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Starting from June 1st, the new cement standards will be implemented, leading to plans of price increases by cement companies in many regions.

2024-05-28 09:02

According to sources, starting from June 1st, due to the implementation of the "new standard" for cement, the production cost of cement will further increase. Cement enterprises in the northeastern region plan to raise prices by another 50 yuan/ton, and if the third round of cement price increases materializes, the cumulative price increase in the three northeastern provinces will be 110 yuan/ton. In addition, cement prices in Henan, Anhui, and the Yangtze River Delta are generally expected to increase by 50 yuan/ton.

Guotou Securities monitoring shows that on May 21st, the national cement price index rose by 2.9% compared to May 14th. In particular, cement prices in the East China and Yangtze River regions increased by 5.9% and 7.0% respectively, outperforming the national average. With the new national standard for cement taking effect on June 1st, cement enterprises are currently in the process of clearing inventory, adopting a production-on-demand and sales-only approach, and low inventory levels have led to a reduction in cement supply from some enterprises, resulting in the increase in cement prices. Since May, the average cement price has increased by 1.3% month-on-month (compared to a previous increase of 0.3%), and decreased by 17.6% year-on-year (compared to a previous decrease of 23.0%).

A research report from Changjiang Securities pointed out that the cement industry is experiencing short-term catalysts from two policies, with the possibility of further policy surprises. Firstly, there is a significant relaxation in real estate policies, and secondly, the issuance of special treasury bonds is accelerating. After two years of restructuring in real estate demand, the proportion of infrastructure construction in the current cement demand structure may exceed 40%, becoming a core support. It is expected that the recovery of key projects will bring about marginal improvement in demand. However, there may be a certain time lag for the expected improvement in the real estate sector to materialize into fundamentals.

Changjiang Securities believes that the current profitability of the cement sector has basically bottomed out, with half of the industry's enterprises experiencing losses. At present, the industry is in a state where "the leading enterprises are making money, the midstream enterprises are losing money, and the trailing enterprises are experiencing losses," indicating a bottoming out under the neutral scenario assumption. Based on this judgment, the further downward risk of the cement industry's fundamentals is limited. It may be appropriate to pay attention to opportunities for sector bottoming out and recovery, focusing on targets such as Conch Cement, Huaxin Cement, as well as stable dividend stocks like TCC Group and Western Cement.

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