The Key to the National Cement Industry — — East China Market

Relying on convenient river and sea transportation conditions and developed economic foundation, East China has always been the absolute core of the national cement market, so there is a saying in the industry that the prosperity of East China leads to the prosperity of the industry, and the death of East China leads to the death of the industry. In the first three quarters of

this year, the profit of the national cement industry exceeded 20 billion yuan, which was significantly improved compared with the same period last year, but the industry still felt cold.

On the one hand, the demand is declining, the market competition pressure is increasing, and the market position

of the domestic East China Cement is based on the super-large capacity scale." With huge market demand and highly linked market structure, East China has a transcendent position in the national cement market.

The East China market covers Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi and Shandong provinces and cities, and is the region with the most active economy, the most complete industrial chain, the largest stock of infrastructure and real estate, and the strongest demand for renewal.

With its unique geographical conditions and huge economic volume, East China has become the largest regional market of cement industry in China, with an annual output of more than 600 million tons of cement, accounting for more than 30% of the total cement production in China.

East China is the key

to the breakdown of the national market. Since the beginning of this year, the overall situation of cement prices across the country has continued to decline, and the whole industry has experienced the worst "traditional peak season" in many years. Near the end of the year, if the price of cement can not return rationally, the cement industry next year is likely to be the coldest year in recent years.

East China, as the key to the national market, is the key to breaking the current cement market.

From the historical experience, East China, especially the Yangtze River Delta region in the Yangtze River Basin, as the core region of the national cement industry, its price, supply and demand and trade changes determine the trend and atmosphere of the national market. This benchmarking role can not be compared with other regional markets in China. Whether it is Xinjiang, Northeast China or Sichuan-Chongqing market, because of its geographical separation and trade liquidity restrictions, the scope of influence is limited to a corner. With the help of the Yangtze River Golden Waterway and coastal routes, East China can expand the scope of influence to the surrounding regional markets. In the

past long historical period, East China, especially the core provinces of the Yangtze River Delta, was one of the regions with the highest price of cement in China. Compared with other regions, the premium of East China has become the "anchor point" of the national cement price increase: enterprises in central and southern China, southwest China and even northeast China will refer to the price level of East China as a benchmark when formulating price strategies. In other words, "East China rises in price, the whole country follows the rise" has been a common logic in the industry.

Looking back on the golden period of the industry from 2018 to 2021, the price of cement in East China and other five regions in China has always maintained a positive price difference, which is 50-70 yuan/ton higher than that in North China, Southwest China and Northwest China on average for a long time, and the price difference with Northeast China is maintained at more than 100 yuan/ton for a long time.

This "price highland" pattern has dual positive effects: on the one hand, the reasonable price difference space stimulates the normal cross-regional flow and optimizes the national resource allocation; on the other hand, the high price area in East China provides a clear "reference frame" for the price increase of the whole industry. The rising price of cement in East China can drive the surrounding areas to follow up, and eventually evolve into a nationwide general rise, and the overall efficiency of the industry has been greatly improved.

At present, the price difference between the Yangtze River Delta market and the surrounding areas has generally narrowed sharply. Judging from the average price in East China, there has even been a situation of price inversion. The disappearance of the price difference led to the loss of the price increase scale in the surrounding market, and the price transmission mechanism was almost paralyzed. The East China market has been reduced to a "price depression" from the "leading market" in the past, which has directly led to the long-term downturn of the national cement price in "no anchor, no expectation, no synergy".

Only when the East China market returns to a reasonable price range, can national cement industry really get out of the trough, and there are two core problems in the East China market that need to be solved urgently.

1. Large enterprises refuse "internal friction" and play a leading role

in the market. In order to achieve the recovery of the East China market, the enabling role of leading enterprises is indispensable. CNBM, Conch Cement and

Therefore, these four enterprises must further focus on the core market of the Yangtze River Basin, fully gather consensus, enhance the level of industry synergy and self-discipline, and play the enabling role of leading enterprises. Specifically, we need to do a good job in deepening peak staggering in off-season, orderly control in peak season, and jointly resist low-price dumping, so as to guide cement prices back to a reasonable range.

At that time, with the rise of the price in the Yangtze River Basin, the price difference relative to other surrounding regions will return to positive and widen, which will drive other regional markets in East China, such as Shandong, to follow up the rise, and then radiate the trend of price stabilization and price recovery to other regions in China, and the national cement industry will also usher in a real turning point.

2. The regional market refuses confrontation and realizes reasonable "linkage"

. The East China market has huge production capacity, convenient transportation conditions, strong liquidity of cement in the regional market, and the regional market is prone to mutual impact.

Taking Anhui market as an example, the demand for cement itself is not too large, but the scale of production capacity is far ahead of other provinces and cities, which is a typical export market. It relies on the convenient transportation conditions of the Yangtze River and the regional advantages close to the eastern coast. at the beginning of this year, there was a case that Anhui sold 160 yuan/ton cement to Wuhan market.".

The East China market and the Yangtze River market are highly linked, which can be said to affect the whole body. If the East China market wants to really stabilize and rebound, it needs the region and relevant provinces to form a broader and solid consensus on peak staggering production and market self-discipline.

Especially as two important cement producing areas along the Yangtze River, as well as the headquarters of two giants, Conch and Huaxin, the synergy between Hubei market and Anhui market is crucial.

Generally speaking, the rise and fall of the East China market has always been closely linked with the national cement industry. Its transformation from "price highland" to "price depression" is not only an intuitive reflection of the cyclical fluctuation of the industry, but also a reflection of the deep contradiction between the lack of market synergy and the imbalance of resource allocation. Nowadays, the national cement industry is at the key crossroads of stabilization and recovery, and the "key" to break the situation is still firmly in the hands of the East China market.

In fact, there have been successful cases in the industry where enterprises along the Yangtze River have worked together to make the cement industry recover. At the end of July last year, the meeting of the Political Bureau of the Central Committee of the Communist Party of China proposed to prevent "involution" vicious competition. Some cement enterprises proposed that the Yangtze River Cement Enterprise Alliance (OCC) led by China Cement Network be formally established to prevent involution, adhere to peak-shifting production on demand and capacity reduction, maintain the prosperity and stability of the Yangtze River cement industry and achieve high-quality development. In the fourth quarter

of last year, the cement market along the Yangtze River recovered. It is inseparable from OCC and China Building Materials, Conch Cement, Huaxin Cement and ". It is also an opportunity to reshape the market order and optimize the industrial structure. Focusing on East China, activating East China and stabilizing East China are the only way for the whole industry to cross the cycle and embrace the recovery.