Recently, the National Bureau of Statistics announced the economic data of the first half of the year, and the GDP growth rate of the first half of the year was 5.5%, which was in line with the market expectation. As for the cement industry, the cumulative cement output from January to June was 95300 million tons, with a year-on-year increase of 1.3%, of which the cement output in June was 185.03 million tons, with a year-on-year decrease of 1.5%. From the data point of view, cement production in the first half of this year is growing, it seems that cement demand is better than same period, but in fact it is the opposite, why?
1. There are differences
in the statistical caliber of data. According to the statement of the Bureau of Statistics, as the scope of Industrial Enterprises above the scale is changing every year, in order to ensure that the data of this year are comparable to those of the previous year, the figures of the same period used to calculate the growth rate of various indicators such as product output are consistent with the statistical scope of enterprises in the current period. This is different from the data published last year. Since this year, due to the poor market, the loss of cement enterprises has expanded, and some enterprises with low competitiveness and poor efficiency have been excluded from the statistical category due to the large decline in business scale or withdrawal from the market, which has led to a low base in the same period, resulting in an increase in cement production over the same period. The absolute output can better reflect the real demand. According to the full-caliber data, the cement output in the first half of last year was 976.82 million tons, and this year it was 95300 million tons, with a year-on-year decrease of 2.4%.
Figure 1: Total cement output in the first half of 2023 decreased by 2.4%
compared with the same period last year Data source: Cement Big Data (https://data.ccement.com/)
II. Downstream demand is
weak, real estate and infrastructure are the two main areas of downstream demand for cement, and their consumption accounts for more than 80%. Since this year, real estate investment has continued to decline, with the cumulative value of investment completed in January-June falling by 7.9% year-on-year, which has caused a greater drag on cement demand; In terms of infrastructure, the issuance of special bonds in the first half of the year amounted to 2.3 trillion yuan, accounting for 60.6% of the annual progress, and the capital support maintained a relatively high growth rate. In the first half of the year, the growth rate of infrastructure investment was 7.2%. However, the cumulative growth rate of road transport industry and public facilities management industry, which accounted for a large proportion of cement demand, was only 3.1% and 2.1% year-on-year, which was much lower than that of infrastructure as a whole. The support of infrastructure construction for cement demand is not strong. Overall, the demand for cement in the first half of this year was weaker than same period.
Figure 2 and Figure 3: Infrastructure support is not strong, and the drag of real estate is obvious
Data source: cement big data (https://data.ccement.com/)
III. Affected
by the overall weak demand and high inventory, the operation of cement enterprises is more difficult this year, and the loss area continues to increase. The industry has increased the intensity of peak staggering and kiln shutdown, especially since the second quarter, the expected demand for cement peak season has failed, and many regions have increased the intensity of independent shutdown. According to the incomplete statistics of Cement Big Data Research Institute, in the first half of the year, 14 provinces (cities) extended the shutdown time, only 4 provinces (cities) reduced the off-peak time, and the cement supply contracted to a certain extent throughout the day.
Table 1: Comparison of peak staggering time in different regions in the first half of 2023 and 2022 (days)
Source: Cement Big Data Research Institute
Although cement enterprises increased their efforts to stop production in the first half of this year, the overall cement inventory of enterprises is still rising under the weak demand. As of June 30, the national cement storage capacity ratio reached 74.17%, reaching a historical high level, 5.51 percentage points higher than same period in 2022. A considerable part of the cement produced by enterprises remained in the warehouse and did not enter the downstream consumption field, which also reflected the weak situation of terminal demand from the side.
Figure 4: Cement storage-capacity ratio reaches historical high in June 2023 (%)
Data source: Cement Big Data (https://data.ccement.com/)
IV. The second half of the year should not be too optimistic
. Looking forward to the second half of the year, the demand for cement may be seasonally warmer, but the overall situation should not be too optimistic. According to the land transaction area of 100 large and medium-sized cities in June, the transaction area in that month was 59.353 million square meters, down 43.9% from the same period last year. The weak land market will affect the new construction and investment in the second half of the year. It is expected that the cement demand in the second half of the year will be difficult to show a bright performance under the bottom grinding state of real estate investment, and the cement demand may be weaker than same period.
Figure 5: The land transaction area of 100 large and medium-sized cities in the first half of 2023 is at a low level in the same period (10,000 square meters)
Data source: cement big data (https://data.ccement.com/)
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