Due to weather conditions, cement demand has been weak, and prices have continued to fluctuate slightly downward. Data shows that last week, the national cement market price fell 0.42% week-on-week.
　　Specifically, price declines were mainly concentrated in Shanghai, Wuhan, Guangzhou, Chongqing, Urumqi and other places, with prices in different regions lowered by 10-20 yuan/ton; regions with price increases mainly included Shenyang, Jiamusi, Nanning and Kunming, where prices were generally raised by 10-20 yuan/ton.
　　Entering mid-to-late May, cement market demand across the country has performed poorly, with the overall market mainly operating weakly. Although prices in some regions have been raised, most increases rely on industry self-discipline for support. Against the backdrop of gradually weakening demand later on, prices will still continue the trend of slight fluctuations downward.
　　Last year, the industry saw both volume and price rise; the improvement trend continued in Q1 this year
　　Data shows that in 2013, real estate investment growth picked up, driving cement demand. Industry output grew by about 9.5%, with total output reaching 2.4 billion tons. Industry-wide revenue grew by 8.6%, and profit rose 16.4% year-on-year. In terms of profitability, low coal prices drove a substantial improvement in gross profit. Industry capacity investment continued to decline: in 2013, industry-wide investment fell 6.5%.
　　Industrial Securities selected A/H-share listed cement companies including Conch, Huaxin, Jiangxi, Chaodong, Shangfeng, Fujian, Sichuan Shuangma, Tapai Group, Tongli, Jidong, Qilianshan, Ningxia Building Materials, Tianshan, CNBM, China Resources Cement, Shanshui Cement, Western Cement, China Tianrui Cement, Asia Cement, and Taiwan Cement as sample companies for statistics.
　　The results show that in Q1 this year, sample companies' revenue growth was relatively good, reaching about 19%; profitability continued to improve, with the sample companies' gross margin at about 26.6%, up about 6.8 percentage points year-on-year, reaching the second-highest level in nearly five years; the net margin was 6.5%, up 4.7 percentage points year-on-year, reaching the highest level for the same period since 2012. In addition, the increase in sample companies' investment expenditure continued to shrink, and debt pressure continued to ease. In Q1, sample companies' net cash outflow from investing activities was about 7.3 billion yuan, down about 26% year-on-year.
　　Cement's comparative advantage in cyclical industries will continue; the northwest region deserves attention
　　Industrial Securities' research report states that over the past year, cement price trends and industry operating profitability have both been stronger than those of steel and coal. Cement's regional monopoly characteristics and low inventory features are conducive to the establishment and maintenance of coordination. In addition, cement has strong control over new supply and the phasing out of outdated capacity. It is expected that new capacity in 2014 will be about 60-80 million tons, with growth continuing to decline.
　　In addition, the demand side of cement in the northwest has strong policy support (such as the new "Silk Road" economic belt and aid construction plans, etc.). After the last wave of large-scale capacity release in 2014, the price recovery curve may be relatively steep.