has a monthly profit of more than 20 million.

Regarding how to evaluate the effectiveness of the management integration of its cement companies, Song Zhiping stated that China Cement was established earlier, one step ahead in management integration, and it has now reached a rapid development road; Southern Cement was established late and is now undergoing deep integration. Can be used to describe the "national road". “I demand that China Cement, South Cement, and North Cement must quickly enter the 'highway' through management integration.” He stressed: “Although management integration has achieved remarkable results in general, China Building Materials has relied on restructuring to develop it. The company's management integration is still a top priority."

Looking to the Future: More Strategic Restructuring

Through large-scale joint reorganization, China National Building Materials has developed rapidly in a short period of time. Will CNBM continue to increase its restructuring efforts in the future? Regarding this issue, Song Zhiping’s reply is: In conjunction with the country’s policy of vigorously supporting joint reorganization, China Building Materials’s first priority is to implement a larger-scale strategic reorganization; Second, China United Cement and Southern Cement should be strengthened and improved. The current reorganization of the strategic areas that have been locked in has formed a good market control force and leading power, forming a larger-scale core profit zone and a synergistic profit zone. Third, it has made great efforts to manage integration and improve efficiency.

Song Zhiping believes that joint reorganization is a matter of hope. It is a matter of morning and evening, first and second, not a question of whether it is a right or wrong. It is popular to say that the development of the industry has evolved from a single enterprise era with “Zhanshan as the king” to a period of limited regional strategy with the “Warlords separatist”. It will gradually evolve into a regional strategic integration in a wider area, forming a three-point world. The pattern of this is the inherent law of the development of the industry. It is not based on human will.

"The government's policy of reducing waste and encouraging joint reorganization is a spring breeze in China's cement industry. China National Building Materials will seize opportunities and firmly implement strategic reorganization and deeper in accordance with established strategies. The management integration will lead the healthy development of the industry while promoting the rapid growth of the company,” Song Zhiping said.

postscript

This year may be the year of the harvest of China National Building Materials Group. The 2009 operating performance assessment was once again rated as A-class, and entered the rank of the second-term A-level enterprise of the central company responsible person from 2007 to 2009. At the same time, it was awarded by the SASAC from 2007 to 2009. The second term "Excellent Business" title. Song Zhiping was personally awarded the title of "National Model Worker" and was also the chairman of the China Pharmaceutical Group. He was hailed as the busiest chairman by the media.

However, Song Zhiping did not slow down his progress because of these honors. In the interview process, we discovered that in the face of one-on-one focus of attention in the industry, he has his own unique and thoughtful thinking and summary. Since taking over the China National Building Materials Group, it took him only 8 years to bring a company with a large number of stalls, many problems, lack of cohesion and centripetal force to a track of healthy and rapid development and become a leader in the building materials industry. Today, China National Building Materials Group has become more and more broad and its direction has become clearer and clearer. It is believed that the future of China Building Materials will surely become a large building material group with an international strategic layout.