Limited power push up cement prices
Judging from the experience of the fourth quarter of 2010, power cuts will promote the elimination of backward production capacity and boost cement prices. The East China Power Grid covers Shanghai, Jiangsu, Zhejiang, Anhui, and Fujian. Fujian, Anhui, and Zhejiang, where the load of electricity usage is rising rapidly, will continue to use thermal power utilization hours for the three provinces if they are maintained for the full year according to the current utilization hours. It will reach 5288 hours, 6167 hours, and 6009 hours, which are close to the load peaks that appeared in 2005.
The country's newly installed capacity has a significant regional difference, presenting a pattern of east China, central China, and northeast and north China. Taking into account that conventional power projects require a two-year construction period, the current structural imbalance in power supply supply determines that power shortages in East China may become the norm in the next two years.
Since April, cement prices in the country have continued to rise, and regions with better performance have mainly appeared in Xinjiang, Northeast China, and East China. The prices of the Beijing-Tianjin-Hebei-Hunan region have also increased significantly. In the second quarter, the performance of listed cement companies will perform better year-on-year and quarter-on-quarter. In the East China and Central China regions since the fourth quarter of last year, the price of cement has remained at a high level since the price increase in the fourth quarter of last year. The main reason for the recent price increase is that the concentration of cement has increased the market's control of cement companies. With the arrival of the peak season of demand, there is ample momentum for companies to increase prices. .
From June to July, it is generally a small off-season for cement demand. If there is a power shortage factor, the cement price is likely to be strong. After that, it will enter the peak season for cement demand in the fourth quarter, and the upward trend of cement price fluctuations in the year will basically be formed.
Market concentration will increase
Based on the continuity of projects that have been started in 2009, from January to October 2010, the cement investment exceeded 140 billion yuan, but the accumulated year-on-year growth rate continued to slow down significantly. The southwestern region was mainly affected by the decline in cement investment growth in Sichuan and Chongqing. The year-on-year growth rate was negative. The central and southern regions are basically no longer growing. North China, northwest and northeast continue to maintain relatively high growth. The four regions in Sichuan, Hebei, Hunan, and Inner Mongolia rank among the top four in cement investment, which means that these four regions are also regions with higher new production capacity in 2010.
China is currently the largest country in cement production, and its annual output accounts for 50% of the world. However, there is a problem that the number of backward production capacity is large and the overall industrial concentration is still low.
As industry access conditions are formally implemented in 2011, further increasing industrial concentration and implementing energy-saving and emission reduction will become the main line of China's cement industry during the “Twelfth Five-Year Plan†period. The main method is to promote mergers and reorganizations and eliminate backward production capacity. The listed cement companies, especially state-owned enterprises, will benefit from the “M&A boomâ€.
At present, the overall concentration of the country is low, but leading companies have emerged in a single region. In the past three years, large enterprises have merged with local small businesses, and they have already lagged behind the gradual withdrawal of production capacity. The degree of concentration in individual regions has been greatly improved. The total market share of the ten companies has exceeded 60% (except in the Southwest region), and the coordination pricing power among large companies in the region has greatly increased.
In the context of increasing market concentration, even if there is a slight excess of regional production capacity, cement companies will increase their regional price levels by controlling production capacity and co-pricing.
Oriental Securities: optimistic about the eastern cement company
There are many good factors in the recent cement dividends. Although the increase in the previous period is relatively large, with the continuous rise in cement prices, the performance of cement listed companies is still room for upward adjustment. The overall valuation is still at a relatively low level. The performance of cement listed companies such as Conch Cement, Jiangxi Cement, and Tower and Card Group all experienced significant year-on-year growth. As cement prices have steadily increased in April, it is expected that the performance of listed companies in the second quarter will perform better year-on-year and quarter-on-quarter.
Eastern Securities is optimistic about the eastern cement companies, recommend Conch Cement, Jiangxi Cement, Tower Group and Jidong Cement. At the same time, the Xinjiang region also entered a large-scale investment implementation stage in 2011, and the cement demand showed a relatively strong trend. It is recommended that attention be paid to the Xinjiang cement stock Tianshan Stock Co., Ltd. and Qing Songsong Construction.
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