According to the Zhituo Finance APP, Guotai Haitong released a Research Report stating that it maintains a "Shareholding" rating for the Cement Industry. Previously, it likened the supply-demand contraction in the Cement Industry to a "tortoise and hare race," believing that as supply continues to shrink, the industry’s profitability can improve once demand enters the range where the decline slows. From the demand represented by Cement in March, the demand not only realized a slowdown in the decline but also achieved a positive growth of 2.5% year-on-year. The firm recommends leading companies in the Cement Industry.

The main points of Guotai Junan are as follows:

The operating rate of the grinding mills and inventory confirm the high reliability of the data, with positive growth in Cement demand in March.

From the operating rates and inventory verified by Zhuochuang, the reliability of the demand data can be confirmed: since March, the operating rates of grinding mills in East and South China have maintained positive growth, with the average operating rates from early March to April 10 being 63% and 62% respectively, which shows a significant improvement compared to 55% and 51% in the same period of 2024; along the river, clinker inventory has remained at a low level of below 40%. The firm believes there is high confidence in the positive growth of Cement demand. Since the second half of 2021, Cement demand has declined from a plateau, dropping from 2.36 billion tons in 2021 to 1.83 billion tons in 2024. The industry holds a pessimistic outlook on Cement demand, and the firm’s judgment of profit recovery is also based on a weak assumption of weak demand decline. However, in March 2025, Cement demand achieved a 2.5% year-on-year growth, with only a 1.4% decline year-on-year in Q1 2025, which is stronger than the firm’s weak demand assumption.

Infrastructure may be the key to demand growth.

From a macro perspective, the newly started construction area, construction area, and investment growth rate in Real Estate for Q1 2025 were -24.4%, -9.5%, and -9.9% respectively, indicating that Real Estate demand remains relatively weak. Infrastructure investment (excluding Electrical Utilities) accumulated a year-on-year growth of 5.8% in Q1 2025. The firm expects Infrastructure to be a core factor that supports Cement demand. From a micro perspective, the operating rate of grinding mills represented by data statistics from Zhuochuang and other sources (mostly large enterprises) better reflects demand; CONCH CEMENT's sales in the first quarter outperformed the industry with positive growth. Considering that large enterprises hold a larger share in major Infrastructure projects, the firm believes micro data can also verify that Infrastructure is the key to demand growth.

Stronger demand than assumed or conducive to the achievement of agreed off-peak days, resulting in stronger price support.

As the decline in Cement demand slows and enters the Range, industry profitability is likely to improve. It is necessary to achieve agreed off-peak days to match the cumulative optimization of the supply side with the declining demand. The industry believes that if demand decreases rapidly, it will be challenging to achieve the agreed days. Currently, weak demand lowering, or even positive month-on-month growth, will help achieve the agreed days, thereby providing stronger support for prices.

Risk warning: MMF fiscal Real Estate macro policy risks; supply-side off-peak coordination risks.