In 2021, Hunan cement prices will open low and go high, compared with 2020, the overall operation will remain high. On the one hand, affected by the rise in the price of bulk raw materials, the cost of cement production has risen; on the other hand, due to the impact of limited electricity production, supply and demand have been imbalanced, and the cement market has been in short supply for a period of time. Let's review the situation of The Hunan cement market in 2021.
First, the 2021 Hunan cement price review
In the first quarter, due to the approaching Spring Festival, the cement market demand in Hunan was sluggish, the clinker inventory was overall low, and the manufacturers accumulated, coupled with the staggered peak production of 40-45 days during the Spring Festival, the supply and demand were weak, and the cement price fell normally;
In the second quarter, in April, affected by rainy weather coupled with the environmental protection inspection team stationed in Hunan, resulting in a sharp decline in mine mining, the lack of sand and gravel raw materials in the mixing station, the decrease in shipments, and poor cement sales, but on the other hand, environmental protection inspections led to a sharp increase in the price of raw materials such as coal, increased production costs of enterprises, supported cement prices, and the market held steady; in May, Hunan cement prices as a whole showed a trend of rising and falling, on the one hand, raw material coal prices remained high, and the production costs of enterprises increased significantly, for Changzhutan On the other hand, the western and northern Hunan regions are affected by the low-priced cement prices in the surrounding areas, coupled with the poor demand in the downstream market, the market is weakened, and the price falls. In June, the rainy weather in Hunan Province continued, the precipitation in a month reached about 20 days, the downstream construction progress was slow, the demand was poor, the cement sales were poor, the cement enterprises in many places were full of kilns, and the cement prices began to fall sharply due to the impact of low-cost cement in Guizhou.
In the third quarter, hunan cement prices fell all the way down in July, falling to a low level for the whole year at the end of July, and the average price of the Hunan cement market reached 326 yuan / ton. At the end of July and the beginning of August, due to the impact of power curtailment and production rationing, the continuous high price of raw materials, the epidemic situation, the staggered peak shutdown in the third quarter, and the increase in cement outgoing shipments, cement prices in many places in Hunan stopped falling and rebounded. Since September, the high price of coal, power rationing and production rationing are even more conducive to the rise in cement prices, at the end of September and the beginning of October, the impact of Power Curtailment in Hunan is serious, the cumulative increase in cement prices is nearly 400 yuan, rising to the highest level of the year, and the average price of the Hunan cement market is as high as 665 yuan / ton.
In the fourth quarter, since October, Hunan cement prices have been in a stable state; on October 18, a new round of power curtailment began. There is no letter notification of this power outage, and the power ratio is divided into periods, and the normal power supply is from 0 am to 8 am, and the power limit is implemented in other time periods. This round of power curtailment has less impact on most cement enterprises in Hunan. However, after the middle of October, the market demand in Hunan is not good, the inventory of manufacturers is high, and some manufacturers implement preferential policies such as rebates and rebates for sales, and the actual factory price of cement is much lower than the listed price of manufacturers, and since then, the price of Hunan cement has begun to fall. Since November and December, the market demand has been worse, in addition to the impact of foreign low-priced cement, the local market competition has become more and more intense, and the phenomenon of manufacturers reducing prices is even more obvious.
According to the monitoring of Centennial Construction Network, as of December 30, 2021, the average price of P.O42.5 bulk cement in the Hunan market was 529 yuan / ton, down 11.24% from the previous month (596 yuan / ton), and up 25.95% from last year (420 yuan / ton). This is down 20.45% from the highest point of the year (665 yuan / ton).
Second, the 2021 Hunan cement supply side analysis
2.1 Analysis of hunan cement production
From January to November 2021, Hunan cement production was 82.55 million tons, a slight decrease of 7.9% compared with cement production in 2020 (89.6446 million tons).
Specifically, in the first quarter of 2021, the impact of the epidemic was significantly reduced, coupled with the rebound in market demand, the demand for cement in Hunan was restored normally, cement enterprises resumed normal work, and cement production increased slightly year-on-year.
In April, due to the impact of rainy weather and environmental protection inspectors, Hunan cement production was restricted, and the output was significantly smaller than last year. In May, due to the impact of rising raw material costs and the impact of low-priced cement in the surrounding areas, local terminal demand performed poorly, and the growth rate of cement production began to slow down. From June to July, the impact of high temperature and rainy weather continued, and cement production began to decline with the arrival of the traditional off-season for cement demand.
In August, coal prices continued to run at a high level, and production costs increased; coupled with the fact that at the end of July and the beginning of August, Zhangjiajie and other areas in Hunan were seriously affected by the epidemic, and some enterprises directly stopped kilns, mills and sales, and cement production fell by 7.44% year-on-year, which is also one of the important reasons why Hunan cement production did not rise in August 2021. From September to October, the power ration in Hunan was serious, and more than 90% of the cement enterprises in Hunan stopped kilns, a few mills worked intermittently, cement was shipped within a limited time, and the output fell sharply compared with last year. In November, market demand recovered less than expected, and cement production was significantly lower than 25.24% in the same period last year.
Since the third quarter, Hunan cement production has continued to decline, and the cement market demand in December has been difficult to improve, and cement production may continue to decline. Therefore, it is expected that the cement production in Hunan in 2021 will decline compared with 2020.
2.2 Hunan cement clinker capacity utilization rate analysis
According to the testing of Centennial Construction Network, as of December 30, 2021, the capacity utilization rate of Hunan cement clinker was 45.21%, and the annual average cement clinker capacity utilization rate was 54.86%, an increase of 10.9% over the average cement clinker capacity utilization rate (49.45%) in 2020. Overall, the capacity utilization rate of Hunan cement clinker in 2021 is higher than last year.
State Grid Hunan Electric Power Co., Ltd. issued an orange warning for the safety of Hunan power grid on September 22, cement production is limited, cement clinker supply tightened; in addition, on September 22, the Department of Industry and Information Technology of Hunan Province and the Department of Ecology and Environment of Hunan Province issued the "Notice on Doing a Good Job in the Staggered Peak Production of Cement Industry in the Special Protective Period for Air Pollution Prevention and Control from 2021 to 2022" requiring the implementation of differentiated staggered peak production, and the supply of cement clinker was further compressed. However, as far as the current Hunan cement market is concerned, although the demand for cement continues to shrink, the market price maintains a certain profit margin, and the market demand for clinker has increased slightly, and the capacity utilization rate of clinker may increase slightly.
Third, the demand side analysis of Hunan cement in 2021
3.1 Hunan concrete capacity utilization rate analysis
From January to February, close to the Spring Festival, most projects entered the end of construction, the amount of building materials used was small, the shipment of mixing stations was not good, most of the mixing stations during the Spring Festival were basically in a state of shutdown, and the capacity utilization rate of concrete fell to the lowest point; starting in March, mixing stations around the world resumed work one after another, and the market demand increased significantly, and by the end of March, the utilization rate of concrete capacity reached the highest point.
At the beginning of April, Hunan Province carried out environmental protection inspections, a number of mining enterprises shut down, coupled with the closure of the wharf inspection, the shortage of sand and gravel supply in some areas, the shortage of raw materials in the mixing station, basically in a semi-suspended state, the capacity utilization rate of concrete began to fall, until the end of April began to run smoothly; from May to the beginning of June, the market demand continued to pick up, the capacity utilization rate of concrete rose slightly; in June, the rainy weather intensified, the downstream industry construction difficulties, the demand was not good, accompanied by fierce market competition, the quotation price difference of the mixing stations was large , resulting in a downward trend in the capacity utilization rate of concrete.
Since July and August, Hunan has entered a high temperature and rainy season, the construction progress has slowed down, coupled with prevention and control reasons, the local operating rate in Hunan is less than 60%, and the demand for concrete has declined significantly. At the same time, the collection of accounts receivable in the summer is poor, the price of raw materials rises at the same time, the ultra-strict treatment also greatly increases the transportation costs, while the price of concrete is difficult to rise, manufacturers can only reduce shipments to survive the difficult period, and the capacity utilization rate of concrete has also declined. Since September, the problem of tight funds has not been alleviated, and when the settlement method is better, the price of concrete is relatively low, and the profit margin is small. In the case of difficult capital operation, the shipment of concrete will also be partially affected. Therefore, although the overall utilization rate of concrete capacity in Hunan shows a downward trend, the fluctuation range is small and tends to be stable.
As of mid-November, with the reduction of rainy weather, the utilization rate of concrete capacity in Hunan has stopped falling and rebounded, coupled with the rush period of the project at the end of the year, downstream demand has slightly increased, and mixing station shipments have rebounded. However, recently, Hunan has been affected by environmental control, orange warning and financial pressures, coupled with the arrival of rain and snow and low temperature weather, entering the winter construction period, some mixing plants have stopped operating, and the utilization rate of concrete capacity has declined.
Since cement is one of the main raw materials for concrete production, the capacity utilization rate of concrete reflects the demand of a part of the cement market. According to the monitoring of the centennial construction network, as of December 30, 2021, the capacity utilization rate of concrete in Hunan was 15.64%, and the average concrete capacity utilization rate for the whole year was 15.78%, which was 39.84% lower than the average capacity utilization rate (26.23%) in 2020. It can be seen that the demand for cement in concrete production in Hunan in 2021 is not as good as last year.
3.2 Investment in infrastructure and housing construction grew steadily
According to data from the National Bureau of Statistics, from January to November, the fixed assets in Hunan increased by 8.4% year-on-year, higher than the national 3.2%; taking January to November 2019 as the base period, the average growth rate of the two years was 7.8%, showing a stable growth trend. From January to November, the real estate development investment in Hunan region was 493.189 billion yuan, although the growth rate fell by 1.1% compared with 1-10 months this year, but it increased by 12.7% year-on-year, compared with 23.1% from January to November 2019, and the real estate development investment grew steadily, of which the funds in place for real estate development enterprises were 598.052 billion yuan, an increase of 9.6%; but the growth rate of commercial housing sales fell, From January to November, the sales area of commercial housing in Hunan was 78.5268 million square meters, down 0.6% year-on-year.
In 2021, the growth rate of infrastructure and housing investment in Hunan Province will slow down, mainly affected by macro-monetary regulation, the rise of raw materials for bulk commodities, and the imbalance between supply and demand in the market. Construction projects in some areas of Hunan are affected by it, the financial pressure is generally large, the market demand is generally poor, and more projects are facing the situation of suspension and suspension of production. But at present, the growth rate of housing infrastructure investment in Hunan Province still maintains a positive growth trend, this year, Hunan Province passed the "Hunan Province "14th Five-Year" Transportation Development Plan (Highway, Waterway)", "Planning" pointed out that will invest about 300 billion yuan in highways, to achieve a total construction scale of 3135 kilometers, to ensure that the mileage of 9000 kilometers in 2025, to achieve "counties and counties have high-speed", the construction of these projects or will play a role in supporting the demand for the cement market. Therefore, it is expected that the overall demand for cement market in Hunan will maintain a steady and slow growth trend in 2022.
Fourth, the outlook of Hunan cement industry in 2022
The following is the analysis of the outlook of some enterprise leaders on the cement industry in Hunan in 2022:
A enterprise: After the rain and snow at the end of December, cement shipments were worse than in the previous period, the current shipment volume averaged less than 5,000 tons, and many commercial mixed stations issued notices to stop work and stop production. Hunan Province has not yet released a document on the staggered peak shutdown in 2022, but according to past experience, the peak in the first quarter is basically not less than 35 days.
Enterprise B: The daily shipments in December were slightly better than in November, mainly due to the high price of cement in November, which directly led to poor market demand. Moreover, it is currently in the stage of price reduction and rush period sweeping, and the market demand has only slightly increased. It is expected that the government will continue to invest in infrastructure projects such as highways in the coming year, when the demand will increase; but the development and start of real estate projects are still relatively poor, such as the improper operation of funds of construction units such as Evergrande, which will also affect the demand for cement.
C enterprise: From the perspective of demand, taking Loudi as an example, it is expected that the demand for cement will gradually decline. First of all, the progress of rural revitalization has entered the end, rural demand is getting lower and lower, the government's control over rural housing construction is becoming more and more stringent, which directly leads to the decline in demand for housing; secondly, from the perspective of real estate, the regulatory authorities have introduced "three red lines", Evergrande and other construction units are facing difficulties, which also affects the real estate development of the entire Loudi, which is embodied in the overall demand for cement in Loudi New Area is less than 700,000 tons; and from the perspective of infrastructure construction, the key project of the entire Loudi is Lilou Expressway, and one-third of the lots are related to Loudi. Many airport construction has yet to be implemented, and the development of infrastructure construction will certainly increase the demand for cement, but the effect is not optimistic. Finally, from the perspective of Loudi twin engines (construction machinery and supporting industries and new steel materials industry), each region is insufficient. According to estimates, the comprehensive cement demand in Loudi as a whole fell by about 8% year-on-year, of which the largest reduction was in the rural market, with a decline of 13%. The demand for the engineering market has increased slightly, about 5%. From the perspective of capacity supply, the Hunan market has added a number of cement production lines, cement production or will increase, while the flow of foreign cement has formed a fixed logistics channel and customer group, resulting in fierce market competition and increased contradictions. However, demand is decreasing, and if the industry cannot continue to strengthen mandatory measures such as staggered peak production in the coming year, the cement industry in Hunan will become more and more difficult.
5. Summary
In 2022, the price of bulk raw materials will be regulated by macro policies and tend to run smoothly, but due to the impact of policies such as limited electricity production and production limitation, the tightening of cement supply in Hunan may be reflected from time to time. In addition, it is difficult to increase investment in housing construction projects in the short term, and the boost to cement demand is limited. And Hunan local enterprises still need to rely on the strict implementation of staggered peak production to achieve industry stability. Therefore, the supply of Hunan cement in 2022 will be slightly compressed, and the market demand is still not optimistic, so it is expected that the price of Hunan cement in 2022 will show a downward trend of shock.