China price growth limited despite strong demand

China price growth limited despite strong demand
Published: 12 May 2008

Cement prices in China are expected to maintain single-digit growth this year because the fragmented sector lacks a few centralised industry leaders to press for a price increase, industry players say.
Figures from the National Development and Reform Commission estimated that at least 1.49bn tonnes of cement will be produced this year, up from 1.36bn tonnes last year.
"Big cement companies are not dominating the market in different regions, which makes it difficult for us to set higher selling prices," said Guo Jingbin, executive director of Anhui Conch Cement.
He expected price growth this year to remain at last year’s seven per cent.
The mainland’s cement market is divided into five regions - the eastern coast as well as the southern, northern, western and central parts. Prices in different regions vary according to how centralised the areas are. Where big companies dominate more of the market, the price is higher.
"In areas like Sichuan and Chongqing, the price can reach CNY500 to CNY600/t," Mr Guo said, adding that the levels were acceptable.
Tom Clough, an executive of Holcim, and Li Yeqing, chief executive of Huaxin Cement, agreed that prices could be higher on the mainland.
"Compared with other places, such as Europe and the United States with cement prices at US$100/t or US$120/t in New Zealand, China’s cement price has huge room for growth," said Mr Clough.
Beijing plans to invest CNY300bn in expanding its rail system; it also hopes to redevelop cities along railways and toll roads, projects that demand large cement supplies.
But the robust demand has not pushed prices up even though big cement producers, such as Anhui Conch, Sinoma and China National Building Material have spelt out their expansion plans with a combined investment of CNY73bn for the next three years.
"In the international market, money to buy a tonne of steel can buy four tonnes of cement; in China, money to buy a tonne of steel can buy 12 tonnes of cement," said Mr Guo.
Executives of big cement firms said mainland cement prices could be lifted and increase at a more attractive rate if small cement producers that undercut the market close shop.