[Cement Market Overview] October: Cost Drive Is Obvious, Market Shocks Upward!

1. Overview

of the national and regional market (1) National market: The cost drive is obvious, and the market fluctuates upward

. In October, special bonds continued to be issued at a high level, and infrastructure projects were supported to a certain extent, but there were few new projects in the real estate sector, and the overall demand was weak; On the supply side, some areas began to enter the winter peak, the supply pressure has been reduced, and the inventory has declined. Overall, the overall demand in October was weak, but the high coal price led to increased cost pressure on cement enterprises, and the price of cement fluctuated and rose. The national cement price index (CEMPI) was 106.53 points at the beginning of October and closed at 109.66 points at the end of the month, up 2.88% annually and down 28.91% year-on-year.

From the regional point of view, the demand of the six regions shows a trend of differentiation, the northern region weakens, the southern region improves slightly, and the overall supply and demand is still weak. Specifically, the demand in East China is rising and the market sales are increasing; the shipment in Southwest China is improving and the willingness to raise prices is strong; the downstream construction in Central and South China is general and the demand is improving to a limited extent; the environmental protection in North China is becoming stricter and the market supply and demand are both weak; the weather in Northeast China is turning cold and the construction is coming to an end; the demand in Northwest China is flat and the accumulation of enterprises is obvious.

Figures 1 and 2: October 2023 National Cement Price Index CEMPI, Cement Price Index (CEMPI) K-line

Chart Data Source: Cement Big Data (https://data.ccement.com/)

Cost. At the end of October, the average spot price of 5500 kcal steam coal was 980 yuan/ton, down 1.51% annually and 38.94% year-on-year. On the demand side, the daily consumption of power plants was seasonally weaker, while the operating rate of non-power industries dropped, and the procurement was more cautious. On the supply side, the security inspection was weaker, the coal mine production began to speed up, the port inventory was high, and the coal price rose and fell. At the end of the month, the cost of coal per ton of cement was about 95.94 yuan/ton, down 1.47 yuan/ton from the end of September, and the cost was still high. At the end of October, the cost price difference between cement and coal was 188.59 yuan/ton, up 5.26% from the previous month, and the price difference between cement and coal increased slightly. In terms of

benefits, the average price of power coal in October was 1016.3 yuan/ton, up 85.76 yuan/ton annually, and the average production cost of cement per ton increased by about 9 yuan/ton, while the average price of cement in October was 325.5 yuan/ton, up 3.94 yuan/ton annually, which made it difficult to cover the cost increase. Cement industry profits are expected to continue to deteriorate in October.

Figure 3: Cement price, coal cost and price difference in October 2023 (yuan/ton)

Data source: cement big data (https://data.ccement.com/)