China cement prices fall in cold season

China cement prices fall in cold season
Published: 24 November 2008

China’s cement market remains volatile as the effect from economic stimulus policy has not spread to the sector, said analysts.

Cement prices in Beijing and Tianjin dropped an average of CNY10/t early in November as it is getting cold there. Especially cement price in Beijing fell CNY10-20/t.

Analysts at China Cement Association and Digital Cement said that Beijing’s demands for cement remained weak as a whole in spite of a slight rise than before. Suspension of some real estate development on cold weather affected the cement market, so the cement prices would continue to fall.

Local cement price in Jiangxi Province fell CNY 20 per ton. Demands for cement slid in northwestern Shaanxi Province, excluding Hanzhong city, as it is cold. So the cement prices would probably drop soon, predicted analysts.

Correction of cement markets in East China’s Jiangsu and Zhejiang Provinces continue at present.

Analysts point out that the economic stimulus policy would not add momentum to the cement industry until one quarter later.

Generally speaking, there is still space for further cement price drop, said an analyst at Guoyuan Securities Co.

Infrastructure investment usually cost over half a year to arouse demands for cement, said Liu Zuoyi, a senior analyst in cement industry. China’s economic stimulus policy which aims to stimulate the domestic consumption and infrastructure investment is expected to bring positive effect on the cement industry one quarter later.

According to 2007’s statistics, every CNY 100 million fixed-asset investment will need CNY 11,500 tons of cement, so CNY 4 trillion investment that the Chinese government has just planned in the economic stimulus policy will cost about 460 million tons of cement.

Given the fixed-asset investment is completed in two years, the annual cement consumption will add by 230 million tons, representing 17 percent of total output in 2007.

Analysts expect if the economic stimulus policy is fulfilled well, the nation’sdemands for cements would probably burst in March 2009. Otherwise, the massive demands will come out in June.

Listed cement producers gained momentum on the CNY 4 trillion investment plan, and Hebei Taihang Cement Co., Ltd. (SHSE: 600553) was the biggest gainer as it closed limit-up in consecutive nine sessions.

Analysts warned investors of decline as the recent rally of cement shares may be driven by speculation capital.