Concrete scandal weighs on listed cement majors
Big mainland cement firms took a hit on the Hong Kong stock exchange yesterday, following news of a construction scandal in Shenzhen and a possible central government investigation into alleged cartel pricing.
Work was suspended on several property projects in Shenzhen - including what was to be the country's tallest tower, the 660-metre Ping An International Finance Centre - after China Central Television reported that the quality of concrete used in these projects was compromised by cheap, untreated sea sand.
The city's Housing and Construction Bureau punished 31 concrete companies, including two wholly owned subsidiaries of China Resources Cement, the Hong Kong-listed firm said yesterday.
The construction bureau ordered a one-year halt to production for one subsidiary, Shenzhen China Resources Wenwei Concrete and revoked certification for another, Shenzhen China Resources Shengcheng Concrete.
"On March 14, the Housing and Construction Bureau of Shenzhen performed tests on the sand used by Wenwei, and we regret the punishment order was published without the results of the tests being released," China Resources Cement said.
Meanwhile, Zhang Mingjing, secretary of the board of directors of Anhui Conch Cement, said the National Development and Reform Commission "has made inquiries of our company regarding pricing practices in different parts of China".
But she denied the NDRC was conducting a full-fledged investigation of the firm.
Conch and China National Building Material (CNBM) are the country's two biggest cement producers and could be affected if the commission widens its investigation to the Yangtze River Delta and northern China, according to Nomura analyst Luo Yang, who is bearish on the companies.
In Hong Kong, Conch's share price fell 1.8 per cent to HK$24.85 yesterday.
CNBM dropped 5.4 per cent to HK$10.20, and BBMG, another large cement producer, declined 9 per cent to HK$5.97. China Resources Cement fell 7.3 per cent to HK$4.32, the biggest drop in 17 months.