Anhui Conch Cement, Asia's largest cement producer, yesterday signed a strategic partnership agreement with Taiwan's Asia Cement to explore overseas markets and share expertise in eco-friendly technologies as the industry begins to feel the bite of Beijing's anti-pollution drive.
Cement prices on the mainland have been rising since September last year, when the central authorities stepped up efforts to close some of the most heavily polluting cement factories even as demand began to pick up with rapid investment in the infrastructure and property sectors.
The State Council said in October it planned to cut 100 million tonnes of outdated cement capacity by the end of next year, driving up the stocks of industry leaders such as Anhui Conch, as investors bet the move would strengthen the bigger players.
"If we find any target that suits our strategies, we will actively seek acquisition opportunities," said Guo Wensan, the chairman of Anhui Conch. "Globally, our priority [of investment] is Southeast Asia."
The firm, which has a domestic capacity of more than 200 million tonnes, is eyeing 10 million tonnes of combined capacity in Vietnam, Indonesia and Myanmar in the next three to five years.
"We don't have much global experience and will learn from Asia Cement," Guo said at a news briefing after the signing ceremony, referring to the latter's global sales networks in other Asian regions as well as America, Africa and the Middle East.
"It's very important to form strategic partnership as pressure from competition and cost rises," said Hsu Shu-tong, the chairman of Asia Cement, which is present in Hubei, Jiangxi and Sichuan provinces and is looking to expand further on the mainland.
The two companies are yet to divulge the details of their planned co-operation. It is understood they will explore opportunities in sharing green technologies, management expertise, market and product expansion and cost control.
They will also tap possibilities for Anhui Conch to enter the Taiwan market and jointly invest in property projects using Anhui Conch's land reserves in over 200 places on the mainland and leverage the department store business of Far Eastern Group, Asia Cement's parent company, said executives from the two companies.
The two firms expect the supply-demand balance in the mainland's cement market will improve this year, with prices and profits rising over last year.
The China Cement Association estimates profits in the industry might have exceeded 80 billion yuan (HK$102.4 billion) last year, while cement output rose 9 per cent to more than 2.4 billion tonnes.
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