In previous years, in March, the cement industry usually entered the peak season, and cement stocks are expected to usher in “spring agitation”. But this year, the peak season is delayed.
Although after the Spring Festival, the cement market will usher in the first wave of “price rise” in the year of the tiger. Since then, cement prices have been rising everywhere. However, in terms of market conditions, the demand in many places is still weak, and the implementation of price push up remains to be seen.
According to the latest statistics of the National Bureau of statistics, the output of cement decreased by – 33000 tons in February, exceeding the year-on-year expectation of the National Bureau of statistics. Excluding the epidemic year, the cement production from January to February 2022 was the lowest in recent ten years. At the same time, the increase of cost side energy price also puts pressure on the profits of cement enterprises.
Weak demand and cost pressure… Is the cement industry at the bottom? Can high prices help cement enterprises break through the encirclement? When will the “spring agitation” of booming production and marketing come?
cement output “fell more than expected”
as for the reason why the performance of cement production was weak in the first two months, Li Kunming of cement big data Research Institute pointed out that there are three reasons: the decline of demand, the decrease of supply and the weakening of expectation
Specifically, in terms of demand, especially from January to February, the new construction area of real estate continued to grow negatively and the decline expanded, dragging down demand;
In terms of supply, from January to February, many cement enterprises implemented peak shifting in winter, the peak shifting time increased compared with previous years, and the implementation effect was good;
In terms of expectations, there is great downward pressure on the economy this year, and the weakening of expectations leads to lack of confidenceP align = “center” from January to February 2022, cement output dropped sharply. Source: big data of cement
For example, in terms of peak shifting and production restriction, from the perspective of some provinces, the peak shifting time in many places in the first quarter was longer than that in previous years, and Jiangsu, Zhejiang and other places with strong cement demand increased by 5-10 days compared with that in previous years.
At the same time, in terms of local construction, the Spring Festival in 2022 is earlier than in previous years, there are fewer key construction projects in January, many places have holidays in advance, and the demand is weaker than that in 2021. After the beginning of spring in February, there are many rainy and snowy weather, and the arrival time of workers is slow. At the same time, the demand in northern China is delayed. From the data of shipment rate, the demand from January to February 2022 is lower than that in the same period, the demand is weaker than that in the same period, and the recovery speed is slow.
As an important support for cement demand, real estate also performed weakly in the first two months. According to the latest data from the National Bureau of statistics, the growth rate of real estate development investment from January to February was only 3.7%, the lowest since August 2020. In addition, the land purchase area decreased by 42.3% year-on-year, the largest decline in history. “Due to the unstable real estate situation and the reduction of major projects, the local cement demand is expected to decline by 10% – 20% this year.” Some cement enterprises spoke bluntly when they were surveyed earlierP align = “center” source: cement big data
It is worth noting that under the situation that the demand is less than expected and the output is falling, the cement price does not fall but rises. It is reported that since the middle and late October of 2021, China’s cement prices have entered the downward channel as a whole, and the decline has gradually stopped until the middle of February this year.
However, even after experiencing the “longest price decline cycle in history”, the price of cement in China is still higher than that in previous years. According to the big data of China cement, by the end of February when the national price started to rise, the average price of cement in China was still 67 yuan / ton higher than that in the same period last year, with an increase of 15.13%.
since March, in addition to Fujian Cement Inc(600802) price increasing by 70 yuan / ton and Henan’s cumulative notice of increasing by 100 yuan / ton, cement in Zhejiang, Jiangsu, Shandong, Jiangxi, Hubei, Guangdong, Sichuan, Guizhou, Yunnan, Shanxi and other places have also increased by different ranges p align = “center” source: cement big data
“The ‘low price’ cement may be hard to return once it goes.” In this regard, the industry insiders of China cement Network Information Center pointed out: “on the whole, due to the rise of energy prices, the increase of investment in environmental protection governance, as well as the influence of factors such as technology upgrading investment, M & A and reorganization, the cement cost shows an upward trend, which will raise the cement price as a whole and reduce the space for the decline of cement price.”
Taking the cost side as an example, as a traditional high-energy consumption industry, the energy cost accounts for more than half of the cement production cost. The change of coal and electricity prices has a great impact on the cement production cost. Tapai cement has said that every 100 yuan rise in coal price will affect the cost of cement per ton by about 10 yuan. In the first half of 2021, the coal price soared, which made it difficult for cement enterprises to increase income and profits. In the later stage, with the implementation of national regulation and control policies, the coal price fell.
But years later, under the influence of various factors, coal prices have risen again, and cement enterprises have mostly responded to cost pressure. For example, when Anhui Conch Cement Company Limited(600585) recently responded to investors’ concerns on the interactive platform, he said frankly that the market coal price has increased year-on-year, and the company will continue to strengthen strategic cooperation with major coal enterprises, further improve the fulfillment proportion of long-term agreement and reduce fuel costsP align = “center” source: SSE e interactive
annual demand still has strong toughness
“The cement demand in the first quarter of 2022 is poor, but it is expected that the cement demand will improve significantly in the second quarter. In the future, the cement demand is not pessimistic, and the industry will still maintain strong toughness.” Li Kunming spoke bluntly.
He pointed out that the 2022 government work report pointed out that the fiscal expenditure in 2022 will expand by 2 trillion yuan compared with that in 2021, and there is a large space for fiscal development; From the perspective of the progress of special bond issuance, 836.1 billion yuan was issued from January to February, accounting for more than 20% of the annual quota. The financial expenditure is obviously ahead of schedule. It is expected that more physical workload will be formed in the second quarter. With the support of many major projects, the cement demand in the second quarter will be strongly supportedP align = “center” the pace of issuing special bonds has accelerated (unit: 100 million yuan) picture source: cement big data
At the same time, generally speaking, the cement price has increased more and decreased less across the country. At present, the local demand continues to recover, the overall situation continues to improve, and the project operating rate has increased. It is expected that the cement price will continue to rise in the near future. “In the medium and long term, the improvement trend of cement supply pattern will continue, and the regional concentration of cement leaders will increase. The resulting improvement of bargaining power is expected to further improve the profitability of cement leaders.” Huaan Securities Co.Ltd(600909) research report said.
several A-share cement enterprises also expressed confidence in the operating conditions in 2022 in their recently disclosed annual reports
For example, the Bbmg Corporation(601992) annual report shows that in 2021, the company achieved an operating revenue of 36.338 billion yuan, an increase of 2.42% year-on-year, an increase of 538 million yuan compared with the planned 35.8 billion yuan at the beginning of 2021. In 2022, the company will adhere to the strategic concept of “integrated development, fit development, innovative development and high-quality development”, and plans to achieve an annual operating revenue of 38 billion yuanP align = “center” source: Gansu Qilianshan Cement Group Co.Ltd(600720) 2021 Annual Report
Gansu Qilianshan Cement Group Co.Ltd(600720) also said in the annual report that in 2022, the quality and efficiency, structural adjustment, innovation ability, deepening reform and Party building will be continuously improved to promote the high-quality development of enterprises to a new level. The main indicators are the sales of more than 23 million tons of cement, more than 1.1 million cubic meters of commercial concrete and more than 1.6 million tons of aggregate, with an operating revenue of more than 8 billion yuan.
Huatai Securities Co.Ltd(601688) research report predicts that there will be fierce competition between weak demand and flexible supply response, which may bring great uncertainty to investors before demand stabilizes. However, in the context of the government’s firm promotion of economic growth, it is expected that the current demand challenge may be temporary, and the improvement of supply tends to be more structural. Once the demand stabilizes, it will help to improve the certainty of the industry to achieve higher profits.
