Interpretation of the Cement Industry III: Cement Demand Will Continue to Increase

In the first quarter, cement prices fell to a certain extent, but the increase was still huge compared with the same period of last year. The reason for the increase in cement prices is mainly due to the increase in coal production prices, resulting in higher production costs, which keeps the cement prices high. On the other hand, there is a gap in the supply of cement, which has increased cement prices in different regions and at different time periods. It is expected that as the demand for cement further increases, cement prices still have room to rise.

For example, in eastern China, the current cement price is a rational return. According to the latest data, the average price of the cement market in East China is 450 yuan/ton, which is the same as the prices in the northwest and southwest from 2008 to 2009. The price level alone is indeed at a high level, but through analysis we believe that the price of cement in East China is not ridiculously high. The main reasons are as follows:

First, the cost of raw materials and labor continues to increase. When it comes to the cost of cement production, it usually only thinks of coal and ignores other costs such as water slag, slag powder, and ore mining and transportation. However, the price of mixed admixtures such as water slag, slag powder, and fly ash has increased by a factor of two to three. . At the same time, due to the impact of the big environment, the labor costs of enterprises are also rising.

Secondly, since the second half of 2010, due to the pressure of energy conservation and emission reduction, localities have been switching to power cuts, the power supply of cement companies has not been guaranteed, and production capacity cannot be released, causing partial fluctuations in supply and demand patterns. In order to ensure the demand for cement for key projects, companies can only use price levers to guide other cement demanders to “pick the peak” to purchase cement.

Third, the company’s production stoppages also require costs. At present, the overcapacity of cement in Jiangsu and Zhejiang is relatively serious. The current high prices are partly due to the suspension of production by cement companies, and it is also necessary for enterprises to stop production and then ignite.

Cement is the basic material for national construction and it is the responsibility of the cement industry to contribute stably to the country’s economic development. The cement price is determined by the market supply and demand, and the cement price should go up and down within a reasonable range.