Improving prices in China filtering through

Improving prices in China filtering through
Published: 20 February 2006

Helped by higher prices at home and some improvements in China, Taiwan’s cement firms with plants in mainland China, including Taiwan Cement Corp, Asia Cement Corp and Chia Hsin Cement Corp, will enjoy higher gross profit margin rates this year.  Because of booming demand for cement, mainland China’s largest cement producer Conch Group has raised its cement price by between 7- 10 per cent since the beginning of this year. Taiwan’s cement producers are expected to benefit from the price hike plus the slump in purchasing price for such material as coal. 
Credit Suisse First Boston estimated Asia Cement would see gross profit margin grow 4-5 per cent in the mainland this year. Chia Hsin noted its gross profit margin in the mainland would reach over 15 per cent. Because of comparatively lower production costs, Taiwan Cement will be able to post a gross profit margin rate of over 18 per cent in the mainland this year. 
Since the beginning of this year, the cement price in southern China region has risen to between RMB340 (US$41.97) and RMB350 (US$43.2) per metric ton from RMB310 (US$38.27) quoted at the end of last year. The prices quoted in central China region has climbed to between RMB250 (US$30.86) and RMB260 (US$32.09) per metric ton from RMB230 (US$28.39) quoted at the end of the third quarter of last year. 
Affected by the implementation of the macroeconomic control policy imposed by the Chinese government, Asia Cement saw a sharp drop in earnings in the mainland last year. Chia Hsin Cement even suffered operating loss in the first half of last year until it increased exports in the second half. Asia Cement said it scored only NT$150 million (US$4.68 million at US$1:NT$32) in earnings in the mainland last year, a sharp decrease from the previous year’s NT$600 million (US$18.75 million).
Asia Cement predicted cement prices quoted for the mainland market to go up in the next two years because of strong demand seen to be fueled by the launch of China’s 11th five-year economic development plan as well as the upcoming 2008 Beijing Olympic Games and 2010 Shanghai World Expo.