CEMENT：CEMENT PRICES REMAINED SOLID BEFORE THE NATIONAL DAY

The average cement price （nationwide） increased 1.2% to RMB426/tonne last week.

    Coal prices remained stable last week.

    CNBM and Tongli Cement proposed forming a JV in Henan.

    Cement stocks under our coverage dropped 1.50% on average last week.

    Overview of last week

    The average cement price （nationwide） rose by 1.2% to RMB426/tonne compared withthe price in the previous week. There was an increase in cement prices of RMB20–50/tonne in east China and south China. In Hunan, there was an increase in cementprices of RMB30–50/tonne. In late September, the cement price continued to climb. In theBeijing–Tianjin–Hebei region, cement prices remained stable, while both supply anddemand were at a low level because of the upcoming National Day holiday. For east andsouth China, the shipment level was stable, and cement prices remained at a high level.

    During the National Day holiday, cement prices are expected to remain stable thanks tothe low inventory level. The uptrend in cement prices should remain intact after theNational Day holiday. The average inventory level （nationwide） decreased from 54.31%to 52.94% last week.

    Coal prices remained unchanged last week

    The comprehensive average price index for Bohai-Rim Steam Coal （Q5500K） remainedat RMB578/tonne last week. The index increased 1.58% on a year-on-year basis.

    CNBM and Tongli Cement aim to strengthen control in HenanLast week, China United Cement （a wholly-owned subsidiary of CNBM [3323.HK; ADD]）and Henan Investment Group （the controlling shareholder of Tongli Cement） proposedforming a JV in Henan. The registered capital is about Rmb9.2bn, with 60% contributedby China United Cement and the balance contributed by Henan Investment Group. Oncethe formation of the JV is completed, China United Cement and Tongli Cement will haveabout a 30% market share in Henan. Including Tianrui Cement [1252.HK; NR], weestimate these three players will have about a 50% market share in Henan in terms ofclinker capacity. This should bode well for cement prices in Henan, thanks to highermarket concentration.

    Cement stocks under coverage declined 1.50% on average lastweek

    The share price of best-performer Conch Cement [0914.CH; ADD] rose 0.5% last week.

    BBMG [2009.HK; ADD], the weakest among our coverage stocks, dropped 3.0% week onweek.