Cement prices fell 0.7% nationwide in the week through February 16 due to a 2.8% decline in eastern China. Prices in all other regions were largely flat. Nationwide cement inventory level rose to 71.6% of full from 67% due to weaker demand in the eastern and south-central regions.
China's State Council is expected to release specific measures to stimulate cement industry consolidation. HSBC anticipated that the measures would be focused on three problems. The first is the lack of financing channels; the government may strengthen financing support for the shakeup, including bank loans and equity placement or bond issuance from secondary market. The second is inefficient approval process which the government may simplify, especially for cross-region deals. The third is heavy tax burden; the government may offer tax breaks to mergers and acquisitions in the industry.
Higher selling prices (forecast to be up 10% in 2014 and 5% in 2015) and structurally lower coal costs will drive an accelerated improvement in China's cement industry profitability, despite higher environmental standards, HSBC said. HSBC forecast the earnings of China's cement sector to grow at a compound annual growth rate of 35% in 2014 and 2015.
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