CITIC Securities' latest research report indicates that in September, cement production reached 154 million tons, down 8.6% year-on-year (compared to a decline of 6.2% in August), marking a slight increase in the contraction rate. Going forward, attention should be paid to the industry's coordinated pricing power and the implementation of production restriction policies by cement companies in the context of supply-side anti-competition efforts.
In the steel sector, crude steel production in September was 73.49 million tons, down 4.6% year-on-year, with domestic apparent consumption of crude steel at 64.52 million tons, also down 4.4% year-on-year, indicating a widening decline in supply and demand. Recently, the industry has seen increased supply-demand weakness; the costs of raw materials have eroded profits, leading to a drop in steel prices and margins. However, the long-term improvement trend for supply and demand in the industry amidst anti-competition dynamics remains unchanged.
Key observations from CITIC Securities include:
Cement: September production saw a slight widening in year-on-year declines, while the pricing during the minor peak season saw a marginal month-on-month uplift. Cement output in September was 154 million tons, down 8.6% year-on-year (compared to a 6.2% decline in August). According to CITIC's construction team, infrastructural investment in September fell by 8.4% year-on-year, with sub-sectors such as water conservancy, environment, and public facility management experiencing a 15% slump, reflecting weak demand for cement. Against the backdrop of sustained pressure on enterprise profits during the off-peak months of July and August, various regions employed staggered production halts and coordinated price increases, yielding limited results. The national average cement price in September rose by 3 yuan to 342 yuan per ton, still below last year's 375 yuan per ton. Preliminary calculations indicate that the industry’s gross profit per ton in September decreased by around 18 yuan year-on-year. Future focus should be on the effectiveness of industry-wide coordinated price increases and the execution progress of production restriction policies in cement companies.
Recommended stocks include CONCH CEMENT (00914), CR BLDG MAT TEC (01313), and Hunan Valin Steel Co., Ltd. (000932).
Glass: Ongoing pressures on completion demand are expected to lead the industry to experience significant losses before triggering maintenance actions. From January to September 2025, housing completion area declined 15% year-on-year to 31.1 million square meters, with the number of days for float glass deep processing orders down 10% year-on-year to 10.75 days. Due to falling raw material prices (such as soda ash and coal), by the end of September, the gross profits per unit for systems using coal gas, petroleum coke, and natural gas were 7.1, 6.4, and 0.6 yuan, respectively. Most production capacities have not yet incurred cash flow losses, leading to delayed systemic maintenance, with daily melting volume for float glass maintaining a high level of 159,000 tons. Recommended stocks include XINYI GLASS (00868) and Zhuzhou Kibing Group Co.,Ltd. (601636).
Steel: Insufficient seasonal demand and weakened supply and demand have led to declining prices. September crude steel production reached 73.49 million tons, down 4.6% year-on-year, while apparent domestic consumption declined by 4.4% year-on-year to 64.52 million tons, indicating a broadening gap in supply and demand. The recent industry trends indicate weakness, with raw material prices negatively affecting profits, which has resulted in lower steel prices and profit margins. However, the long-term trend for improvement in supply and demand remains in place amidst anti-competition efforts.
Recommended focus areas include: 1) From a long-term perspective, the current valuations of core industry assets are generally at historical lows. As the profitability cycle bottoms out, there is potential for valuation recovery, particularly recommending Hunan Valin Steel Co., Ltd. (000932). 2) In the short term, adjustments to production and medium-term capacity clearance have a more significant marginal impact on rebar enterprises, recommending steel companies with higher efficiency and a greater proportion of rebar output.
Risk factors include ongoing downward pressure on demand and the risk of rising raw material prices.