Cement prices to rally thanks to booming property market

Chinese cement prices are predicted to rebound strongly in the remaining three months of the year, say analysts, thanks to surging domestic home prices, which have also boosted the share prices of cement manufacturers listed in the mainland and in Hong Kong.

Surging mortgage loans have pushed up the average home prices in China’s four first-tier cities by over 30 per cent so far this year, and the momentum could continue well into the fourth quarter and the first half of next year, Jefferies analysts Po Wei and Howard Lau wrote in a research report.

Most domestic property developers are now accelerating their construction activities to take advantage of the increase in sales, and that in turn should help support construction demand in the second half of this year, although growth should be slower than in the first half, the report said.

Jefferies expects construction demand in the second half to rise 2 per cent year on year, lower than the 5 per cent year on year growth in the first six months.

Demand for cement in the second half will be largely reflected in the fourth quarter after floods in July and August disrupted most building activity, Jefferies said.

“We expect the seasonal rebound in demand to drive up cement prices strongly in core regions. Due to the low base effect...the cement price has risen by more than 10 per cent over the past month in east China,” it said.