Vulnerabilities exist however from overcapacity, reliance on policy stimulus, and export vulnerabilities. Trade frictions could undermine the competitiveness of Chinese building material exporters should subsidization issues escalate globally or if protectionism rises.
The global construction materials industry has seen steady growth over the past decade and going into 2022 remained a key sector supporting worldwide infrastructure development and construction activity. However, rising energy and commodity costs as well as ongoing global supply chain disruptions in the wake of the Covid-19 pandemic presented challenges. Overall industry revenue was estimated at over $11 trillion USD globally according to research reports from 2022. The industry encompasses the production of a wide range of basic materials needed for buildings, facilities, and engineering projects including cement, aggregates, bricks, glass, steel, and aluminum among others. Demand for construction materials closely follows trends in the broader construction industry which is driven by many factors including population and economic growth, urbanization rates, government infrastructure spending plans, and private sector real estate development.
Heading into 2022, the outlook was for continued but moderating growth in the construction materials industry supported by an influx of stimulus spending globally aimed at revitalizing economies recovering from the pandemic crisis. However, major headwinds arose from inflationary pressures squeezing producer and consumer budgets. The conflict in Ukraine also disrupted supplies and pushed commodity prices upward including for energy, steel, and grains impacting overall costs. According to industry analysts, global construction materials demand was projected to increase by 3-4% in 2022 with China expected to continue leading growth. Their view was demand would remain resilient despite economic challenges as countries worked to upgrade aging infrastructure and address housing needs.
A key trend impacting the construction materials landscape in recent years has been China’s dominance, which further strengthened in 2022. China accounted for over half of global cement consumption and was the leading producer and consumer of major materials like steel and glass. The size and importance of China’s domestic market as well as its role as a major exporter shapes conditions and competition internationally. Overall, China produced over 2300 million tons of cement in 2022 making it by far the world’s top cement manufacturer according to official statistics, ahead of numbers from India, the US, Turkey, Vietnam, and others. Cement used in China alone has exceeded cement usage in the entire European Union zone. China is estimated to have a cement production capacity of over 3.5 billion tons annually whereas the capacity of the whole European Union is only around 400 million tons.
While the construction industry in China faces cyclical adjustment threats, underlying long-term drivers of demand remained supportive into 2022 and beyond according to analysts. Factors like urbanization, a growing middle-class society with rising incomes, and the Belt and Road infrastructure export initiative established strong foundations. In particular, ongoing urbanization, with still over half of China's population residing in rural areas pointed to continued cement use as millions migrate to cities for work and improved living standards. In 2022, China maintained an over 50% urbanization rate and aimed to raise it further over the coming years helping sustain construction materials needs. Meanwhile, the influential Belt and Road program promoted by China tied trade and infrastructure ties between Asia, Africa, and Europe, creating substantial opportunities for Chinese construction companies and suppliers of materials like cement to expand regionally and globally.
Key attributes contributing to China's dominance in construction materials include large economies of scale with highly concentrated, integrated national champions as producers. For example, the top five Chinese cement producers alone accounted for around one-third of China's total annual cement output in 2022. The scale and expertise established domestically have allowed these companies to also become important players internationally. However, in recent years environmental regulation changes have pressured carbon-intensive heavy industries in China including cement, pushing a transition toward lower emissions production and usage. Policy goals articulated in 2022 aimed to peak carbon emissions before 2030 and achieve carbon neutrality by 2060, implying ongoing adjustments in industrial practices would be required. Sustainable technologies and alternative cement forms are being explored. Still, China's overall infrastructure and construction growth trajectory indicated materials demand will remain colossal.
Within China, Guangdong province bordering Hong Kong emerged as the top-producing region for construction materials like cement in 2022 beating out other long-time leaders. Official data showed Guangdong's cement capacity exceeded 200 million tons, putting it ahead of Henan and Shandong provinces previously topping output charts. Guangdong benefited from robust economic expansion with major urban centers such as Guangzhou and Shenzhen bolstering property development and infrastructure advancement. Gains in other South China coastal provinces like Fujian, Jiangsu, and Zhejiang also supported national output totals. Raw material self-sufficiency for cement production remains high in China, a factor inviting foreign investment into domestic supply networks seeking advantages of localization. However, import demand for feedstocks like coal and pet coke supporting energy-hungry kilns also rose from countries like Australia, Indonesia, and Russia in 2022.
While cement as aggregates form the core of the construction materials industry by volume, demand trends for other materials closely follow cement globally including concrete, steel, glass, aluminum, and wood. Steel usage for reinforcing cement and other applications internationally has been growing at a rate of around 3-5% annually over the past decade as of 2022 driven by infrastructure and building construction worldwide. China accounted for around 55% of global steel production in 2022, well ahead of runners-up India, Japan, and the US. Factors supporting domestic Chinese steel demand included ongoing manufacturing sector expansion and related building construction projects nationwide for factories, ports, and related facilities above ground and underground subways. Infrastructure programs represented about 20% of the reported growth in Chinese steel consumption. Urbanization also increased steel consumption to support larger residential and commercial buildings as populations grew more concentrated. In 2022, Chinese government urbanization targets through 2025 pointed to continued population shifts to cities boosting materials needs.
China's grip on global steel output has been diminishing slightly however as shorter construction cycles and environmental pollution concerns impel efficiency gains and reduced production overcapacity elsewhere including in regions like South Asia and the Middle East. Stability and growing industrialization in countries like India, Vietnam, and Saudi Arabia have allowed their steel sectors to close some of the gap with China. However, China's total steelmaking scale and more well-developed manufacturing and export capabilities kept it entrenched as the number one producer worldwide at over 1 billion tons yearly volume. As with cement, integrating sourcing operations in China allowed steel majors like HBIS and Shagang access to the world's largest materials market supporting increasingly globalized operations demanding competition. In 2022, China imported over 100 million tons of iron ore crucially supporting its gigantic steel sector according to customs data.
Demand for industrial metals like aluminum also increased rapidly in China aligning with the country's infrastructure programs and manufacturing boom. Aluminum finds widespread modern construction applications from rail to power grids and is increasingly deployed in energy and transport sectors transitioning to electric power. In 2022, projections indicated China could account for over half of the expected 4% rise in global aluminum consumption. Large-scale aluminum production again concentrates in China led by national heavyweights like Chinalco. New smelting technologies combined with the allocation of key hydroelectric resources in western provinces have enabled cost leadership. However, growing environmental scrutiny domestically and globally has China promoting more recycling and low-carbon production. Sustainable aluminum innovation emerged as a new strategic priority for companies to satisfy decarbonization goals while retaining the advantages of scale. Policies emphasized recycling old metal stock as China's aluminum cycle matures.
The glass industry represents a smaller yet globally significant construction material closely following building construction cycles. Supply and demand for flat and specialty glass products tracks urbanization rates and economic development worldwide. China's massive scale in glass manufacturing stems from its leading position in building construction and manufacturing exports requiring glass. Chinese firms dominate global float glass output and trades. GUILIN is the world's top glass container producer and exemplifies industrial capabilities taking hold. However, overcapacity issues persist in China's domestic glass industry and international trade frictions emerge periodically. Glass product exports tend to be controversial due to perceptions of unfair subsidization in China, though glass clusters in coastal provinces hold major export importance locally for employment and development. In 2022, Chinese companies emphasized efficiency improvements and higher value-added specialty glass to weather challenges.
Wood represents another major construction material where demand trends link to real estate markets. China as the world's top construction hardware consumer has established a large wood processing industry meeting the needs of engineered wood products as well as pulp/paper applications. Major production centers concentrate in resource-rich regions of northeast, northwest, and southwest China. Growth in Chinese wood manufacturing aligns with ongoing panelized prefabricated construction employing wood components for building frames and interiors. However, wood supply constraints and trade issues have emerged for China relying on imports of softwood and bamboo alongside plantations and logging at home. Sustainability certifications rose on the agenda in 2022 with some mills transitioning sourcing to protect brand reputation and satisfy demand in lucrative export segments like Japan.
China holds additional strengths in adjacent construction materials sectors such as glass fiber, plastics, roofing, and flooring materials according to the 2022 industry assessment. Massive scales of demand stem from real estate and infrastructure building programs nationwide dwarfing other global markets. This supports integrated, export-oriented suppliers prominent across industries. For example, Holcim and Shandong Lucchini represent leading fiberglass makers with global operations tracing back to Chinese manufacturing concentrations. Plastics producers like Formosa and Sinopec hold petrochemical integration serving construction while cultivating higher-tech applications. The combination of construction stimulus, industrial might, resource advantages, and export push allows firms emerging from China's construction materials industries to become worldwide forces.
Vulnerabilities exist however from overcapacity, reliance on policy stimulus, and export vulnerabilities. Trade frictions could undermine the competitiveness of Chinese building material exporters should subsidization issues escalate globally or if protectionism rises. Environmental constraints may require difficult structural adjustments at Chinese cement and metals complexes among others relying on high carbon processes. In spite of some envision