China Cement Weekly:Cement Prices Remained Strong Last Week;CNBM/SINOMA Merger Entered the Final Stage

National cement prices remained strong last week. The average cementprice (nationwide) increased 2.4% week on week to RMB366/tonne last week.

    Cement prices in some parts of Hebei, Shanxi, Shanghai, Jiangsu, Anhui,Henan, Shandong, Chongqing and Gansu went up by RMB20-70/tonne. Thetight supply of cement and clinker continued to drive prices higher. In certainregions of Henan, Shandong and northern Jiangsu, cement prices exceededRMB500/tonne. The average inventory level (nationwide) was down furtherto 54.44%.

    Coal prices continued to drop slightly. The comprehensive average priceindex for Bohai-Rim Steam Coal (Q5500K) dropped RMB1/tonne to RMB576/tonne last week. The index was down 4.1% on a year-on-year (YoY) basis.

    SASAC approved the merger between CNBM and SINOMA. Last week, theState-owned Assets Supervision and Administration Commission (SASAC)officially agreed to the merger between CNBM [3323.HK; BUY] and SINOMA[1893.HK; NOT RATED]. The next important date will be December 6. SINOMAwill hold an EGM on that day to seek shareholders’ approval for the merger.

    Based on the latest price of CNBM, the implied offer price to SINOMAshareholders is HK$5.98, which is largely in line with the market price ofSINOMA (HK$5.84). This suggests there is very limited room for arbitrage.

    Cement stocks under coverage increased 0.7% on average. The sector’sshare price performance was relatively stable last week. Best performer ConchCement [914.HK; HOLD] was up 2.9% week on week. CNBM, the weakestamong our coverage stocks, dropped 3.3% week on week.