Cement Prices In Many Places Are Approaching Historical Highs, And Cement Supply In Some Regions Is Limited

Affected by the dual control of the state, some regions have limited the power supply and production of the cement industry, and the contraction of the supply side has pushed up the cement price again. Recently, many cement prices ushered in the fourth round of upward adjustment, among which Guangxi, Guangdong and other places ushered in a stronger upward trend.

"This year's price is like a roller coaster, and the cumulative increase has reached 230 yuan per ton." Qin Shizhang, a cement dealer in Guangxi, told the 21st century economic report that the cement price, which has rarely fallen since May, bottomed out in July and opened the way for the rise.

According to Qin Shizhang, following the announcement of the third round of increase of 50 yuan / ton on September 6, enterprises around the country have been increasing for the fourth time, with the range of 80-100 yuan / ton since September 10. After four rounds of increase, the cumulative increase of cement price reached 230 yuan / ton.

Hou Linlin, a cement analyst with Zhuo Chuang information, told reporters in the 21st century economic report that the historical peak of cement price appeared at the end of December 2019, and the average national market price of bulk cement reached 486.56 yuan / ton. As of September 13, the average price of cement in China has reached 424.67 yuan / ton. On September 14, prices in some regions are still rising, and the gap from the peak is getting smaller and smaller.

The higher cement price is also transmitted to the secondary market. The cement sector rose again in September. As of September 10, the cement index rose by 17.76%, among which Huaxin Cement, Shangfeng cement and tapai group were the top three, accounting for 34%, 28% and 24% respectively.

Limited supply of cement in some areas

According to Bao Rongfu, an analyst at Tianfeng securities, the logic of the rise in September is different from that in August. The logic of the rise in August is more the marginal improvement signs on the demand side, and the high enterprise costs jointly promote the price rise. The core of the rise in September is that some regions restrict the production of cement enterprises under the pressure of dual control of energy consumption, resulting in a sharp contraction of the supply side.

In August this year, the national development and Reform Commission issued the "barometer of the achievement of the goal of dual control of energy consumption in all regions in the first half of 2021". In terms of the reduction of energy consumption intensity, the energy consumption intensity of nine provinces (autonomous regions) in the first half of the year did not decrease but increased, which was a first-class warning; In terms of total energy consumption control, eight provinces (regions) are the first level warning.

Among them, Guangdong and Guangxi are among the first-class early warning in these two aspects. The energy consumption intensity does not decrease but rises. The goal of dual control of energy consumption throughout the year, especially the reduction of energy consumption intensity, is urgent.

In this regard, Guangxi has started the requirement of cement production restriction, requiring that the cement output in September should not exceed 40% of the average monthly output in the first half of the year, and the power load in September should not exceed 40% of the average monthly load in the first half of the year. According to the estimates of industry insiders, Guangxi cement production will be reduced by nearly 6 million tons.

In addition, some local cement plants revealed that due to the strengthening of industrial power management and control, grinding stopped during the day and could not operate normally at night, which also affected the production capacity of Guangxi cement. A cement enterprise in Liuzhou, Guangxi, was limited by power supply, and the kiln and mill were all stopped. Suddenly, a one-time increase of 100 yuan / ton was reported.

Guangxi production restriction soon spread to the Pearl River Delta region. Guangdong is the largest cement consumption market in China. Guangxi supplies Guangdong cement through Xijiang River, which makes up for the market gap of nearly 10 million tons in Guangdong, and becomes one of the main suppliers of Guangdong cement and clinker.

According to Bao Rongfu's analysis, recently, the price of cement in the Pearl River Delta and northern Guangdong increased by 50 yuan / ton again. In fact, the local downstream demand remained stable, and the increase was mainly due to the sharp decrease in supply. On the one hand, due to the impact of production restriction in Guangxi, the cement entering Guangdong fell sharply; On the other hand, Huizhou, Guangdong Province, also experienced power rationing, prompting prices to continue to rise.

After Guangxi took the lead in carrying out double restrictions, Yunnan, Jiangsu and other provinces have taken follow-up measures to varying degrees recently. On September 11, the development and Reform Commission of Yunnan Province issued a document requiring that the cement output in September 2021 should be reduced by more than 80% on the basis of that in August, and that the peak production time of all cement enterprises from October to December should not be less than 40 days.

Under multiple influences, some regions began to supply limited or even stopped supplying some specifications of cement. According to Qin Shizhang, some cement plants have been informed to limit sales and distribute sales to regional customers according to the proportion in June, July and August. Some production enterprises, including Tata cement, have announced the suspension of the sale of some types of cement and the specific recovery time.

Cement price may break through historical high

Cement industry is one of the main areas of carbon emission in China, and the proportion of carbon emission in 2020 will be about 13%. "Dual control" of total energy consumption and intensity is an important measure to reduce pollutants and greenhouse gas emissions from the source, and also an effective way to force the transformation of economic development mode.

The fourth quarter is usually the peak season of cement production in most provinces, and the production capacity is often higher than that in the first half of the year. Relevant data show that, taking 2020 as an example, the annual output of cement industry in China is 2.377 billion tons, of which the cement output in the second half of the year is 1.379 billion tons, accounting for 58.01% of the annual output.

In order to ensure the completion of the annual energy consumption double control target, especially the target task of energy consumption intensity reduction, "it is expected that production restriction in the second half of the year will run through the whole fourth quarter, but the specific strength may be adjusted according to the actual situation of consumption reduction." Bao Rongfu analyzes that affected by the dual control of energy consumption, cement enterprises in many places are limiting production by 50% - 60%, and enterprises are limiting delivery, which does not rule out that prices continue to rise sharply in the later period.

In fact, the cement industry is under the pressure of energy consumption and emission reduction, leading to the price rise, which has appeared before.

In the second half of 2010, due to the pressure of energy consumption and emission reduction at the end of the Eleventh Five Year Plan period, the governments of various regions carried out power rationing for cement and other high energy consumption industries. Since July 2010, cement prices have risen sharply against the background of strong demand and limited supply. The high point in the second half of 2010 has increased by more than 20% compared with the low point in July. The sharp rise in prices further increased the profits of leading enterprises, thus driving up the share price. During this period, the growth rate of conch, Huaxin, evergreen and tapai was more than three times.

According to the statistics of China cement network, at present, the production capacity of the provinces receiving the first level warning has reached 500 million tons, accounting for 28% of the total capacity of the country. Some industry analysts believe that the impact of the peak season production restriction on the market will continue to expand, reflected in the price will significantly promote the rise. At present, the price level has not reached a new historical high, but if it continues, some regions, such as Guangxi and Guangdong, may break through the historical high. At that time, it is not ruled out that the energy sector will introduce some price limiting measures in order to ensure the stable price of raw materials.

Affected by the continuous rise of coal price in the first half of 2021, the cost side of cement industry is under pressure, and the profit decreases year on year. According to the data of the National Bureau of statistics, in the first half of this year, China's accumulated cement sales revenue was 483.6 billion yuan, a year-on-year increase of 13.2%; The total profit was 73.07 billion yuan, down 7.2% year on year.

Hou Linlin said that if the price can last until the end of the year, the profit of cement industry in the second half of the year is expected to improve compared with the first half. This year, the coal price is at a high level, the rise of cement price in the early stage is driven by the rising cost, and the profits of some enterprises are offset by the rising cost. After entering September, the rise of cement price in most regions is due to the change of supply and demand relationship due to the influence of production restriction requirements, which promotes the rise of cement price. The gross profit per ton in the second half of the year will certainly be better than that in the first half of the year.

However, Wei Yu, a senior analyst at the cement big data Research Institute of China cement.com, told reporters in the 21st century economic report that the profit level also depends on the volume of trading and supply. In the fourth quarter, most of the cement enterprises are still more likely to recover profits, but some regions have greater efforts to limit production, and the reduced part may hinder the improvement of profits.