On the evening of July 13, the China Cement Association issued a letter on "policy suggestions on setting up special funds for structural adjustment of cement industry", for the provincial and municipal cement (building materials) associations to put forward policy suggestions to the competent departments of provincial governments, so as to promote the introduction and implementation of provincial special funds documents as soon as possible. Here we selected eight key contents: 1) the basic task of de capacity at the present stage: the annual utilization rate of clinker production capacity in the whole industry should reach about 80%; more than 85% of cement clinker production enterprises in various provinces and regions should make profits. Both indicators were achieved at the same time.

2) The utilization rate of the industry's production capacity should not be less than 80%. Within five years, the whole industry needs to eliminate and reduce the cement clinker production capacity by more than 390 million tons, and about 130000 employees need to be transferred or resettled.

3) It is proposed that the closed clinker production line should refer to the design capacity scale, and the average compensation per ton of clinker should not be less than 50 yuan. During the "13th five year plan" period, at least 20 billion yuan of special funds should be raised. The compensation funds are mainly used for the related expenses such as job transfer, resettlement and compensation of employees who quit enterprises with excess capacity. 4) The scope, method and standard of special fund collection: the collection object is all cement clinker production enterprises; the clinker and complete cement production line are collected according to the charge increase of not less than 0.11 yuan and 0.07 yuan per kilowatt hour respectively, and transferred to the independent account of "special fund" by the power supply department in the month after collecting the special fund, deducting 8% of the management fee.

5) If you leave early, make up more, if you leave late, make up less. 17 years ago, it withdrew from 20% of the floating average subsidy level, and after 17 years, it will give 80% of the average subsidy level.

6) More compensation for short running time and less compensation for long running time. 120% of the average subsidy level will be given to those built after 2006, and 80% of the average subsidy level will be given to those built before 2006. 7) The carbon emission quota and emission right of enterprises with capacity withdrawal can be reserved for carbon market and emission right trading. 8) All provinces and cities can refer to the collection method and standard of this special fund, but not lower than this collection standard. comment

1. Rich: the letter responds to the content of Article 19 "financial support" in the document No. 34 issued by the State Office of the people's Republic of China on promoting the steady growth of the building materials industry, adjusting the structure and increasing the efficiency: explore the joint establishment of special funds for industrial structure adjustment by large-scale backbone cement enterprises and flat glass enterprises in accordance with the principle of who benefits and who pays, which is specially used to reward and supplement the production capacity that actively exits. 2. High target: the average capacity utilization rate of the industry will be increased to 80%, and the regional concentration is expected to increase significantly. Referring to the past average profit level of the industry when the utilization rate of cement production capacity was around 80%, we expect the roe of leading enterprises to rise to more than 16%. 3. Proper measures: compulsory levy, electricity price plus increases the cost of clinker and cement by about 7 yuan and 5 yuan per ton, which is good for leading enterprises with higher technical specifications. Market oriented exit, early leave more compensation, late leave less compensation, new line more compensation, old line less compensation. The bottom line of subsidy of 50 yuan / ton is reasonable. For the production line before 2006, it is equivalent to one year's depreciation cost. However, the willingness of subsidy feedback from the grassroots is higher, even reaching 80-100 yuan / ton. 4. It is expected that the local rules will be issued, and patches will be added, such as measures to stop cheating and resuming production.

Investment advice

From the feedback of the early grassroots research, the letter reflects the willingness of the industry and grassroots associations to accelerate the supply side reform. The goal is high and the measures are appropriate. Generally speaking, it is beneficial to the leading enterprises. We believe that the probability of adoption is high, which will significantly strengthen the expectation of cement supply side reform. As judged by the medium-term strategy, in July and August, the macro environment was relatively loose, the supply side reform was accelerated, and cyclical stocks ushered in a window of opportunity. The recent rise of cement is considered to be the plate rotation after the confirmation of the rise of coal and other pre cyclical varieties. On the other hand, it is also the expectation of price increase and supply side reform in the future peak season. According to the seasonal law of this year, the next two weeks will be the time window for the cement price to reach the bottom. With the influence of Rainstorm in the early stage, the price may rise in advance. From the perspective of medium-term performance, cement also has comparative advantages. The growth rate of performance in the third quarter is expected to turn positive, and it will accelerate upward in the fourth quarter. At present, the conch is 1.2 times Pb, and its value is underestimated. We recommend conch cement, Jidong Cement, Ningxia building materials, Huaxin Cement, Qilian Mountain and Yatai group. Risk tip: local governments and associations failed to make progress in time, fraud and compensation occurred in large numbers and were difficult to supervise.