Recently, the cement network APP video number carried out the online live broadcast of "Sharing Hui Building Materials Observation", and Li Kunming, an analyst of China Cement Network Cement Big Data Research Institute, looked forward to the cement industry in 2024.
First of all, let's briefly review the market situation in 2023. In
2023, affected by the continuous adjustment of real estate, the development of cement industry continued to decline.
In the first quarter, the downstream work resumption was still good, and the overall demand was better than the same period; in the second and third quarters, "the peak season was not strong, and the off-season was weaker", the demand weakened significantly, coupled with the fierce market competition, the cement price continued to decline; in the fourth quarter, the weak demand recovered, and the cement price rose slightly.
Overall, it is estimated that the national cement output in 2023 will be 2.048 billion tons, a decrease of 81 million tons, a decrease of 3.8% compared with the same period last year, and the cement output will hit a new low since 2011; The center of gravity of
coal price has moved down, with the annual average price of about 972 yuan/ton, a year-on-year decrease of about 300 yuan/ton, and the average production cost per ton of cement enterprises decreased by about 36 yuan/ton;
the annual average price of cement was 370 yuan/ton, a decrease of about 107 yuan/ton over the same period last year, with a range of up to 22%.
Due to the large decline in cement prices and the decline in demand, the industry's profits have fallen sharply. We expect that the industry's profits in 2023 will be around 31 billion yuan, a decline of more than 50%.
Figure: It is estimated that the total profit of the cement industry in 2023 will be about
31 billion yuan. Data source: Cement Big Data (https://data.ccement.com/)
Although the situation in the whole country is relatively poor, there are also some regions that perform well. Among the 31 provinces and cities in China, Tibet and Xinjiang are the two regions that have realized the increase of both volume and price. The demand in Tibet has increased by more than 50%, and the large infrastructure projects such as Sichuan-Tibet Railway and Yarlung Zangbo River Hydropower Station in this region have made remarkable efforts. The construction of railway infrastructure projects in Xinjiang has been accelerated, the cement output has increased by 24% year on year, the cement price has increased by 3.4%, and the industry efficiency has improved.
For 2024, we believe that the overall market pressure is still high, but the downward trend will slow down.
First of all, on the demand side, it is expected that the drag of real estate will be weakened and infrastructure will still be pulled. In 2024, the demand for cement will decline slightly, and the decline will continue to narrow. The annual cement output will be about 2.01 billion tons, down about 2% year-on-year. In the
real estate sector, the Central Economic Work Conference in December 2023 mentioned that we should actively and steadily resolve real estate risks, meet the reasonable financing needs of different ownership real estate enterprises equally, and promote the steady and healthy development of the real estate market. We will accelerate the construction of affordable housing, the construction of public infrastructure for both emergency and emergency use, and the transformation of villages in cities.
In 2024, the key work of real estate is still "guaranteeing the delivery of buildings" and "controlling risks", while the "three major projects" continue to work hard, which will slow down the decline of real estate investment. Land acquisition area and new construction are two important indicators of the investment side. As of November 2023, they have decreased by 25.2% and 21.2% respectively compared with the same period last year, and have not yet stabilized. They have a negative impact on the investment in the front-end construction and installation projects of real estate in 2023.
However, under the hedge of the "three major projects", the decline in real estate investment may be narrowed, and the drag of real estate on cement demand will be reduced.
Figure: Real estate land acquisition is not stable, and new construction is still declining
. Data source: cement big data (https://data.ccement.com/)
In the field of infrastructure, infrastructure investment is still an important starting point for stabilizing the macroeconomic market. In October 2023, the central government issued trillions of treasury bonds, and it is expected that the amount of special debt will be increased in 2024 under the requirement of steady growth, which will benefit infrastructure investment. However, considering that local governments are facing greater debt pressure and squeezing some financial funds, it is expected that the growth rate of infrastructure in 2024 will be slightly faster than that in 2023;
Secondly, some new projects will enter the civil construction period in 2024, boosting cement demand, and the pull of infrastructure on cement demand is still increasing.
Then on the supply side, production capacity is still less than expected, and supply pressure is controllable as a whole. In 2023, 16 new clinker production lines were put into operation , involving a total capacity of 23.16 million tons, accounting for only 43.5% of the planned production capacity, far less than expected.
According to the tracking of China Cement Network Cement Big Data Research Institute, 27 clinker lines with a capacity of more than 40 million tons are planned to be put into operation in 2024, plus some that should have been put into operation in 2023, more are actually planned to be put into operation.
Regionally, Chongqing and Yunnan in southwest China, Hunan and Guangdong in central and southern China, and Fujian in East China all have 2-4 lines put into operation, and the market is facing greater operational pressure.
In view of the fact that the industry is still under great pressure in 2024, it is expected that the release progress of new investment capacity will still be less than expected. Nevertheless, the contradiction between supply and demand is highlighted in the downward period of demand, and the problem of overcapacity is still serious.
Furthermore, the price situation, the current cement prices reached a relatively low level, many enterprises operating at a loss, strong willingness to raise prices, in the context of basically stable demand, cement prices are unlikely to weaken significantly.
We judge that the cement price will rebound to a certain extent in 2024, but the rising space may be limited under the constraints of serious overcapacity. It is expected that the focus of the average price of cement in 2024 will continue to move down compared with 2023. From the quarterly trend, the year-on-year decline will gradually narrow, and there is a possibility of turning positive in the second half of the year. Finally, the benefit is expected to move down the average price and increase the cost, and the profit is hard to say optimistic. In terms of
cost, under the background of stricter security inspection, the difficulty of coal supply may gradually increase, coupled with economic recovery and increased consumption, there is an upward risk of coal price, and the pressure of production cost of cement enterprises may increase.
On the whole, the average price of cement is lower than that in 2023, and the superimposed cost is increased, so it is hard to say that the benefit of the industry is optimistic. It is expected that the benefit of the cement industry in 2024 will continue to decline compared with that in 2023, and the profit will be at a low level.
Figure: Cement industry profits are expected to continue to decline
in 2024 Data source: Cement Big Data (https://data.ccement.com/)
