Environmental protection is real, supply and demand gap continues -- Shandong environmental research summary
 The implementation of 2+26 urban environmental protection production restrictions will not be discounted
In March this year, four ministries and commissions jointly issued the "2017 Air Pollution Prevention and Control Plan for Beijing, Tianjin, Hebei and surrounding areas", implementing production restrictions and winter peak production in "2+26" cities in Beijing, Tianjin, Hebei and surrounding areas, involving Jinan, Zibo, Jining, Dezhou, Liaocheng, Binzhou, Heze 7 prefectural level cities in Shandong. Through the investigation of Shandong Jining, Liaocheng, Jinan and Dezhou, we found that many prefectures and cities have effectively promoted according to the previous requirements and the corresponding time nodes, and the enterprises that fail to meet the environmental protection standards have basically closed down, and the governance of small scattered and dirty enterprises has been unprecedented. It is expected that the winter production limit program will be strictly implemented, governments at all levels have studied and formulated specific measures, detailed to the enterprise, responsibility to the party committee, environmental protection is a hard task, the implementation is not discounted.
 Environmental protection is a political task
The survey found that local governments have been fully aware of the importance of green development, "clear water and green mountains are gold and silver mountains" has become the government's number one project, is a hard constraint. At present, the local government to grasp the environmental protection work, awareness has been raised to whether to support the central government, whether to practice the height of the four consciousness, the idea of using the "party and government responsibility, one job dual responsibility" approach, the first leader personally grasp, mainly using the means of interview, accountability ideas, not only to supervise enterprises, but also to supervise the grassroots Party committee government, environmental protection has been raised to an unprecedented height.
 Strict rectification in accordance with environmental protection requirements is a long-term work, a long time for work
Shandong Province's environmental protection work is relatively early, strictly shut down small scattered pollution enterprises, do not meet the requirements of medium-sized enterprises to carry out environmental rectification in March this year began to be fully implemented. The fourth round of central environmental supervision stationed in Shandong is not only an inspection of the preliminary work, but also a supervision of the next step to continue to strictly implement. On the basis that government staff at all levels have deeply rooted in the hearts of the people, environmental protection work will not relax in the future. In addition, at present, the Beijing-Tianjin-Hebei and surrounding areas are widely carried out cross-regional inspections, and other provincial environmental protection professional cadres are deployed for supervision and inspection, and it is gradually normalized.
 It is very difficult for closed enterprises to resume production
For the closed enterprises that do not meet the requirements, in principle, they can resume production on the basis of meeting the industrial policies, land policies, park policies and environmental protection requirements. However, the multiple demands on them make it difficult to meet them in a short time. For example, industrial enterprises require all to enter the park, but to enter the park to meet the industrial policy and planning requirements of the park, but also related to the industrial chain of the park, some parks also set the minimum investment requirements, in addition to environmental protection equipment installation also takes about 5 months. At present, the industry clearance caused by environmental supervision and production restriction and the benefit of large enterprises are expected to be sustainable.
 Maintain the high price in September, and the supply and demand gap continues to be judged
Overall, we think the survey largely supports our previous assessment. PPI prices likely hit a second-half high in August-September. Eight central environmental protection inspection teams in August 7 to 15, the implementation of inspectors stationed, inspection and rectification, is expected to be completed by September 15. Taking into account the 19th National Congress, the fourth batch of environmental inspectors will be completed earlier. Environmental inspectors strict time in the entry stage, the price of products in related industries with the expected advance adjustment, September is the PPI high. However, this round of environmental protection is very strong, and various places may also carry out a look back to avoid the resurgence of pollution sources, the gap between supply and demand will not shrink soon, and the profits of environmental protection standards are expected to be sustainable.
From September 11 to 14, Huatai Strategy team, together with macro/chemical/nonferrous/light industry team, went to Shandong to investigate environmental protection production restrictions. Four days trip 2000+ km, visiting local governments and environmental protection departments, listed companies, small and medium-sized enterprises.
Policy outlook: Do not see green mountains, environmental protection will not relax. We believe that environmental protection production restrictions will become the new normal policy, do not see green mountains, will never relax. Under the double constraints of environmental protection production restriction and price stability, the environmental protection production restriction policy is expected to change from extensive to fine, but it will not be easily relaxed.
Local environmental protection departments: strict policy implementation, grassroots is not sloppy. Environmental supervision at the central level has continued. Environmental protection standards, lower than higher stricter. Local government officials are strictly held accountable and no longer "cover" for enterprises in pursuit of GDP. Grassroots environmental supervision is not lax, random night checks are the norm. Network format supervision, the masses have awards to report. Environmental protection production restrictions supporting standards will continue to improve.
Listed companies: The tightening of environmental protection has no impact on standardized production capacity, and significantly benefits from the price increase brought about by the contraction of supply. Most of the listed companies said that their own production capacity is fully compliant, and emissions are fully up to or even stricter than local government standards. In order to avoid repeated equipment upgrades, most of the qualified enterprises are in place in one step and carry out equipment in accordance with strict standards. Product prices have risen rapidly this year, and we are optimistic about the prospects for future market share and profitability.
Small and medium-sized enterprises: "scattered and dirty" enterprises resolutely shut down, and rectification enterprises "withdraw from the city into the park". "Scattered and dirty" enterprises were firmly shut down. The investment threshold of the chemical industry park is getting higher and higher, and the construction cycle is being prolonged. The number of industrial parks that rectify enterprises "withdraw from the city and enter the park" should also be reduced.
Green mountains "millennium plan", transformation pains are inevitable. Under environmental protection, workers face re-employment. Environmental protection also has an impact on consumer prices. For example, some boilers burned by people selling steamed bread have been shut down, resulting in a shortage of steamed bread supply in some places. Street pancake vendors unified "coal to gas." Small-scale chicken farms have been shut down and egg prices have risen significantly.
The end of environmental protection inspectors has an impact on both ends of supply and demand
We saw in August the national cement production growth rate of -3.7%, cement production for three consecutive months negative year-on-year growth. The year-on-year decline in August was the value since 2016, showing the impact of environmental protection inspectors on the demand side. On the other hand, we see that the national cement storage ratio is also slowly declining during the environmental protection inspection period, and the price is also slowly increasing, indicating that the impact of environmental protection inspectors on the supply side is greater than the impact on the demand side.
During the environmental protection inspection, the cement storage ratio slowly decreased. After the end of the inspection, with the gradual recovery of downstream demand, the lower inventory position gives the bargaining power of cement companies, and we see an accelerated upward trend in the national average price of cement.
This year, North China cement production has been extended both in length and scope
The air pollution prevention and control program in North China is the policy focus of environmental protection and production restriction this year, and the relevant policy documents are as early as the "Beijing-Tianjin-Hebei and surrounding areas 2017 Air pollution prevention and control work Program" released in February this year, followed by the "Beijing-Tianjin-Hebei and surrounding areas 2017-2018 Autumn and winter Comprehensive Air pollution control Action Plan" released at the end of August this year.
In the program in February, it is required to implement off-peak production in the heating season of cement (including grinding station). In August, the plan requires that cement (including special cement, excluding grinding stations) be stopped in the heating season, and cement grinding stations should be stopped during heavy pollution weather warnings. According to last year's experience, off-peak production means that in the four-month heating period, enterprises can take turns to get a month of production time. If all are shut down, that means supply is shrinking more than a year ago.
Among the six provinces and cities, Henan Province has taken the lead in introducing a specific landing plan. According to the Implementation Plan of Industrial enterprises' peak production in the Autumn and Winter of 2017-2018 in Henan Province, all cement enterprises in the Beijing-Tianjin-Hebei air pollution transmission channel cities and Luoyang and Pingdingshan have stopped production during the heating season, that is, they have stopped production for 4 months. In other parts of Henan Province, cement companies have 20 days of production from January 21 to February 10, 2018, and all production stops for the rest of the time. The production stop time is half a month earlier than last year, and the production stop scope has expanded from last year's air pollution transmission channel cities to the whole province. From the information disclosed in advance by the relevant departments in Shandong Province, the time and scope of the shutdown are also similar.
The clinker gap this winter could reach 11 million tons
Last year, most areas began peak production on December 1, and the clinker gap in four provinces reached 6.12 million tons after implementation in December. Considering that last year was peak production, some enterprises will still be in production, while there are some enterprises that do not implement production suspension in accordance with the regulations (such as Shandong Province only reduced by 40%), if strictly implemented this year, the clinker gap will expand. Under normal circumstances, the capacity of cement kilns with waste incineration and heating accounts for 15-20%, so we estimate that the clinker gap in December in Shanxi, Hebei, Shandong and Henan can reach 10 million tons.
In November last year, except for about half a month of production in Henan, other regions did not stop production, and this year from November 15, a full shutdown. Therefore, we expect that in November this year, Shanxi, Hebei, Shandong and Henan will produce about 5 million tons of clinker gap. This year, the suspension of production was announced earlier, and companies will increase their own clinker and cement storage. According to experience, the inventory capacity of cement enterprises is generally 5-20 days of capacity scale, and the average is 12 days. In the limit case, if the Jinjiluyu cement company enters the production shutdown period, the clinker gap is about 1 million tons in November.
The four provinces of Shanxi, Hebei, Shandong and Henan have a large number of clinker gaps in winter, which is bound to bring the price of clinker and cement to continue to rise, while most of these gaps are supplied by the neighboring provinces of Anhui, Jiangsu, Hubei and other provinces, so it will also pull the price of clinker and cement in East and central China to rise sharply. Good East China, central China's regional leading enterprises.