China cement price gains

China cement price gains
09 October 2007

Cement prices in most regional Chinese markets have been rising steadily since mid-September matching the peak season construction activities. Conch Cement’s recent price hike in East China further also confirms this upward trend.

The closure of small cement capacity YTD has been way ahead of analysts expectations, further confirming the view that the industry is still in the early stages of long-term recovery in profitability.

Deutsche Bank analysts in Hong Kong have raised their earnings estimates significantly for CNBM and Conch Cement – two production heavyweights, raising target prices by 50 per cent for CNBM to HK$33.0 and 32 per cent for Conch Cement to HK$82.0.

In fact, Deutsche Bank prefers CNBM to Conch Cement as it expects CNBM’s cement capacity to expand faster due to its ongoing acquisitions. CNBM will continue to leverage its strong support from both central and local governments to consolidate the cement markets in Southeast China and Huaihai region. This will help CNBM to realise a bigger market share at a much faster pace than building greenfield projects.

Key risks, however, would include a sharp decline in cement prices or a substantial rise in energy (coal and electricity) prices.
Published under Cement News