What happened when the north-south cement price gap narrowed sharply and overall demand fell?

In the past month, the gap between north-south cement prices has narrowed significantly.

On November 30, Baichuan Yingfu data showed that the bulk price of P.O42.5 cement in Liaoyang, Northeast China was 408 yuan / ton. In Qingyuan, Guangdong in the same period, the bulk price of P.O42.5 cement was as high as 758 yuan / ton. The price difference between the two places is as high as 350 yuan / ton.

A month has passed, China Securities News and China Securities Taurus reporters have learned from many sources that at present, the price gap between Northeast China and South China has returned to less than 100 yuan.

Southern cement prices fell sharply

"Prices in South China have fallen sharply recently. The average price of cement in northeast China is 561 yuan / ton, and the average price of cement in Guangdong and Guangxi is 585 yuan / ton. Chen Bolin, deputy secretary-general of the China Cement Association and president of the Digital Cement Network, told reporters.

Digital Cement Network believes that in the fourth quarter of 2021, cement demand fell sharply, with the highest year-on-year decline. The decline in market demand has far exceeded expectations. New real estate starts and sales continue to decline, special debt issuance has not yet fallen on new projects, shortage of funds and rising raw material prices, early site shutdown is the main reason for the shortage of cement demand.

The reporter learned that there are obvious regional differences in the cement industry. There is a clear difference between the north and the south in the light and high seasons. For the north, winter outdoor work is limited, which is the traditional off-season, and the rest of the season is the high season. For the southern region, the summer is rainy for the low season, and the rest of the time is the seasonal peak season. Therefore, there are obvious differences in cement demand and prices between the north and the south in summer and winter.

But as things stand, this winter, this situation is being broken.

On the one hand, the downstream infrastructure and real estate operating rate in many areas of the south are insufficient, resulting in less than expected demand, the original supply and demand balance has been broken, and the price center has moved down, on the other hand, the northern demand has not completely quieted, while the supply side has dropped significantly under the staggered peak production, and the price center has moved up.

The relevant person in charge of the cement plant in Xinjiang told reporters that Xinjiang entered the middle of winter in November, and outdoor operations basically stopped. However, there are still indoor needs, such as interior decoration and indoor construction to use cement.

Introduction of staggered peak production policies

Recently, many places in the south have issued detailed rules for the production of cement peaks.

Yunnan Province requires all cement clinker production lines to comprehensively plan and carry out staggered peak production during the Spring Festival, hot summer, rainy season and major events. In recent years, cement production enterprises in and around the built-up areas of cities where the ambient air quality has been mildly polluted and above have been concentrated in March and May, and the rest of the states (cities) have completed it in quarters. Each cement clinker production line has an average annual staggered production day base of 100 days, and the implementation time starts from January 1, 2022.

Jiangxi Cement Industry 2022 Staggered Peak Production Implementation Plan requires that, in principle, 11 enterprises in Jiangxi Province that produce clinker, 51 production lines are all involved in staggered peak production, and the annual staggered peak production is planned to increase by 15 days to not less than 70 days on the basis of not less than 55 days in 2021. Among them, the peak in the first quarter of 2022 is not less than 40 days, and the time is 00:00 on January 1, 2022 to 24:00 on March 31, 2022. Other periods in 2022: plum rain (June), hot summer (July-August), environmentally sensitive period or according to actual needs, the peak is not less than 30 days, the specific time is to be determined.

The Ministry of Industry and Information Technology, the Ministry of Science and Technology and the Ministry of Natural Resources jointly issued the "14th Five-Year Plan" Raw Material Industrial Development Plan, mentioning that by 2025, the production capacity of key raw materials such as crude steel and cement will only decrease and not increase, and the capacity utilization rate will remain at a reasonable level. The comprehensive energy consumption of steel per ton of steel in the steel industry was reduced by 2%, the energy consumption level per clinker of cement products was reduced by 3.7%, and the carbon emissions of electrolytic aluminum were reduced by 5%. Research and establish a constraint mechanism for curbing the expansion of excess capacity by means of carbon emissions, pollutant emissions, and total energy consumption. Implement the normalization of peak-shifting production of cement, and explore the establishment of a peak-shifting production mechanism for steel and other industries. Implement energy-saving reviews and strictly control fuel coal consumption in major coal-consuming industries such as petrochemicals, iron and steel, and building materials。

"Staggered peak production can alleviate inventory pressure while also helping to stabilize prices." Chen Bolin said.

This article originated from China Securities News