Demand pressure over the price of cement prices down

Since late July, with the exception of Guiyang and Guangxi, where limited electricity has affected cement prices in some regions, prices in different regions have dropped by around RMB 20-40/ton, mainly due to the weak market demand and the production line in the original area in East China. Post-production inventory is relatively high, and the entry of low-priced cement in the foreign market has a negative impact on the local cement price. Jiangsu and Zhejiang cement companies started a new round of limited production and guaranteed prices in late August.

It is reported that from January to July this year, the country’s total cement production increased by 19.2% year-on-year, and the production in the southwest and northwest regions grew rapidly, with a cumulative increase of 25.3% and 20.3% year-on-year, which was mainly due to the impact of faster production capacity, and accumulative production in the east and south central regions. The growth rate was 5.9% and 8.7%, which was related to the policy that the region's new production capacity was relatively small and the large-scale enterprises adopted the policy of limiting production and insuring prices.

In terms of cement demand, the national fixed asset investment growth rate reached 25.4% in January-July, and the total fixed asset investment in the East China region grew at a high rate, reaching 37.0%. The growth rate in North China and Northeast China was relatively low. In terms of total investment, the growth rate in East China is also at a high level, and southwest and south-central China are weak. In the second half of the year, under the conditions of financial constraints, there is a risk that downstream demand will fall too quickly.

This year, the proportion of new production capacity in East China and South Central China accounts for 2% of the total output of the local area last year, and the supply of new products is limited. The ratio in the southwest and northwest regions is 11% and 14%. Newly-started cement production capacity in the northwest region is higher.

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