UBS: China cement sector to outperform next six months

UBS believes China cement demand has bottomed and cement inventories are falling. Moreover, cement prices have picked up with the national average price rising for the past four weeks after declining for 21 weeks.

"We believe there will be more upside in 4Q12 based on an overlap of seasonal strengthen and a recovery in infrastructure spending," says to research house in a report by Dow Jones Global Equities News. Aggressive new capacity additions in the past five years have put pressure on China's cement market, but in the next two years, UBS believes cement demand will record high single-digit growth and that new capacity additions will "slow materially." Hence, capacity utilisation rates should improve and cement prices may stage a moderate recovery in 2013 and 2014. "As the industry is turning around, we believe the sector will outperform in the next six months," the research house concluded.