Electricity shortage has limited impact on cement market prices in East China

Since April, there has been a rare off-season “electricity shortage” phenomenon in the eastern coastal areas, and power-consumption and electricity-receiving measures have been adopted in various places. This has also led most cement industry professionals to expect higher cement prices in East China.

However, from the tracking of the situation in the past two months, prices in most provinces have remained stable, and prices in Jiangxi and Fujian provinces have only risen. According to statistics, from April to May, the cement prices in Jiangxi and Fujian provinces were directly or indirectly affected by the “electricity shortage”. The cumulative increase was 80 yuan/ton, and the current market price was 480-520 yuan/ton, which was higher after the increase. The price was basically the same as Jiangsu, Zhejiang and Shanghai, and it met the previous judgment.

Although power cuts have not been able to continue to push the price of cement in East China sharply higher, they have enabled companies to maintain more reasonable inventory levels. According to the survey, the stocks of cement and clinker in East China are currently low, which is basically around 60%, and some big companies are even less than 50%. As a rule, the price of cement stocks below 50% should have been raised, but the dominant companies have chosen to stabilize prices.

Industry analysts believe that the first consideration is the entry of foreign clinker. Taking Jiangsu Province as an example, more than a dozen companies in Jiangsu Province suspended electricity in April, and the output of clinker was 4.25 million tons, which was 2 million tons less than the same period of last year, and cement output was 15 million tons, which was the same as last year. In other words, the supply of clinker in Jiangsu Province was reduced by 2 million tons under the kiln shutdown situation of the leading enterprises, and the cement price was successfully maintained. However, the actual usage of clinker was not reduced, but was only supplemented by imported clinker. Therefore, it is not worthwhile for companies to pursue high prices and reduce production.

Second, in the second half of the year, some production capacity will be released in central China. At this stage, the price stability will be more ideal, and it will also provide space for the release of new production capacity.

Third, the current price has reached the goal of many companies.

On the whole, the performance of cement prices in East China after the first half of the season was still very prominent. According to industry analysts, in the coming months, with the peak of summer electricity consumption, the use of electricity by cement companies is limited, but the impact on the price of cement in East China will remain limited. June-July is an off-season demand for cement. During this period, the supply and demand of cement in the region will be simultaneously reduced and basically balanced. In addition, taking into account the effects of macro-control policies, the cement demand in the 3rd and 4th quarters may have uncertain decline. In the second half of the year, the East China region will face even more severe challenges. It is very optimistic that prices will rise sharply and are unlikely to continue to maintain stability.