In the fourth quarter of this year, China’s cement market changed the previous trend that impacted the annual price peak, and the overall performance was weak. In the context of the surge in costs throughout the year, the high profit scene of the industry for a long time may appear downward.
weak market performance in the fourth quarter
As 2021 draws to a close, the bull market in the cement industry at the end of the year, which has lasted for many years, has not been staged this year.
In late December, the national cement demand continued to decline. On the one hand, the northern market was in the traditional off-season in winter, on the other hand, the demand in eastern China, Central South, southwest and other Southern markets was also lower than that in the same period of previous years. Due to the short-term rapid rise of cement market prices in September and October, the market rising space seems to have been overdrawn in advance.
According to the monitoring of China cement network, the overall market in Northeast China has been closed in winter, and the cement price in central and southern regions such as Shenyang, Liaoyang and Dalian continues to fall by 40-50 yuan / ton. In East China, some major manufacturers in Nanjing and Zhenjiang of Jiangsu Province publicly notified to reduce the price of bulk cement by 30 yuan / ton; The market demand in Fujian continued to be weak. Since the 21st, some major enterprises in the region have started a new round of cement price decline of 20-30 yuan / ton; Jiangxi market is gradually entering the off-season, and the demand and sales volume are poor. Some manufacturers in Ganzhou continue to reduce the cement price by 40-60 yuan / ton.
Not only the price did not show considerable performance, but also the supply and demand of cement market was light at the end of the year.
According to the data of digital cement network, in November 2021, the production suspension and restriction of enterprises due to the tight supply of coal and electricity under “dual control of energy consumption” gradually eased, and the production of cement enterprises returned to normal. However, the construction progress of key projects and real estate projects was slow, and the demand of China’s cement market was weak, which was still in the doldrums.
In November, the cement output in a single month in China fell sharply year-on-year, and the decline continued to expand, and the output was the lowest since the same period in recent ten years; After the year-on-year decline of single month output for three consecutive months reached more than double digits, the national cumulative cement output showed negative growth year-on-year from January to November.
From January to November 2021, China’s cumulative cement output was 2.173 billion tons, a year-on-year decrease of 0.2%, an increase of 2.1% from January to October and an increase of 1.2% in the same period of last year; It is about 1% higher than that from January to November 2019, with an average growth of about 0.5% in two years; In November, China’s monthly cement output was about 200 million tons, down 18.6% year-on-year and 0.9% month on month.
At the end of the year, the cement industry in many places also sounded the horn of staggered peak production.
On December 24, Jiangsu Building Materials Industry Association issued the notice on the plan for kiln shutdown and verification of cement industry in Jiangsu Province in 2022, requiring 23 enterprises involved in clinker production in Jiangsu Province and 39 production lines to stop kilns for a total of no less than 70 days throughout the year, including 35 days during the Spring Festival (January 1-March 31) and 20 days during the Meiyu high temperature season (June 1-September 30).
On December 29, Yunnan Cement Association also issued the work arrangement for peak shifting production in 2022. The document requires that all cement clinker production lines in the province should comprehensively and orderly carry out staggered peak production. The base number of off peak production days of each cement clinker production line is 100 days. The production line for collaborative disposal of urban domestic waste, toxic and hazardous waste and other tasks shall not be less than 70 days. The actual feeding time of the new production line shall prevail. The kiln shutdown time shall be converted in the same proportion.
annual profit or year-on-year decline
In 2014, affected by the excess supply in the market, the demand of the cement industry peaked, the price fell sharply, and the profitability of enterprises in the industry was poor. However, since 2017, driven by the supply side reform policy and the promotion of peak shifting production in the cement industry, the prosperity of the cement market has gradually increased and the price center has moved up. At the same time, the profitability of the cement industry has continuously refreshed the historical extreme value in 2018 and 2019, and successfully withstood the impact of the epidemic in 2020. When the industry basically stagnated in the first quarter, The annual profit level remained high.
However, in 2021, the profit level of the cement industry may fall year-on-year due to factors such as soaring costs. According to the prediction of China cement Network & cement big data research institute, the profit of the whole cement industry will be about 155.286 billion yuan in 2021, a year-on-year decrease of 15.28%.
The analysis shows that in the first half of 2021, the supply and demand of the cement industry were booming, and the overall situation continued to be high. In the third quarter, the volume and price entered the traditional off-season in July and August, and the limited power production in September affected the sharp contraction of supply, the superimposed demand improved, and the cement price reached a record high. However, the cement demand continued to decline in the fourth quarter, and the high price effect in the third quarter was weakened. The cement output in the fourth quarter is expected to be 588 million tons, a year-on-year decrease of 15.74%; The average price of cement was 616.75 yuan / ton, a year-on-year increase of 32.88%. For the whole year, the cement output is expected to be 2.359 billion tons in 2021, a year-on-year decrease of 0.73%, and the average price of cement is 501.25 yuan / ton, a year-on-year increase of 10.87%.
Although the average price of cement is at an all-time high, the sharp rise in cost and the decline in cement production have led to a decline in the profits of the whole industry.
In 2021, the average price of coal in China exceeded 1000 yuan / ton, with a significant year-on-year increase of 78.21%, and the cost of cement also increased.
The Environmental Planning Institute of the Ministry of ecological environment recently released the Research Report on the road map of total coal consumption control in key industries under the “double carbon” background. The data released in the report show that the total coal consumption in China’s four key industries of thermal power, steel, cement and coal chemical industry in 2019 was 2.41 billion tons of standard coal, accounting for 86% of the total coal consumption in China, of which the coal consumption in the power industry accounted for the largest proportion, Reached 54%, followed by iron and steel, coal chemical industry and cement industry, accounting for 17%, 9% and 6% respectively.
Chen Bolin, Deputy Secretary General of China Cement Association and President of digital cement network, previously pointed out in an interview with the reporter of securities times · e company that since 2021, coal prices have continued to rise, and the factory price of coal in some regions has exceeded 1400 yuan / ton, increasing the cost of cement production. In terms of quarters, the profit increased by 13.2% year-on-year in the first quarter due to the simultaneous rise of volume and price. In the second quarter, affected by the downward price, the profit decreased by 13.2% year-on-year.
profit in 2022 is expected to repair
With market fluctuations and the help of a series of measures to ensure China’s energy supply, China’s coal price has “halved” in a short time since October this year. At present, the market supply is sufficient, and the coal price has returned to a reasonable range.
Zhao Bowen, an analyst at Zhuo Chuang, believes that the focus of commodity prices in 2022 may be lower than that in 2021. From the macro level, the “bull market” in the commodity market has ended, and 2022 will enter a long-term “top grinding” process.
While the coal cost is expected to fall as a whole, the leading enterprises in the cement industry will make large-scale mergers and acquisitions in 2021, and the integration of the cement market will continue in 2022.
In December 2021, the business of China building materials cement sector completed in-depth integration. After integration, Tianshan cement became the cement enterprise with the largest production capacity in the industry, holding 100% equity of Zoomlion cement, 99.9% equity of Nanfang cement, 95.7% equity of Southwest cement and 100% equity of Sinoma cement, with a clinker production capacity of about 300 million tons, a commercial concrete production capacity of about 400 million cubic meters and an aggregate production capacity of about 150 million tons.
Another cement giant Anhui Conch Cement Company Limited(600585) has also accelerated the pace of M & A in recent years. On December 21, China West Construction Group Co.Ltd(002302) disclosed the fixed increase plan. As a war investor, Anhui Conch Cement Company Limited(600585) subscribed 1.76 billion yuan. After the issuance, it will hold China West Construction Group Co.Ltd(002302) 16.3% shares and become the second largest shareholder of the latter. In August this year, Anhui Conch Cement Company Limited(600585) announced that it planned to acquire 100% equity of conch new energy company, which is mainly engaged in photovoltaic power generation, for 443 million yuan to provide power support for cement production. By the end of the third quarter, Anhui Conch Cement Company Limited(600585) still held Gansu Shangfeng Cement Co.Ltd(000672) 20265600 shares, with a shareholding ratio of 2.53%.
On December 29, the “14th five year plan” for the development of raw material industry released on the website of the Ministry of industry and information technology showed that in 2020, the added value of China’s raw material industry accounted for 27.4% of industries above Designated Size, and the output of cement and flat glass remained the first in the world for many consecutive years. The industrial concentration of the top 10 cement enterprise groups reached 58%.
China cement Network & cement big data research institute predicts that the overall rise of cement price center in 2022 can make up for the loss of output to a certain extent, superimpose the downward shift of coal price center, alleviate the cost pressure, continuously optimize the competition pattern, improve the concentration, and effectively ensure the development trend of high quality and increased efficiency of the industry. To sum up, the cement output in 2022 will be about 2.285 billion tons, the average price of cement will be increased, and the annual profit may be RMB 169.881 billion, an increase of about 9.4% year-on-year.
(Securities Times · e company)
