A-Share Non-metallic Building Materials:Comments on Demand Data for the Cement Industry in 10M15

Cement output down 4.6% YoY in 10M15

In 10M15, China’s cement output was 1.95 billion tons, down 4.6%YoY. In October 2015, China’s cement output was 225 million tons,down 3.5% YoY or up 3.4% MoM. In 10M15, decline in cumulativegrowth rate narrowed as compared with 9M15, but overall cementdemand has been weak since September 2014.

China’s economic growth still weak in 10M15

In 10M15, China’s urban fixed asset investment (FAI) grew at 10.2%to Rmb44.7tn, while real estate investment grew at 2% to Rmb7.9tn.

Total planned investment for new projects was Rmb33.7tn,representing a growth rate of 4.1%. Total planned investment forconstruction projects in progress was Rmb93.8tn, representing agrowth rate of 5.3%, both of which were substantially slower than thesame period last year. Data revealed China’s economic growth stilllost steam this year, with overall demand remaining weak. FAI andproperty investment growth fell, and infrastructure investment will bethe major steady growth driver.

By sub-sectors, infrastructure investment was the steadygrowth driver amid grim property investment

Since 2013, all sub-indexes measuring the monthly growth rate ofproperty investment fluctuated significantly, which was due todevelopers’ short-term investment in view of the uncertainties orunclear of the government’s stimulus policies and market outlook. In2014, the property industry was expected to deteriorate, with all keyindicators showing negative growth. In 10M15, growth rate of newconstruction starts remained negative, pointing to developers’ aim atcash return despite improving sales given the sluggish economicgrowth, with infrastructure investment being the steady growthdriver: In 10M15, growth rate of investment for the railway andtransportation industry was 1.4%, 17.7% for road transport industry,23% for water management industry and 19.4% for public utilitiesmanagement industry, proving infrastructure investment growth wasthe “steady growth driver” of China economy.

Comments on 10M15 macroeconomic data

In 10M15, industry value added grew 5.6% YoY, showing theeconomy was under downward pressure. By sub-sectors,manufacturing and property investment looked dim, butinfrastructure investment supported the demand for cement.

Property investment fell from a year back, with monthly data pointingto short-term investment behavior.