4.10-11, the price of cement in the areas along the Yangtze River, especially in the Yangtze River Delta, increased by 30 yuan/ton, and the price of clinker increased by 30 yuan/ton synchronously, which is still in the process of implementation. According to the rules of previous years, the cement industry began to enter the peak demand season around mid-April, and the price increase is in line with the market rules. However, the author believes that the current supply and demand situation is still poor, the basis for price increases is not solid, many enterprises are still on the sidelines, should calmly look at this round of large-scale push up cement prices in the Yangtze River Delta region!
Table 1: Recent changes
in cement prices along the Yangtze River Source: Cement Big Data Research Institute
I. Demand recovery is far slower than that in the same period
. The Yangtze River Delta region is the region with the strongest demand for cement in China. Its annual consumption accounts for more than 20% of the country's total. According to the rules of previous years, the demand for cement in this area has recovered to 7-8% around mid-April. However, due to the impact of rainy weather and financial problems this year, the demand has recovered slowly. At present, it is about 50%, which is 25 percentage points lower than the same period. It is only equivalent to 2022, when the epidemic is more serious. The serious shortage of demand may be the main factor that makes this round of price increases difficult to implement.
Figure 1: Cement shipment rate in the Yangtze River Delta region is lower than that in the same period (%)
Data source: Cement Big Data (https://data.ccement.com/)
II. In the
first quarter, the market situation was poor, and many enterprises extended the shutdown time independently, but the recovery rhythm in the downstream was still slow in April. In addition, the enterprises resumed normal production, and the clinker inventory of enterprises did not decline. At present, the clinker inventory ratio in the Yangtze River Delta region is about 70%, which is at a historical high level. High inventory has greatly suppressed the rise in cement prices.
Figure 2: The ratio of clinker storage capacity in the Yangtze River Delta region reached a high level in the same period (%)
Data source: Cement Big Data (https://data.ccement.com/)
III. Coal price fluctuates and the cost support weakens
. Coal is the biggest cost of cement production, and the trend of coal price has a greater impact on cement price. Since March, coal demand has entered the seasonal off-season, coupled with high production and imports, coal is in a situation of excess supply, and prices have been declining all the way. Up to now, the average spot price of thermal coal is around 818 yuan/ton, and the price has not stopped falling. In April, the downstream consumption is difficult to improve, the weak pattern of coal price remains unchanged, and the cost side is difficult to support the rise of cement price.
Figure 3: Fluctuation and Decline
of Coal Price Data Source: Cement Big Data (https://data.ccement.com/)
IV. Lack of Enterprise Confidence and Poor
Market Synergy China Cement Network Cement Big Data shows that. Since this year, the confidence index of the cement market along the Yangtze River is mostly below 50%, and now it is around 47%. The lack of confidence also reflects the fact that the market competition is fierce and the enterprise synergy is poor to a certain extent. The author understands that this round of price increases has not been followed by Huangshi in Hubei, Jiujiang in Jiangxi, Wuhu in Anhui and Tongling along the Yangtze River, and many enterprises are still on the sidelines. In addition, once an enterprise fails to raise prices, it is easy to infect, leading to a fall in prices in the surrounding areas, and the results of price increases are difficult to defend. The negative impact of lack of confidence and poor synergy on price increases should not be underestimated.
Figure 4: The confidence index of the cement market along the Yangtze River is at a low level (%)
Data source: cement big data (https://data.ccement.com/)
The price pressure in the second quarter is relatively high. Judging the market trend
rationally, in the short term, the price of cement in many areas along the Yangtze River has fallen below the cost line, and enterprises are under great pressure to operate, which does not exclude the possibility that the price in the areas that have not been raised will follow suit. For a long time, the relationship between supply and demand is the core factor to determine the price trend. At present, the real estate land acquisition and sales have not stabilized, and are still in a weak bottom. Next, the Yangtze River Delta region will face factors such as rainy season and busy farming. It is expected that the demand will be difficult to improve significantly, while the supply will increase. It is expected that the market will face greater operational pressure in the second quarter. Enterprises should rationally judge the market trend.
