Cement companies in China experienced major gains in the last month of 2010 on speculation of government plans to build 10 million low-cost apartments in 2011. This development would mark a 72%increase on 2010 numbers according to Xinhua. The additional construction would push up the need for cement and providers across China are working to meet demand. China Shuangji Cement Ltd. (OTCBB:CSGJ), a leading producer of high-quality Portland cement in Shandong and Hainan Provinces is among the companies looking to capitalize on the expanding market, building a larger facility to ramp up production and increase profit potential.
In mid-December, the company announced that it has begun the permit process to build a new cement plant on Hainan Island to replace its existing Dongfang production line. China Shuangji's new state-of-the-art cement factory will have an annual production capacity that is 4 times greater than its existing Dongfang cement plant. Once operating at full capacity, the company expects the new Zhaoyuan City cement facility to increase its production capacity by approximately 66% to 2 500,000 MT per year. As a result, the company expects that its revenue run rate and profit will be approximately 66% higher than it is currently.
China is experience unprecedented urbanization with hundreds of millions of people migrating to metropolitan areas.
To cope with the colossal population influx, a city like Beijing may need to invest as much as $3.6 trillion in urban infrastructure by 2020 according to state media. Cities across China are experiencing growth of similar magnitude and well positioned cement companies with reap the benefits.
Already cement demand is at 1.3 billion metric tons and with economic growth of 10% in 2010 and with conservative predictions between 9-9.7% growth for 2011 according to Bloomberg, the number will continue to rise. China is now the world’s second largest economy and the number one consumer of cement.
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