Since July last year, home sales in China have continued to decline. In the first seven months of the year, home sales in the country reached only 900 billion yuan (about 129 billion USD), 30% lower than the same period a year earlier.
Gary Ng, senior economist at Natixis CIB (Asia Pacific) said that it was difficult for China to recover quickly in the second half of 2022 in the real estate sector. That situation would continue to cause obstacles to China's economic growth.
The drop in cement is indicative of a growing spillover effect on other industries that benefited from the previous construction boom. Official data shows that new constructions in China have fallen by more than 40% annually every month since April.
In recent years, we have seen a construction boom in China. Cement companies expected that they would soon be trading cement for these large infrastructure projects, Mr. Riley said. But then, the combination of the real estate crisis and China's zero Covid policy really dealt a blow to business.
Stocks of China's major cement producers were accordingly severely affected. Anhui Conch Cement and China Resources Cement, two of the country's largest companies, have seen shares listed on the Hong Kong Stock Exchange fall for the third time since the beginning of the year.
Other commodities such as iron ore - the raw material for steel production - were also affected by weakness in China's real estate sector. Maike Metals International, a major importer of refined copper, said it was selling off assets to survive a liquidity crunch caused by real estate problems.
Beijing has responded in recent months by announcing a series of actions to boost the economy and the real estate sector, including stimulus packages worth tens of billions of dollars.
Share prices of China's largest cement companies continuously plunge (Source: Bloomberg)
Regarding domestic situation, Vietnam cement industry is in a situation of oversupply when the production capacity far exceeds the domestic market demand and there is a shortage of large-scale cement factories. In recent months, the cement export channel has continuously declined, domestic consumption has almost stagnated, while production costs have increased too high, posing a great threat to the operation of many cement factories.
Currently, the price of input materials for cement production such as coal and freight rates has increased sharply. Meanwhile, consumption of this item slows down, large inventories make cement producers face fierce competitive pressure on prices.
According to the Vietnam Cement Association, inventory is a big concern of many cement businesses today and a big challenge for the industry in the last months of 2022.
It is forecasted that from now until the end of the year, cement export volume will continue to decline. Accordingly, the decline in the export channel may increase competitive pressure in the domestic market. China and the Philippines are the two main import markets of cement, clinker has reduced imports from Vietnam, leading to a sharp decline in recent months.
(Source: ximang.vn)
