On November 12, the Department of Industry and Information Technology of Shandong Province and the Department of Ecology and Environment of Shandong Province issued a notice on organizing the normalization of staggered production of cement for the years 2024-2025. The notice specifies that staggered production time shall strictly comply with the regulations of the Ministry of Industry and Information Technology and the Ministry of Ecology and Environment. Staggered production during the heating season will be from 00:00 on November 15, 2024 to 24:00 on March 15, 2025, totaling 120 days.

Provincial cement industry associations can, according to the actual market supply and demand situation, autonomously negotiate within the industry, appropriately increase the number of staggered production days during the non-heating season to the maximum extent to adjust the supply-demand contradiction, alleviate inventory pressure, enhance industry efficiency, and implement it through industry self-discipline.

In the first three quarters of this year, the national cement market capacity utilization rate has significantly decreased.

The China Cement Association expects that in the first three quarters, the total profit of the cement industry will decrease by about 65% year-on-year, with the industry's sales profit margin falling to below 2%.

However, the cement industry is expected to usher in a turning point of simultaneous increase in quantity and price in the fourth quarter.

"Although the performance in the first three quarters was poor, the cement industry is still expected to achieve a performance rebound in the later period through policy adjustments, improvement in market demand, and other factors."

The CEO of Number Cement Net, Chen Bailing, believes that with the gradual improvement of the macroeconomic environment, the cement industry is expected to see a positive transformation of rising volume and prices in the fourth quarter.

"This trend is mainly attributed to the increased policy support at the national level, the introduction of a series of incremental policy measures, and the accelerated issuance of special bonds to alleviate financial constraints, which will effectively increase the start-up rate of downstream engineering projects and slow down the declining trend of cement demand."

Guolian Securities released a research report stating that against the background of a significant year-on-year increase in industry profit pressure in 2024H1, most regions in 2024Q3 continue to increase the staggered production of cement, the industry's supply and demand situation is gradually improving, cement prices continue to rise slightly, showing a certain characteristic of "off-season not light", and industry profits have improved both year-on-year and quarter-on-quarter. Currently, the profitability of the cement industry may be at historically low levels, while the valuations of major cement companies are also at historical lows. It is recommended to pay more attention to positive changes in various aspects of policies, industries, and companies. In terms of investment targets, it is suggested to focus on cement industry leaders with scale advantages, technological advantages, and regional market leadership, especially those representing central state-owned enterprises.

Cement-related Hong Kong stocks include:

Conch Cement (00914), CR Building Material Technology (01313), Asia Cement (00743), West China Cement (02233), China National Building Material (03323), etc.