Cement prices continue to rise and infrastructure stimulus is not yet obvious

Cement prices continued to keep rising. Last week, the national high standard cement market price rose slightly by 1.7% to 340 yuan/ton. The national mill operating rate rose by 0.1% to 59.6%, cement storage capacity ratio fell by 1.4% to 70.1%. According to the analysis, in the fourth quarter, under the dual effects of corporate synergy and profitability, prices in some regions still have sustained upward power, and the original loss-making cement companies are expected to turn losses. However, there is still demand for support for future price increases, and it will take time for infrastructure projects to stimulate demand.

East China still has upward momentum. Cement prices in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Pearl River Delta region rose by RMB 10-50/tonne last week. During the National Day, the domestic cement market demand has dropped, but the price is mostly stable.

Prices in East China and Guangdong and Guangxi continue to rise. Among them, in East China except Shandong, prices in other provinces rose, generally increasing by 20 yuan/ton, and in southern Jiangsu by 40 yuan/ton. The prices of cement in Guangdong and Guangxi continue to rise, rising by 20-30 yuan/ton in different regions. The continuous rise in prices is mainly due to tight supply of clinker.

The cement price in the country continued to rebound recently, especially in East China where cement prices have continued to fall since July last year, and has gradually risen under the leadership of local leading companies. Shenyin Wanguo predicts that in the fourth quarter, under the dual role of corporate synergy and profitability, prices in East China and Guangdong and Guangdong regions will continue to have rising momentum. With the implementation of the company's price increase, the original loss-making enterprise will achieve a profit from losses.

However, Guosen Securities pointed out that as the power for this price increase mainly comes from the warming season of cement demand and the coordinated production restriction of leading companies, the oversupply situation has not been substantially improved and the room for price recovery will be overcapacity. Repression, the soaring cement price situation in the second half of 2010 is difficult to reproduce. The sharp rise in cement prices in the future still needs to wait for the joint effect of demand and supply.

It is worth noting that cement stocks rose strongly after the NDRC concentrated on approving infrastructure projects such as urban rail and road and Sichuan's launch of 3.67 trillion construction projects. However, analysts believe that there is still need for improvement in the fundamentals of the industry in the future, and it is necessary to wait for demand to pick up. If a series of favorable policies announced by the previous government can be implemented, cement demand is expected to pick up by the end of this year or early next year, and the industry's earnings will improve.

Infrastructural stimulus has not been clearly investigated by institutions. After the mid-month price hikes in East China, sales have been greatly affected. Now that it has been adjusted back, the slight increase in overall demand is not enough to absorb excess capacity, and prices have been blocked. The price increase in the northwest is expected to be lower. From the feedback of the surveyed subjects, the overall demand has not substantially improved, and whether the price can continue to be further observed in October.

The agency research shows that the demand for infrastructure projects is still soft. Most of the survey respondents indicated that they have not yet seen an increase in the number of newly started infrastructure projects. The phenomenon that funds are not in place has not improved. Some of the survey respondents reflected that the construction of highways and water conservancy in South China has improved; the construction of Shanxi Expressway has a certain pulling effect on high-grade cement; Shaanxi has added some expressway projects but is still in the tendering phase, and the research object reflects the substantive pulling action. At least next year will be reflected.

The survey results also showed that cement manufacturers' confidence in sales in October rose seasonally, and only 25% of respondents believe that the peak season in October will improve.