Property grip bites China's building materials

China's building material sector slowed down sharply in the first nine months of this year due to the government's tightening of the property sector, according to the latest data from the country's top economic planner.

Cement output rose 6.7 percent year on year to 1.59 billion tonnes in the January-September period, compared with 18.1 percent recorded in the same period of 2011, according to a report by the National Development and Reform Commission (NDRC) on its website.The output of flat glass fell 4 percent year on year to 5.38 billion weight boxes in the first nine months, plunging from a year-on-year increase of 17.9 percent last year, according to NDRC data.

A major consumer of cement and flat glass, the property sector is still subject to the government's tightest control measures in recent years, such as prohibition of buying third homes and higher down payment requirement.

Prices of cement and flat glass also headed toward different directions in September. Factory price of cement tumbled 18.7 percent from August to an average of 317.3 yuan (50.36 U.S. dollars) per tonne at major building material manufacturers. The wholesale price of flat glass rebounded 1.4 percent from August to 61.3 yuan per weight boxes.

At the end of September, cement inventories of major enterprises amounted to 17.57 million tonnes, compared with 10.42 percent at the end of last year end, indicating the sector was struggling with overcapacity and duplicated construction problems.

Meanwhile, flat glass continued to pile up in September, with stocks increasing 25 percent year on year to 46.62 million weight boxes, compared with 29.37 million weight boxes at the end of December 2011, according to NDRC data.

Profits of China's building materials industry retreated 9.7 percent year on year to 192.5 billion yuan in the first eight months of 2012, as cement makers posted a 53-percent decline in profits while flat glass manufacturers swung to a net loss of 870 million yuan from a profit of 2.56billion yuan in the same period of last year.

600450 Property grip bites China's building materials
Date: 7 November 2012

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