www.shcri.com - In the first half of 2009, Chinese cement industry developed steadily in general. The cement output continued to increase rapidly. According to National Bureau of Statistics, the total output of cement from January to June in China reached 734.622 million tons, rising by 14.9% YOY. Because of the increase on the fix asset investment and the recovery of Chinese real estate industry, the demands for cement also increased. Compared with the last year, the cement price had begun to rise. But as the production capacity improved too fast, the price was increased only in a small range.
In the latter half of 2009, the overall operation status of Chinese cement industry will be much better than the first half of 2009. First, the production capacity of cement will continue to expand, but the growth range will be narrowed down. Second, with the realization of the infrastructure investment and the recovery of the real estate market, the demands for cement will increase greatly. The relationship between supply and demand will be improved and the price trend of cement will be optimistic. Besides, the elimination of low production capacity, the improvement of the industrial concentration and the enhancement of the industry chains of cement enterprises will all promote the development of Chinese cement industry.
As to the supply of cement, the production will continue to rise significantly. But the government has begun to concern the excessive release of the production capacity and will carry out some measures to control the trend. Therefore, the growth rate of the production capacity will be slowed down, which is good for the healthy development of Chinese cement industry.
Besides, from the end of June, China Development and Reform Commission has begun to investigate the outputs, production capacity, investment and other factors of the cement industry to enhance the macro-control on it. China Ministry of Industry and Information Technology has begun to investigate the adjustment of the cement structure in July. All these suggest that the production capacity of cement will decline and the cement price will rise in a certain degree.
As to the demands, with the realization of the infrastructure investment and the recovery of the real estate market, demands for cement will continue to increase greatly. The 4 trillion RMB (586 billion USD) stimulus package which was approved by China State Council is mainly focused on the infrastructure construction. As a basic industry, cement is needed in nearly all the projects. With the increase of the investment, the demands will face a bright future undoubtedly. Moreover, as the important support of the cement industry, the recovery of the real estate industry will certainly stimulate the increase of the cement demands. The cement demands on the real estate industry account for about 30% of the total demands in the downstream of the cement industry. They affect each other significantly.
As to the price, with the realization of the investment on infrastructure construction and the recovery of the real estate industry, and the decrease of the production capacity resulting from the restriction poly of the government, the cement price will enter a new rising stage. Moreover, as the economy remains steady, the price of coal will begin to increase, which will add the coats of the production of cement. Therefore, the cement price will accordingly increase.
As to policies, the development of the cement industry is mainly dependent on the effective restricting policies of the government on the production capacity. It is also important to eliminate the backward production capacity. Besides, the government should encourage the reorganization and cooperation of enterprises to improve the industrial concentration, which will improve the abilities to bargain with the upstream suppliers and the control abilities on the downstream customers. The government should also encourage enterprises to produce the terminal products such as the commercial concrete to prolong the industrial chain.
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Source: China Research and Intelligence
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