中国材料-反内卷 - 实际情况如何-Anti-Involution - How Real Is It_

Summary of Conference Call on China's Anti-Involution and Supply-Side Reform Industry Overview - The focus is on the China Materials sector, particularly the implications of the anti-involution campaign and supply-side reforms across various industries including steel, cement, coal, lithium, and waterproofing materials [1][2][3][4][10][11]. Key Points and Arguments Anti-Involution Campaign - The anti-involution campaign is perceived to be more complex and less effective than previous supply-side reforms from 2015-2018, but it is expected to have a quicker impact on upstream industries due to improved supply control experience [1][2]. - The campaign aims to regulate excessive competition, with various industrial regulators and associations actively involved in consultations and proposals [2]. Steel Industry - A target of approximately 30 million tons (mnt) production cut was communicated to steel mills, with a 1% reduction in pig iron production year-to-date (YTD) [2][16]. - Steel margins have improved significantly, recovering to over Rmb 400/ton from Rmb 150/ton earlier in the year, despite rising raw material prices [2]. - Further production cuts of 10-20 mnt are anticipated for the remainder of the year, aligning with declining domestic and overseas demand [2][16]. Cement Industry - Cement is the first industry to implement anti-involution policies, with a 20% cut in overproduction mandated by the end of 2025 [3][13]. - The Ministry of Industry and Information Technology (MIIT) has set stricter requirements for capacity swaps to address the 20% overproduction at the industry level [3][13]. Coal Industry - The National Energy Administration has initiated checks on coal overproduction, focusing on whether production exceeds designed capacities by 10% [4][17]. - The impact of these checks is expected to be minor, as over 70% of coal capacity is owned by state-owned enterprises (SOEs) that operate within designed capacities [4][17]. Lithium Industry - Recent enforcement of mining regulations may disrupt lithium production, with specific projects facing suspension due to licensing issues [10][22]. - These disruptions could tighten supply and support price increases in the short term, although lithium is not a primary target of the anti-involution campaign [10][23]. Waterproofing Materials - The waterproofing materials sector has seen significant price competition, leading to market consolidation, with leading players increasing their market share from 20% in 2021 to 45% in 2024 [11][21]. - Price hikes have been announced by major companies in response to anti-involution messaging, which is expected to improve industry margins [11][21]. Potential Beneficiaries - Key beneficiaries of the anti-involution measures include Anhui Conch, China National Building Material (CNBM) in the cement sector, and Baosteel in the steel sector, which are expected to see margin expansion and improved supply-demand balance [27][28][41]. Risks and Considerations - Upside risks include stronger-than-expected infrastructure demand and stricter production suspensions [29][30][31]. - Downside risks involve weaker property demand and potential government intervention in pricing [32][33][34]. Conclusion - The anti-involution campaign is set to reshape the landscape of several key industries in China, with varying degrees of impact expected across sectors. The focus on supply-side reforms aims to address overproduction and improve profitability, particularly in cement and steel, while also posing risks that investors should monitor closely.