2024, the Political Bureau of the Central Committee of the Communist Party of China held a meeting and put forward the idea of "overall study of policies and measures to digest the stock of real estate and optimize the incremental housing, to build a new model of real estate development, and to promote the high-quality development of real estate". De-inventory has become an important task for the real estate industry at this stage. On the same day, the Ministry of Natural Resources issued the Notice on the Supply of Residential Land in 2024, which requires that the supply of new commercial residential land should be reasonably controlled according to the cycle of commercial residential de-industrialization, and that the target of real estate de-inventory should be achieved by regulating the supply of land. Therefore, this paper will analyze the impact of destocking in the real estate industry on cement demand from the perspective of land supply. Since
2021, as the real estate industry has entered a downward cycle, the domestic land market has continued to shrink substantially, and the scale of supply and demand is only about half of the average level of the past decade. From January to May 2024, the supply scale of residential land in China was 96.67 million square meters, a decrease of about 25.9% compared with the same period last year, and the decline was still obvious.
Specifically, from January to February, the scale of domestic land supply increased slightly compared with the same period last year; from March to April, the intensity of land promotion was weakened, and the scale of land supply was less than the same period last year, with a decline of about 3-4%; In May, although the scale of land supply increased slightly under the influence of seasonal factors, the year-on-year decline further expanded to more than 40% due to policy restrictions.
Figure 1: Scale and Change of National Residential Land Supply (10,000 square meters,%)
Source: Cement Big Data (https://data.ccement.com/)
Shrinkage of land supply is the result of the downturn of the real estate industry in the past. It is also the core factor restricting the scale of real estate construction in the future. At this stage, real estate enterprises are generally more cautious in land acquisition, and the task of local government debt conversion limits the behavior of urban investment in land acquisition. In addition, the central government re-mentions inventory removal, domestic land supply is subject to multiple constraints, and the scale of residential land supply will further shrink. Therefore, in the short term, there is still no realistic basis for substantial improvement in the total demand for cement on the real estate side.
In addition, according to the data of the Ministry of Finance, the budgetary revenue of government-managed funds nationwide from January to May 2024 was 166.8 billion yuan, down 10.8% from the same period last year. Among them, the revenue from the transfer of state-owned land use rights was 1281 billion yuan, down 14.0% from the same period last year. In the context of the contraction of land supply scale, local government revenue will decrease, and the pressure of fiscal revenue and expenditure will have a negative impact on the start of infrastructure projects, thus dragging down the demand for cement at the infrastructure end.
Second, the supply and demand of land in more than 80% of provinces and cities has weakened, and the decline in Hebei and Henan provinces is more obvious
. Jiangsu, Shandong, Henan and Hebei are the major provinces of land supply, and the supply of residential land in 2023 is more than 40 million square meters. They account for 11.1%, 9.4%, 7.0% and 6.9% of the total supply of residential land in China, followed by Sichuan, Hubei, Zhejiang, Anhui, Guizhou, Hunan and Jiangxi provinces, where the supply of residential land is generally between 20 million and 40 million square meters, accounting for about 4.8% -6.0%; The supply of residential land in other provinces and cities in China is below 2000 square meters.
According to the above data, under the background of real estate de-inventory, the government's control of land supply scale may have a relatively large impact on cement demand in Jiangsu, Shandong, Henan and Hebei provinces.
Figure 2: Proportion of Residential Land Supply in China's Provinces and Cities in 2023 (%)
Data Source: Cement Big Data (https://data.ccement.com/)
From January to May 2024, among the 30 provinces and cities in China, The supply of residential land decreased by 26 and the turnover of residential land decreased by 25, accounting for more than 80%. It can be seen that the domestic land market will continue the trend of weak supply and demand in 2024.
In terms of land supply, Shandong, Hebei, Jiangsu and Henan continue to occupy the top four places in the supply of residential land, but the supply has decreased year on year. Among them, the reduction of residential land supply in Henan and Hebei is relatively obvious, with a year-on-year decline of 17.7% and 40.1% respectively.
From the perspective of land turnover rate, the average turnover rate of residential land transfer (residential land turnover/residential land supply) is 73.2%. Among the provinces and cities whose land turnover is higher than the national average, the turnover rates of Hebei, Sichuan, Anhui and Henan provinces are lower than the average level, and the turnover rates of residential land are 71.2%, 70.1%, 67.4% and 61.7%, respectively. The low turnover rate of residential land indicates that the local land supply is excessive, and the government has the possibility of actively reducing the supply.
Table 1: Supply and Transaction of Residential Land by Provinces and Cities from January to May 2024 (Unit: 10,000 square meters,%)
Data Source: Cement Big Data (https://data.ccement.com/)
From the perspective of the cycle of commercial housing, In Zhuhai and Dongguan, where the period of commercial residential housing sold is more than 36 months, the transfer of land for new commercial residential housing should be suspended, and the supply of land should be limited; in Changzhou, Beijing, Changchun and other 23 cities, where the period of commercial residential housing sold is between 18 months and 36 months, the upper limit of land transfer area should be determined according to the principle of "how much to activate and how much to supply"; The de-industrialization cycle of Chengdu, Shanghai, Xi'an, Hefei and Hangzhou is less than 18 months, and the land supply can be regulated and controlled by the local government independently and flexibly.
It can be seen that the current situation of commercial housing in regional central cities is generally better than that in surrounding cities, and the overall situation of commercial housing in Yangtze River Delta, Chengdu-Chongqing and Guanzhong Plain urban agglomerations is better than that in Beijing-Tianjin-Hebei, Pearl River Delta and Northeast China. Therefore, Beijing-Tianjin-Hebei, Pearl River Delta and Northeast China are more likely to be subject to policy constraints, and land supply is expected to shrink more significantly, dragging down local cement demand.
Figure 3: Cycle of commercial housing in 30 large and medium-sized cities in China in May 2024 (month)
Data source: cement big data (https://data.ccement.com/)
III.
Since the downturn of the real estate cycle, the domestic land market has continued to shrink, which has become the main drag factor for the weakening of cement demand. Beginning in May 2024, the government's re-mention of real estate de-inventory will further promote the contraction of the land market from the perspective of supply. At this stage, there is a more obvious differentiation phenomenon in the real estate and land markets of various provinces and cities in China. Hebei, Henan and other provinces have the pressure of excess land supply, coupled with the relatively long cycle of commercial housing in the central cities of the region, which is obviously affected by the policy, and the contraction of the land market will be greater than that of other regions in China. Therefore, the real estate destocking policy is expected to exert certain pressure on the demand for cement in the above-mentioned regions.
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