Real estate for 3 consecutive months negative growth building materials trapped in the industry overcapacity.

China Paint Network
: the latest data from the
National Bureau of Statistics show that from January to October this year, real estate development investment grew by 2% year-on-year in nominal terms, a 19-month decline, and again became the worst investment data China has experienced since the housing reform in 1998, compared with more than 20% two years ago. This change, but also to its upstream and downstream industries directly affected by the building materials industry as a stick, the industry's original rapid expansion of the situation quickly disappeared, and even the phenomenon can only rely on "affordable" to survive. Root cause: Real estate investment for the first time in three consecutive months negative growth
real estate after years of high-snrocking to open a long-term inventory status, which in turn led to a sharp decline in new investment. The change has hit its biggest affiliate, the building materials industry, hard.
the latest data from the BoDSC, real estate development investment grew at a monthly rate of -2.4% in October, the third consecutive month of negative growth after a growth rate of -1.1% in August and -3.1% in September. In addition, the monthly growth rate of new housing construction area in addition to September's "flash in the pan", fell below zero again in October, year-on-year growth rate of -24.5%, the cumulative growth rate is from 2014 after the whole negative growth. "Investment grew at a negative rate for the third month in a row for the first time since 2009." An industry insider said that real estate is facing a long-term state of inventory, such as Tieling to inventory cycle of up to eight years, this is only the beginning of the negative pull of real estate investment. Indeed, the latest figures from the Institute show that more than half of the 50 cities monitored have a inventory-dification cycle of more than 12 months. Among them, the North Sea inventory cycle as high as 30.1 months, Yantai 26.4 months, Jingmen 25.5 months, Hohhot 24.9 months, Sanya 23 months. The main reason for the huge inventory is the disorderly development of local construction expansion in the past ten years. However, the demand for housing is limited. According to the 2015 China Resident Financial Competence Report Survey, China's household property ownership rate reached 83.43 percent, with 40.07 percent of households owning more than two properties, of which 52.07 percent accounted for more than half of the total assets of households, and 16.19 percent accounted for more than 80 percent of households. The reality of inventory backlogs means that investment is still difficult to pick up in the short term. And the real estate industry is linked to investment, one end to consumption, therefore, the decline in real estate investment led to a large number of expansion of the building materials industry into the industry-wide overcapacity.
s dilemma building materials trapped in the industry overcapacity
Hengyang is a small town in Hunan, but has nearly 100 cement enterprises and cement products enterprises, annual production capacity of 16 million tons. However, as the economy slows and demand declines, Hengyang's annual demand is no more than 8m tonnes, with serious overcapacity. Hengyang Cement's plight is only a microcosm of the building materials industry. In the ceramics industry, for example, the proportion of overcapacity is as high as 40%. Since 2015, 12 pottery companies in the Pearl River Delta region have closed down. In addition, real estate accounted for 75% of the flat glass industry, there have been large-scale losses. "The sharp decline in the building materials industry is not just affected by the real estate sector, but the weakness of the property market is a direct factor in its decline." Industry insiders say.
indeed, the building materials industry, which grew significantly in the first three quarters of 2014, has been in a sharp decline since the fourth quarter, much like the real estate sector. WIND data show that wind three-tier industry building materials 48 listed enterprises, the first three quarters of 2014 operating income of 51.9 billion yuan, 128.4 billion yuan, 203.7 billion yuan, respectively, up 18.95 percent, 9.93 6.92%, and net profit was RMB3,011 million, RMB11,615 million and RMB17.8 billion, respectively, up 398.86 percent, 53.51 percent and 30.28 percent year-on-year, respectively. However, the 2014 annual report showed that operating income and net profit grew by only 1.93% and -3.88%. At the same time, in the first quarter of 2015, operating income and net profit growth slowed sharply to -11.71% and -72.25%. "The rapid growth of the past few years has resulted in an early overdraft of building materials." Industry insiders pointed out that in the past decade, China's infrastructure and real estate industry has developed rapidly, prompting the provision of important basic raw materials building materials industry has been a leap forward in development. But as a result, demand is overdrafted ahead of schedule, and the building materials industry faces severe overcapacity. The result of excess capacity is a sharp drop in profits and even widespread losses. In cement, for example, the cement industry was profitable a few years ago when the steel industry was losing money across the scale, the people said. But in 2015, the cement industry began to repeat the steel industry's mistakes, profits fell sharply, and even some areas opened the "see who can afford" competition. Data show that in the first three quarters, nearly half of cement and flat glass enterprises lost money, cement loss-making enterprises lost up to 17 billion yuan, flat glass loss-making enterprises lost 3 billion yuan. More seriously, although half of the current cement and flat glass industries maintain small profits, the reality is that many of them are in a state of hidden losses. Kong Xiangzhong, executive vice president and secretary-general of the China Cement Association, said cement prices have continued to decline so far this year, with the average factory price of GM cement falling 10 percent in the first three quarters from a year earlier. Average monthly factory prices for GM cement hit their lowest level since the 2008 financial crisis in September. The report issued by the China Building Materials Federation at a symposium of the heads of some trade associations under the State Council pointed out that since March 2012, the factory price index of industrial producers nationwide has declined for 40 consecutive months year-on-year, and the current factory price of industrial products in China is only equivalent to the 2007 level. It is worth noting that after the second quarter of this year, cement, flat glass prices fell below the industry average cost line, the price has lost the lever function to adjust the balance between supply and demand. Qiao Longde, president of the China Building Materials Federation, said that some cement and flat glass production enterprises do not hesitate to sell their products at below-cost prices, mainly in order to withdraw some of the product funds in the face of shrinking market demand, fearing that the flow of capital to enterprises is interrupted, endangering the production and operation of enterprises. "However, this kind of thirst-quenching helpless action, not only caused a substantial decline in sales revenue and earnings, but also can not fundamentally solve the problem of corporate capital flow, but will push the enterprise into the business activities of cash income reduction, the bank to lend the embarrassing situation." Joe Longde said. Challenge: Resolving capacity as the number one priority
"Although overcapacity has existed for many years, this year the situation is particularly serious." Qiao Longde said that some industries that have overcapacity are still adding new capacity, resulting in an irregular state of market competition, not only building materials industry-wide economic operation appeared under pressure, but also the extent of serious economic decline far beyond the economic operation of the degree of downward pressure, to the development of the industry brought a huge impact. Many enterprises are still wandering in confusion or at a low level, blindly waiting to rely on external pull to change the status quo. Kong Xiangzhong also pointed out that the resource environment, so that the building materials industry is facing unprecedented resource and environmental pressure and challenges. At the same time, labor, land, fuel power and other prices continue to rise, factors of production cost pressure increased, building materials industry economic operation is facing the most severe difficult situation in recent years. Therefore, to contain and reverse the current decline in the price and economic benefits of building materials products, is to achieve this year's building materials industry smooth operation of the urgent need and the first task. In this regard, Joe Longde pointed out that since last year, regional organizations held more than 20 symposiums and forums to curb new production capacity, cement enterprises and glass enterprises jointly issued an initiative to the building materials industry, committed not to add new capacity. In addition, it will further promote the production of the wrong peak kiln, promote energy conservation and emission reduction, and alleviate the contradiction between supply and demand. "The transformation and upgrading of enterprises themselves, mergers and reorganizations are also important ways to dissolve production capacity.
" Qiao Longde said, will speed up the application for the further elimination of backward cement production capacity policy measures, and the cement, flat glass, construction sanitary ceramics industry merger and reorganization related policies.
addition, Joe Longde believes that it is possible to break through the existing merger and reorganization model, change one-on-one negotiations, and gradually develop a guide to the directory, clear directional destination and orientation directory. Can be changed into a whole acquisition into mutual shareholding. Using mixed ownership system, try enterprises in the same region, set up a new company in accordance with the capital to operate unifiedly, organize the wrong peak production, and try to share profits with the production-limiting enterprises and production and operation enterprises in the same region. "To 'go out' as an important support for adjusting the structure and changing the way of development," said Joe Longde, the implementation of the country's "Belt and Road" policy, for the industry's advanced technology and equipment and efficient production capacity "going out" to create opportunities and conditions, building materials industry should make full use of national policies and foreign market resources, give full play to China's building materials industry technology, equipment, science and technology advantages, expand new development space.