Cement market opens up price rising mode new Big Mac raises industry integration expectation

 Cement market opens up price rising mode new Big Mac raises industry integration expectation

Expected price increase in peak season

After three days of heavy rain, Sanmenxia became cool after the beginning of autumn. Taking advantage of the better weather, the temporarily suspended construction site quickly resumed its previous busy days.

Although Henan is not in the Yangtze River Basin, the amount of rainwater this year is larger and longer than that in the past, which will slow down the construction progress to a certain extent. But after the middle and late August, the rain may not be so fierce. Talking about the engineering situation this year, the head of the transportation project materials and equipment department of a local central enterprise told the securities times u00b7 e company that the domestic epidemic situation did have an impact on the promotion of infrastructure projects at the beginning of the year. However, since April and may, the project construction in Henan has been gradually restored. In recent years, the number of new projects has obviously increased compared with previous years, and the demand for material procurement will also increase accordingly.

Although our project is based on the list price of cement, but the surrounding projects have reflected that the cement price has been adjusted recently, and the current range is not large. The person in charge said.

For cement traders, price fluctuations or more likely to touch sensitive nerves.

Prices have been falling in the first few months of this year, and only in these two weeks have they started to rise. Now the ex factory price of P.O42.5 can reach 400 yuan / ton, which is 30 or 40 yuan higher than that in the previous period. Liu Yu, who runs cement trade in Zhengzhou port area, said that although the current cement price is still unable to match the same period last year, the gap between supply and demand in the market has emerged. Its distribution of regional manufacturers have no inventory, are on-site production.. In the near future, the demand for construction work on the construction site has increased, and the price will not drop in the future.

Compared with the central region, the hot degree of cement market in East China is more obvious since August.

At the end of July, the clinker price rose first, and then the cement price began to rise. Last week, the price of P.O42.5 bulk cement in East China increased by 30 yuan per ton. From the national level, although the prices in Guangxi and other regions are still slightly callback recently, with the end of Meiyu season and the improvement of construction conditions in the areas along the river, the overall demand for cement will step into an upward channel, and the price will also rise accordingly. Zhuo Chuang analyst Wang Qi said.

Wang Qi said that in the first half of this year, affected by the epidemic situation, the average price of cement in China showed a downward trend. Even if the climate improved in March, the price recovery was not obvious. By the end of July, the average price of P.O42.5 bulk cement reached an annual low of 403 yuan / ton, which was nearly 22% lower than the price of more than 490 yuan / ton at the beginning of the year, and about 5% lower than the price of 424 yuan / ton in the same period of last year.

However, judging from the recent market performance, the epidemic did not disrupt the rhythm of cement peak season.

Wang Qi said that according to the usual practice, cement prices will show a rising trend in August every year, and will officially enter the peak demand season in September and October. The impact of this years epidemic situation began to decline in April. Although the cement production and sales volume decreased in the first half of the year, the domestic infrastructure investment was relatively large in May and June, and the demand rebounded obviously, and there was room for the price to rise in the future.

In the view of Li Xueying, an analyst at the business agency, this years cement peak season may be ahead of the previous years. According to the monitoring data, the cement price reached the low point in the middle and late August of 2019, and then went up all the way to the end of the year. This year, the cement price rose from the beginning of August. On August 10, the average price of P.O42.5 bulk cement was 429 yuan / ton, nearly 4% higher than that of 412.6 yuan / ton on August 1.

Li Xueying believes that the current cement market demand is improving, the inventory is generally not high, and prices are rising one after another, and the cement price is generally in the upward channel.

Around August 1, the main enterprises in Bozhou, Anhui Province, announced that the price of high-grade cement had risen by 20 yuan / ton. Since then, from August 4 to 5, major enterprises in Zhenjiang, Nanjing, Yangzhou and other regions in Jiangsu Province informed the prices of various types of cement to rise by 20-30 yuan / ton. After that, the prices of various types of cement of major manufacturers in Hangzhou, Wenzhou, Lishui and other regions in Zhejiang Province rose by 20-30 yuan / ton.

With the end of the flood season and the commencement of various infrastructure projects, the market demand is picking up, and the sales volume in many places is good. In addition, with the help of the early rise of clinker along the river, cement manufacturers have promoted the rise of cement price. The low price of cement seems to have appeared in the year, and it will enter the peak season price rise stage in the later stage.

A new concept of integration

At the same time of the coming of peak season, the recent big action of cement industry integration has also attracted much attention.

Tianshan company announced on the evening of July 24 that it plans to purchase the cement plate assets of the controlling shareholder China Building Materials Co., Ltd. by issuing shares or issuing shares and paying cash to purchase assets.

After the suspension of trading on July 27, Tianshan shares disclosed a major asset restructuring plan on the evening of August 7. It plans to issue shares to China building materials and other parties to purchase 100% equity of Zoomlion cement, 99.93% equity of Nanfang cement, 95.72% equity of Southwest cement and 100% equity of Sinoma cement, which means that the current 5 unlisted cement enterprises of China building materials will realize A-share listing.

After this asset integration, from the perspective of capital market, the cement industry has emerged as an absolute leader. Tianshan cement production capacity will be increased to about 430 million tons, clinker production capacity will be increased to more than 300 million tons, and commercial concrete production capacity will be increased to more than 400 million cubic meters. By the end of 2019, conch, the largest cement enterprise in a shares, had a clinker production capacity of 253 million tons, a cement production capacity of 359 million tons and a commercial concrete of 3 million cubic meters. However, Tianshan shares were originally affiliated to China National Building Materials Co., Ltd., and this integration is the subsidiary company of cement plate under other building materials, so the impact on the industry is not obvious. Chen Bolin, Deputy Secretary General of China Cement Association and executive president of digital cement network, said.

Chen Bolin believes that although the integration of CMBs cement plate assets does not bring about any changes from the perspective of industry concentration, it still solves the problem of intra group competition. The advantage of this restructuring is that the operating environment of these subsidiaries will be improved and their management and control ability will be further increased.

Wang Qi also said that from the perspective of listed companies, this reorganization has formed a big Mac, but actually from the perspective of the market, it has little impact on the industry. Before that, the main business scope of Tianshan Co., Ltd. was concentrated in Xinjiang and Northwest China, with only a few manufacturers in East China and South China. This reorganization is only the integration of capital level, and will not bring obvious changes to the enterprise market coverage. However, all of its cement assets in a plate after the overall development of building materials. The fluctuation of cement market after integration will not impact other listed company platforms of China Building Materials Corporation, which can reduce market risk.

Chen Bailin said that although the restructuring did not involve two other A-share cement listed companies Qilianshan and Ningxia building materials, it would be inevitable for China building materials to merge its cement assets into a listing platform.

The concentration of cement industry is far from enough. From the perspective of industry research, at present, the capacity of the top 10 leading enterprises accounts for only 58%, while the goal of the industry is to strive to increase to 70% ~ 80%. Therefore, both the government and enterprises will continue to promote the industry concentration through mergers and acquisitions, which is also the general trend. He said.

Before the integration of its cement assets by Fanzhong building materials, Jidong Cement and Jinyu group have just completed major asset restructuring in 2019, concentrating the cement assets on Jidong platform, which is the largest scale merger and reorganization of the cement industry through market-oriented way. This integration has both market factors and policy promotion. Under the background of the integration of Beijing, Tianjin and Hebei, the integration of the two over competitive enterprises is conducive to enhancing the synergy and improving the regional competitive environment, and the core is to improve the industry concentration. In recent years, the pace of cement industry integration has not stopped. In the future, with the further increase of profitability of large enterprises, the relevant expectations will be further strengthened.

Peak shifting production meets key nodes

In addition to price rise and capacity integration, staggered production is undoubtedly the key word of cement industry in recent years.

In 2016, the Ministry of industry and information technology and the Ministry of environmental protection jointly issued the notice on further improving the peak load shifting production of cement, namely the State Councils No. 34 document, which has attracted the attention of the industry market. In order to resolve the contradiction of serious overcapacity in the cement industry and reduce air pollution during the heating period, it was decided to further improve the peak load shifting production from 2016 to 20 based on the comprehensive Trial Implementation of staggered peak production in northern China in 2015 During the period of 20 years, the peak production of cement was staggered.

All cement production lines in 15 provinces (autonomous regions, municipalities directly under the central government) including Beijing, Tianjin, Hebei and other provinces (autonomous regions and municipalities directly under the central government) should have staggered peak production. In addition to the 15 provinces (autonomous regions and municipalities directly under the central government), other regions should also refer to the practice of the northern region and combine with the local actual situation to carry out peak shifting production during the Spring Festival, hot summer and rainy season.

Based on the adjustment of supply and demand of cement market brought by staggered peak production, the cement price has repeatedly climbed to a high point in recent years, and the overall profit level of the industry has also reached a record high from 154.6 billion yuan in 2018 to 186.7 billion yuan in 2019.

The implementation period of Document No. 34 is three years, that is, it will expire this year. Whether the peak shift production policy will change after the expiration of the period, the relevant departments have objections. Whether the follow-up peak shifting policy will continue to be promoted and how to promote it are all issues of general concern to the market. Chen said.

Wang Qi also mentioned in an interview with a reporter from the securities times u00b7 e company that the peak shifting production has been normalized in the past two years. Originally, some enterprises in the South did not need to carry out peak shifting production, but they were also promoting peak shifting. In addition, in northern China, including Hebei, Shanxi, Henan and other regions, many times, there is no local government to stamp and endorse the documents to promote staggering peak. It is obvious that the implementation of staggered peak coordination of cement enterprises is poor.

The original purpose of peak shifting is to stagger the heating peak in winter and reduce emissions. However, in recent years, the state has successively issued relevant policies to require the emission of nitrogen oxides of cement enterprises to be reduced to less than 50, which is already very strict, so sometimes it is not significant to stagger the peak in summer. However, for the cement industry, the operators focus is not the same. Enterprises hope that cement can avoid a large amount of inventory accumulation in the off-season, avoid vicious competition in the peak season, achieve a balance between supply and demand, and keep the price at a reasonable level, and even make higher profits. Wang Qi said.

Can staggered production be continued from multiple market perspectives?

On August 6, LV Guixin, a first-class inspector of the raw materials industry department of the Ministry of industry and information technology, went to China Cement Association for investigation. The investigation focused on the substantive effects brought by the implementation of peak load shifting production policy in recent years on the cement industry. Everyone agreed that staggered production is an important and effective means to solve the serious overcapacity in the cement industry, and the production capacity of the whole industry was also improved Under the condition that the utilization rate does not reach a reasonable range and the consumption will decline in the future, the task of structural adjustment of cement industry will be long-term and arduous. Therefore, the industry will put forward suggestions on the normalization of peak load shifting production policy as soon as possible. The raw materials department will promote the Ministry of industry and information technology and the Ministry of ecological environment to issue guidance on the normalization of peak load shifting production, so as to ensure the continuity of peak shifting production policy. Chen said.

At present, in the case of no obvious improvement in the industrys de capacity, the peak shifting production policy is still of vital significance to ease the contradiction between supply and demand. The effect of staggered peak production on the steady benefit growth of cement industry in recent years is very obvious. Therefore, whether the policy is promoted or not has a significant impact on the stability of industrial enterprises, including listed companies. The attitude of this meeting is to continue and normalize peak shifting production. Of course, the specific time and region still need to be adjusted.

It is difficult for the industry to make new profits

As of August 10, 10 of the 20 A-share listed companies in the industry cement sector of CITIC Securities have disclosed the performance forecast for the first half of 2020, and half of them have predicted that the profit level will decline year on year.

In this context, can the coming industry peak season support enterprise profit level to a new high?

Last year, the overall cement price was up, which led to a high price opening this year. In the first half of the year, the general trend was downward, but the current price is still at a historical good level. The recent recovery of the market callback, or because of the earlier period of this year there was a more obvious downward trend, the latter trend depends on the recovery of demand. Chen Bolin said in an interview with a reporter from securities times u00b7 e company.

This year, because of the epidemic situation, the peak season in the second quarter was shorter than that in previous years, but it was more flexible. Therefore, although the overall sales data in the first half of the year decreased by 4.8%, it was much better than that of other industries. In the second half of the year, affected by the epidemic situation and the severe rainy season, it is expected that there will be a good demand elasticity at the end of the third quarter and the beginning of the fourth quarter. From the market environment, the follow-up price trend should be good.

He said frankly, since the overall profit of the cement industry itself was at a high level last year, it is not expected to achieve growth this year. It is better to achieve the same level as last year.

In the first quarter of this year, due to the loss of the epidemic situation, the income and profit of the cement industry in the first half of this year decreased by 6 points on a year-on-year basis. In the first half of this year, the industry made a profit of 76.7 billion yuan, compared with more than 80 billion yuan last year. However, although the cement sales in the first quarter fell by more than 20% year-on-year in the first quarter, the sales volume data of a single month have increased year-on-year for four consecutive months since April, and reached a new record in May, and the sales volume in June also rose by more than 8% year-on-year. Overall, the overall impact on sales in the first half of the year is not prominent. Chen Bailin.

Although the epidemic situation has changed the rhythm of cement price fluctuation, making the industry more and more disturbed, the enterprises response to market demand is becoming more and more sensitive, which also brings the ability to resist volatility. As a kind of internal friction material, cement is not affected by the external world environment in the short term. Under the background of constant domestic investment, if sales increase by 5% every month after August, the annual sales volume can increase year-on-year to make up for the loss in the first quarter.

Li Xueying also said in the interview that in the short term, cement prices will enter the upward channel with the advent of the peak season, but the overall market trend in the second half of the year still depends on the demand and policy level guidance factors. In the first half of this year, under the background of both the volume and price of cement market, it is difficult to determine the overall profit level of the whole year.

Wang Qi also believes that, because the profit of the whole industry has been at a very high level last year, it is difficult to surpass this year. According to the current situation, unless there is a big increase in cement price in the second half of the year, the profit situation of this years whole year will be worse than that of last year, he said.