Year to date, cement prices in Guangdong province have increased by RMB 50-60/t, or 16.7-20 per cent, to RMB350-360/t. This is reported to be because of the cracking down on low-quality cement, robust demand and seasonal cement output reduction - report analysts at Deutche Bank in Taiwan.
In 3Q07, most of the cement makers in this region, including Taiwan Cement Company (TCC), were forced on reducing their operating rate to 50-70% due to a shortage of electricity. As a result, cement supply could not meet market demand and cement ASPs increased in the weakest season within a year.
While 4Q, the peak season, is approaching, analysts expect the cement prices in Guangdong to trend up further to RMB370/ton and maintain flat in 2008F.
As TCC’s operation in Yinde, Guangdong performs as an important sector for TCC’s China operation, the pricing trend there should have a major impact to the cement pricing forecast for TCC. Accordingly, Deutsche analysts have raised their 07F and 08F blended cement ASP forecasts for TCC to RMB322/t and RMB340/t, respectively, from previous RMB313/t and RMB 330/t,