According to the Summary of Construction Outlook in China (the “Summary”),
published in August 6, 2013 by the Freedonia Group, an industry research firm,
construction expenditures in China are expected to increase 8.5 percent per year
in real terms through 2017. Ongoing urbanization and industrialization, rising
income levels, further population and household growth, and the government’s
continuing efforts to expand and upgrade physical infrastructure in the country
will support healthy growth in construction spending.
Construction expenditures in China are nearly equally split among residential
buildings, nonresidential buildings, and nonbuilding structures. The increases
will benefit from stated efforts to expand and upgrade the country’s transportation
infrastructure, such as highways network, subway systems in major cities, and
several airports. Utilities construction will also contribute to the expenditures
on nonbuilding construction, particularly in rapidly growing urban areas, as
the government continues to expand and improve access to such infrastructure
like water supply, sewage treatment, rubbish disposal, and gas distribution.
Further efforts to increase the country’s power generation capacity and
improve electricity transmission networks will also drive spending on nonbuilding
construction.
Demand for cement in China will be driven by rising, but decelerating, construction
expenditures in China. Further advances in cement manufacturing technology are
also expected to stimulate sales by improving the quality of the product, stressing
the versatility of certain types of cement with excellent performance and/or
price benefits over other types of cement across a range of construction applications.
Regional cement markets reflect differences in construction expenditures, which
in turn are driven by local trends in demographics, industrial output and economic
activity. The cement markets in Northwest and Southwest China are expected to
grow at a faster pace, as a result of the government’s Great Western Development
strategy, which aims to promote investment in these areas. Consumption of cement
in Central and Northern China is also expected to exceed the national average,
supported by high levels of transportation infrastructure construction and booming
urban markets in Beijing and Tianjin. (Summary of the Freedonia Group's January
2009 "Cement in China" report from Business Wire).
Residential and non-residential buildings in China are increasingly requiring
much more concrete due to, among other reasons, the short supply of wood. China
is currently the largest consumption market of cement worldwide at over $200
billion annually. At the present rate, it is presumed that China will continue
to be an important player in the global construction materials market for at
least the next two decades.
Construction contractors are expected to continuously represent the largest
market for cement. Economic downturns or reductions in government funding of
infrastructure projects could significantly reduce our revenues. However, we
believe that the ready-mix concrete market exhibits the strongest growth in
the cement industry. Revenues are expected to be received from government regulations
banning on-site concrete and mortar mixing. Demand for cement used in concrete
products is expected to be driven by the increasing popularity of precast concrete
with many construction contractors. In addition, the phase-out of clay bricks
will heighten demand for concrete blocks. Recognizing the significant environmental
impact created from the large-scale construction activities undertaken in the
past few decades, China’s government implemented Decree #341 in 2004 which
bans onsite concrete production in over 200 major cities across China in order
to reduce environmental damage from onsite cement mixing and improve the quality
of concrete used in construction.
