China’s cement inventory declined after climbing for 13 consecutive weeks amid signs of recovery in real estate, infrastructure

 

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China’s cement inventories declined significantly in the last week of July after climbing for 13 consecutive weeks amid recovery in real estate activities and step-up in infrastructure construction.

Cement inventory ratio stood at 72.69% in the week of July 25 – 31, falling by 1.88 percentage points from the previous week, according to data from the China Cement Association.

Generally speaking, cement inventory ratio declines in spring and autumn. This year, driven by restocking on expectation of pick-up in infrastructure investment, cement inventories rose at the start of the year and in the second quarter, inventories climbed further due to Covid outbreaks’ disruptions to infrastructure constructions. In the week of July 11 – 17, cement inventory ratio reached 75%, marking the highest level since January 2016.

At the end of July, as the energy-intensive cement industry adopted off-peak production and demand from the real estate sector and infrastructure construction improved, cement inventories finally started to decline, said industry insiders.

The official Purchasing Managers’ Index (PMI) for construction activities hit 59.2% in July, rising by 2.6 percentage points from the previous month, picking up for the second consecutive month, according to data from the National Bureau of Statistics (NBS).

The pickup was partly due to acceleration in infrastructure construction, said Wang Tao, chief China economist at UBS.

Analysts noted that, unlike the previous rounds of infrastructure push which focused on traditional projects such as railway and highway construction, this round includes some new infrastructure projects such as wind power and soar power, which means that cement demand from infrastructure is not as strong as before.

In the real estate sector, while new construction starts contracted further in July and home sales remained sluggish, sales in the last few days of the month showed signs of pickup and the latest round of land auctions in Shanghai also posted stronger performance, they said.

In addition, the Politburo, the top decision-making body of the China Communist Party, has called for ensuring home delivery amid the widespread home mortgage boycott, which analysts believe will help boost property project completion.