Since the second quarter of last year, raw material prices have risen sharply, and this upward trend has continued into the first half of this year. As a result, industrial enterprises have seen a significant boost in profits, leading to increased willingness to produce and invest, and the economy has shown clear signs of recovery. However, starting from the second quarter, prices for some bulk raw materials have begun to decline, and the pace of price increases has slowed down for most types. In particular, toward the end of the first half of the year, there was a sharp drop and correction in prices. Many institutions predict that the economic and industrial trends in the second half of the year will continue the downward trajectory observed at the end of the first half.

The first half of the year saw continued price increases, with rising costs being the primary driving force.

In the first half of the year, the price of commercial concrete did not show any signs of decline; instead, it continued the upward trend that began in the second half of last year, reaching new highs. Looking at the monthly trends, from January to mid-March, the average nationwide price of commercial concrete remained relatively stable. Starting from the second half of March, prices began to surge sharply, but by the end of June, the upward momentum gradually weakened, suggesting a possible ceiling effect. At the end of June, the national average price of commercial concrete (C30) stood at 325 yuan per cubic meter, up 17 yuan per cubic meter year-on-year. The overall average price for the first half of the year was 314 yuan per cubic meter, an increase of 23 yuan per cubic meter compared to the previous year.

Figure 1: Trend of Average National Price for Commercial Concrete (C30, Yuan/cubic meter) in 2016 and H1 2017

Data source: China National Building Materials Academy

From the perspective of contributing factors, the price trend of commercial concrete is primarily influenced by changes in the prices of raw materials at the cost end. In the second half of last year, due to the combined impact of multiple factors, concrete companies experienced a significant increase in costs, prompting most concrete enterprises across the country to raise their selling prices. In the first half of this year, while some costs have stabilized at high levels, raw material costs continue to rise—particularly in April and May, when the prices of sand, gravel, and aggregates surged dramatically, leading concrete companies to raise their prices once again. In June, as raw material prices encountered seasonal stagnation during the off-season and sand and gravel aggregate prices began to show signs of decline, concrete prices stabilized at relatively high levels.

From 2016 to 2017, concrete prices experienced relatively frequent fluctuations, a marked departure from the “steadfast” price trend observed in previous years. Looking at historical trends, compared with cement prices, concrete prices remained relatively stable at relatively high levels throughout 2014, even as cement prices continued to decline. It wasn't until the second half of 2015—when cumulative cement price declines reached 30 percentage points—that concrete prices began to plummet sharply. Subsequently, as cement prices continued to fall, concrete prices first stabilized and then started declining gradually. Starting from the second half of 2016, concrete prices became more responsive to changes in cement prices, and by the first half of 2017, concrete prices had begun to rise in tandem with the increase in cement prices.

Figure 2: Trends in Concrete Prices and Cement Price Index from 2014 to Present (yuan/cubic meter, %)

Data sources: China Cement Network, China National Cement Research Institute

East China and Northwest China recorded the largest cumulative increases in the first half of the year, while the average price in Northeast China declined year-on-year in the first half.

Looking at regional breakdowns, with the exception of the Northeast region, the other five major regions saw a noticeable increase in prices during the second half of last year. In the first half of this year, concrete prices remained stable at high levels during the first two months of the first quarter across all six regions. In the second half of March, the Northwest, East China, North China, and Southwest regions experienced price increases, while the Central-South and Northeast regions began to see rising prices again by April. In terms of cumulative price increases for the first half of the year, East China recorded the largest gain, nearing 30 yuan per cubic meter; followed by the Northwest region, with a cumulative increase of 26 yuan per cubic meter. The Northeast and North China regions saw cumulative increases ranging from 12 to 15 yuan per cubic meter, while the Southwest and Central-South regions had the lowest cumulative increases, at 8 yuan and 2 yuan per cubic meter, respectively.

In the first half of the year, the average prices in the six major regions showed year-on-year increases in five of them, with only the Northeast region experiencing a decline compared to the same period last year. Among these, the North China, Central-South, and Southwest regions saw average price increases of more than 30 yuan per cubic meter year-on-year; the East China and Northwest regions recorded year-on-year increases of around 15 yuan per cubic meter, while the Northeast region saw a year-on-year decrease of 14 yuan per cubic meter.

Figure 3: Price Trends for Commercial Concrete in Six Major Regions (C30, Yuan/cubic meter)

Data source: China National Building Materials Academy

In the second half of the year, there will be a trend of steady growth with continued upward momentum.

At the end of June, cement prices on the cost side showed a slight downward trend, while sand and gravel aggregate prices exhibited pronounced regional differences. In northern regions, prices continued to rise, whereas in South China, sand and gravel prices declined. Meanwhile, prices along the Yangtze River basin kept climbing. In early July, cement prices also showed diverging trends across different regions: prices fell in North China, Northeast China, and East China, while prices rose again in Central-South China, Southwest China, and Northwest China.

Since current concrete price trends are synchronized with changes in cost-side prices, we can assess the outlook for concrete prices in the second half of the year by examining the trend of cost-side price changes. During the hot summer months, cement sales typically enter a slow season, so it’s only natural that cement prices experience a slight decline. In early July, some regional cement companies announced price increases during this off-season; however, as the third quarter begins and the off-season comes to an end, regions where cement prices had previously fallen may once again halt their downward trend and start to rebound.

In the sand and gravel aggregate industry, there is no trend of weakening in sand and gravel mining or environmental inspections in the second half of the year. The price declines observed in some regions in June were mainly due to a drop in demand; once demand recovers, sand and gravel prices could once again start trending upward.

In early July, some regions in northwest China saw several commercial concrete companies issue notices of supply disruptions due to rising raw material prices, creating an opportunity for concrete prices to increase. As is well known, concrete companies have lower profit margins along the industrial chain compared to cement companies. Therefore, “resisting” the rise in raw material costs through this approach is unlikely to be effective. Instead, passing on price increases to downstream customers may ultimately become the most viable path for these companies to alleviate their own cost pressures.