In the first four months of this year, building materials enterprises above designated size achieved main business revenue of 1.3 trillion yuan, up 14.35% year on year, and total profits of 82.9 billion yuan, up 29.9% year on year. The growth rates of both economic indicators were higher than the national year-on-year growth rate for industrial enterprises above designated size in the same period, and the industry achieved steady and relatively rapid growth. It is expected that in the first five months of this year and even in the first half of the year, the building materials industry will still be able to maintain steady growth. However, some emerging problems in the industry's operations have also exposed that the downward pressure facing the building materials industry is amplifying.
  The sharp reduction in the number of enterprises above designated size sends a signal of a difficult market environment. According to data from the National Bureau of Statistics, in the first four months, there were 28,000 building materials enterprises above designated size nationwide, an increase of more than 2,100 year on year, but a decrease of nearly 1,000 compared with the first three months. This was the first sharp reduction in the number of enterprises above designated size since 2011. By sector, cement, brick and tile and building block, and cement products industries changed relatively greatly, with the reductions in enterprises above designated size accounting for about 17%, 14%, and 20% of the total, respectively. By region, the reduction in enterprises above designated size in the eastern region accounted for about 54% of the total, more than half of the national total, among which Shandong Province reduced more than 180 enterprises above designated size, the largest among all provinces nationwide. The reduction in the number of building materials enterprises above designated size indicates that the industry's market environment has deteriorated somewhat, some enterprises are facing greater market and competitive pressure, and to a certain extent it also reflects the transformation and upgrading and industrialization process of some building materials sectors.
  Weak market demand has led to falling prices of major products. Affected by the reduction in new housing construction area, the gradual completion of key projects, and climatic factors such as rainfall, especially the accelerated release of some newly added production capacity, market demand for building materials has weakened since the beginning of this year. The imbalance between supply and demand in markets such as cement and flat glass has become apparent, and product prices have continued to fluctuate downward.
  In April and May of this year, cement prices changed from the upward trend of the same period in previous years. Apart from increases in some areas of the southwest and northwest, cement prices in north China, south China, and east China all fell significantly. Since February this year, the national average ex-factory price of general-purpose cement has fallen for four consecutive months, with a cumulative decline of 14 yuan, dropping to 308 yuan/ton by the end of May. Although it is higher than the same period last year, downward pressure is increasingly apparent. Since the beginning of this year, flat glass prices have continued to decline. From January to May, the national average ex-factory price of general-purpose flat glass continued to fall by nearly 3 yuan cumulatively, dropping to 68 yuan/weight case in May, the lowest point since September 2012. Among them, the ex-factory price of ordinary float glass at some enterprises has fallen to as low as 46 yuan/weight case, below the break-even point.
  Judging from current trends, there are no obvious signs that the continued fluctuation and decline in cement prices will improve, and according to an analysis of the industry operation cycles of the flat glass industry over the years, it will also be difficult to move out of the low-level fluctuation range in a short period. The continued decline in cement and flat glass prices also indicates that downward pressure on the industry has amplified somewhat.
  The gradual narrowing of the growth rate of economic benefits in the building materials industry warns that downward pressure on the industry is increasing. In February, March, and April of this year, the cumulative year-on-year growth rates of profits of building materials industrial enterprises above designated size were 46.2%, 32.5%, and 29.9%, respectively, all higher than the growth rate of national industrial enterprises. On the one hand, this was because the profit base of the cement and flat glass manufacturing industries in the same period last year was relatively low, enabling a relatively large increase in profits in the same period this year, thereby keeping the overall profit growth rate of the building materials industry relatively fast. On the other hand, it benefited from the foundational supporting role of the building materials products industry, which continued to maintain steady and relatively rapid growth. However, as the profitability of the cement and flat glass manufacturing industries gradually recovered after May last year, the profit growth rate will gradually fall back, and its overall impact on the building materials industry will also weaken. At the same time, after several years of rapid development, it will be difficult for the products industry to maintain much room for profit growth. Therefore, it will be difficult for the profit growth rate of the entire building materials industry to remain at a high level, and the growth rate will gradually narrow.
  Enterprises face financing difficulties, accounts receivable remain high, and funding strains are becoming increasingly prominent. As the state pays increasing attention to industries with overcapacity, the financial system will treat the cement and flat glass industries more and more strictly, and phenomena such as difficulty in obtaining loans and reluctance to lend will frequently appear. Some enterprises have even experienced banks withdrawing loans. Since March this year, the proportion of domestic loans in the sources of funds for fixed asset investment in the building materials industry has shown a downward trend, and the decline has gradually widened. In the first five months of this year, domestic loans accounted for 7.6% of funding sources, down 1.4 percentage points year on year, with the decline 1.2 percentage points larger than in the first four months. Financing difficulties and high financing costs have become common problems facing cement and flat glass enterprises. In addition, as labor costs and prices of raw and fuel materials generally rise, especially as energy-saving and emission-reduction standards become increasingly stringent, enterprise operating costs and corresponding investment are showing rigid upward trends. Building materials enterprises, especially those with relatively high asset-liability ratios and those in industries with overcapacity, are finding themselves stretched in terms of cash flow.