China cement prices expected to surge by year-end

China cement prices expected to surge by year-end
Published: 27 November 2007

China’s cement price is expected to continue surging towards the year-end as a result of government action to phase out backward production capacity and the general recovery of the sector.  
Shanxi, Hunan and Guangdong led the country in the rise of cement price in October. In Jincheng city, Shanxi province, the cement price climbed 36.36 per cent to reach 300 yuan/ton (US$40.41 ton) from September’s 220 yuan/ton. In Shaoyang, Hunan province, cement price reached a historical high of between 360-400 yuan/ton in October. And in Guangdong province, cement price climbed to as high as 380 yuan/ton on account of a tight electricity supply.  
Industrial experts say that the cement price will maintain its rising momentum in the last two months of this year due to three factors:  
First, construction projects are facing an acceleration towards the year-end due to fiscal factors such as clearance, thus pushing up the demand for cement;  
Second, the warm-winter factor and advancement of winter construction technology will add to the demand for cement;  
Third, local governments are currently phasing out backward cement production capacity as required by the National Development and Reform Commission (NDRC).  
As the time leading to the year-end will be the NDRC’s regular time to review the results of the phasing-out at localities, there will be impetus for localities to speed up the process. The cut back in supply is expected to support higher prices of cement in the rest of the year and 2008. 
Experts predict that cement price could rise to a new high in 2008, against a backdrop of backward capacity phasing-out and a slowdown in the buildup of new production capacity.  
In addition, the high cement price will be sustained by factors such as a price hike in fuels (coal and electricity) and expected mergers in the sector.