Cement Price Stabilizes, Rebounds Aggregate Market Or Becomes New Growth Point

In August, the weather improved and the cement industry also ushered in a sunny day.

As of the end of August 3, affected by the news that cement prices in many places are picking up, A-share cement plate is abnormal, and Huaxin Cement (600801. SH) is up 3.99%; Conch Cement (600585. SH), tapai group (002233. SZ), China Iron (000927. SZ) and other stocks rose. On the same day, the cement price index of Centennial construction network was 453.50 yuan / ton, up 1.73% on a weekly basis.

In fact, this upward trend has been in the market for several days. On August 2, the cement price index of Centennial construction network was 451.16 yuan / ton, up 1.01% month on month. Among them, the indexes of East China, South China, North China and central China all rose on a month on month basis, which was mainly due to the end of the decline trend. At the end of July, more and more companies announced to rise, thus raising the regional price level; On August 1, China cement network market data showed that many places in China announced to increase the cement price, including Jiangxi Province increased the price by 60 yuan / ton, Yulin in Guangxi, Baoshan in Yunnan Province and some parts of Anhui Province by 50 yuan / ton, while in Jiangsu and Zhejiang provinces, the cement price increased by 20-30 yuan / ton.

Wei Yu, senior analyst of cement big data Research Institute of China cement.com, said that in the short term, with the end of the rainy season, the demand in the middle and lower reaches of the Yangtze River is expected to take the lead in seasonal recovery, and the cement price may come back to a stop in the first and middle of August.

Bao Rongfu, an analyst with Tianfeng securities, also analyzed: "at the end of July, although most of the domestic areas were still affected by typhoon and high temperature weather, and the downstream demand showed a gradual decline, but the cement price has stabilized, and some regions have rebounded slightly. In August, as the adverse factors subsided, downstream demand rebounded, and under the background of substantial increase in production costs, cement enterprises in various regions will actively promote the price repair and increase. "

The turning point is coming

In addition to the rebound in cement demand at the end of the rainy season, tight supply also pushed cement prices to rebound.

Jiang Yuanlin, a senior cement analyst at Centennial construction network of Shanghai Iron and Steel Union, said in an interview with the 21st century economic reporter that the rebound of demand and the decrease of supply have become the logic of the current round of price rise in the cement industry.

In Jiang Yuanlin's opinion, due to the power limitation of the power plant, most cement plants, especially in Guangxi, Henan and Zhejiang, have had off peak kiln shutdown. At the same time, some cement kiln lines have been shut down for maintenance, so the supply of cement products will decline in August.

Prior to this, Henan Provincial Development and Reform Commission to protect the province's power coal supply dispatch notice document caused concern. According to the notice, the rainstorm in Southeast Shanxi on July 11 caused the interruption of Houyue line and Taijiao line, which had a great impact on the power coal transportation outside Henan Province. In order to ensure the power coal supply in the province, Henan energy and chemical group, Pingmei Group, Zhengzhou Coal Group, Shenhuo Group and other coal production enterprises were required to prohibit all coal produced by coal mines from being sold outside the province.

In fact, as early as 2010, there was a large-scale "power rationing tide". The cement price in East China started early because of the power and production restriction measures, and the cement price rose far more than expected. As of October of that year, cement prices in Hangzhou, Hefei, Shanghai and Nanchang have risen by more than 100 yuan / ton, up 20% - 40% year-on-year.

In this case, the clinker inventory of downstream grinding station enterprises is gradually reduced, so the supply has a tight trend. Prior to the market news, the Yangtze River Delta has cement enterprises in order to ensure that their own clinker sufficient, suspended all clinker export. Recently, Jiangsu Tianshan cement group issued a notice saying that grinding enterprises are facing material cut-off.

In addition, the implementation of the new replacement rules in the cement industry is also conducive to the recovery of cement prices. Wang Tao, an analyst at Tianfeng securities, said that the implementation of the new rules for cement industry replacement will further tighten the replacement ratio and trans provincial replacement index, which will help optimize the supply pattern of the cement industry and reduce the excess capacity. At present, some provinces have explicitly proposed to prohibit new production capacity, and the supply side of the cement industry is expected to usher in substantial improvement in the future. In addition, with the increase of sea freight this year, the disturbance factors of foreign clinker entry on the local cement price will be significantly weakened. Under the background of improved fundamentals and substantial increase in production costs, cement enterprises will actively promote the price repair and increase.

On July 20, the Ministry of industry and information technology issued the revised implementation measures for capacity replacement in cement glass industry (hereinafter referred to as the implementation measures), further tightening the replacement ratio and trans provincial replacement index, and required to be implemented from August 1, 2021. According to the implementation measures to be implemented, the replacement ratio of cement clinker production capacity is increased from 1.5:1 and 1.25:1 to 2:1 and 1.5:1 respectively.

Large aggregate demand

Since the Meiyu rainy season began in June, due to the adverse factors such as Meiyu, high school entrance examination, busy farming and market capital shortage, the downstream demand has been weak, and the enterprise inventory has been rising, resulting in the continuous decline of cement prices. As of July 30, the cement price index of Centennial construction network was 446.39, down 4.65% month on month.

However, benefited from the strong demand from January to May this year, the performance of cement enterprises in the first half of this year maintained a high growth. According to the semi annual performance forecast of 2021 disclosed by Jidong Cement on the evening of July 13, the company expects the net profit attributable to shareholders of listed companies to be 1.2-1.3 billion yuan in the first half of the year, an increase of 20% - 30% over the same period of last year.

However, Jiang Yuanlin also pointed out that "as the coal price is still high, the profits of the cement industry in the second half of the year may not be as good as the same period last year. Carbon trading index may become the breakthrough point of profit growth of cement industry, and carbon reduction goal can be achieved through the treatment of domestic waste, industrial waste, waste heat power generation and other measures

Bao Rongfu pointed out that under the pressure of the main cement industry, the aggregate market may become a new blue ocean for cement enterprises. According to the statistics of China cement network, the production capacity of the top 10 enterprises in the aggregate industry is still less than 500 million tons, accounting for less than 3%. The industry concentration is far lower than that of cement. From 2017 to 2018, the state closed more than 30000 sand and stone mines“ With the strict control of mineral rights, the resource attribute of aggregate is gradually highlighted. The increase of mining cost further raises the threshold for small enterprises to enter. The aggregate business is expected to become a new growth point for cement enterprises due to the high gross profit rate of aggregate business. Enterprises such as Huaxin Cement, conch cement and China National Building Materials Co., Ltd. have the first mover advantage in aggregate layout. "

On July 23, at the 8th national aggregate industry science and technology conference, Zhu Xianfu, Vice Minister of solid waste business department of Nanfang Road Machinery Co., Ltd., also said that the current market demand for high-quality aggregate is increasing, which promotes the high-quality development of mechanism sand and stone industry. In order to realize the effective substitution of machine-made sand for resources, high-quality processing equipment and production technology are indispensable.

On the other hand, considering that the investment level of new infrastructure is still growing, the cement industry may benefit directly. Wu Huidong, an analyst at Tianfeng securities, pointed out that the trend of the cement industry in the second half of the year may be improved. On the one hand, the total amount of new government special bonds in the first half of the year was 1 trillion, and 2.65 trillion yuan was still to be issued, which is expected to be approved or accelerated in the second half of the year, and the long-term funds released by RRR reduction will be about 1 trillion yuan, which may help to improve the gold level of hot money, The rebound of cement price in peak season can still be expected. At the same time, due to the low base in the second half of last year, the enterprise performance may exceed the expected year-on-year. At present, the valuation of cement enterprises has reached a new low in recent years. Under the goal of carbon peak and carbon neutralization, small enterprises with high energy consumption at the supply end are expected to speed up the liquidation, and the market share of large enterprises will be further increased, and the valuation will have the opportunity to repair.

According to the data of the National Bureau of statistics, more than 10000 large projects with RMB 50 million and above were put into storage in June, up 11.6% month on month. From January to may, the planned total investment of new projects increased by 9% year-on-year, with an average growth rate of 8.4% in two years, 0.9% higher than that in the previous four months.

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