China government’s policies drive construction
Commodity housing, sold to private parties, has been predicted to dip in 2012. Property prices are already falling so less local government land is now being sold to property developers, meaning a slowdown in new buildings. This will reduce new housing construction, which has accounted for more than seven per cent of GDP in the last few years, according to Deloitte research.
However, the construction of 36m units of affordable houses on a budget of CNY1.3trn was among the central aims of the new five-year plan. Social housing is expected to increase cement demand by 3-7 per cent during 2011-13, if the government maintains its 10m unit construction rate target for 2011-12, says BOCI.
The social housing shortages are most acute in the north and southwest. The top five provinces in terms of demand are: Heilongjiang (N), Chongqing (SW), Shaanxi (NW), Inner Mongolia (N) and Hunan (Central). BOCI suggests that Anhui Conch – with its major capacity in Heilongjiang, Hunan and Chongqing provinces – will be one of the main beneficiaries. Sanshui Cement should pick up orders from Inner Mongolia, while social housing will help CNBM may bolster its sales in Hunan province.
Rapid urbanisation continues at a strong pace with high cement demand for housing, although in the long run the government’s high targeting is unsustainable. China has set an urbanisation rate of 51.5 per cent from 47.5 per cent, an increase of four percentage points on the 11th Five-Year plan.
The IMF forecasts that there will be 380m more inhabitants in China’s urban areas by 2030, taking the urbanisation rate to 70 per cent. This means China needs to build around 5m homes every year, but the government has targeted 10m affordable housing units for 2011-12. So construction is running well ahead of demand. Indeed, Société Générale reports: “With around 1.8bnm2 of new residential floor [already] completed in 2010, China has built the equivalent of Spain’s housing floor space stock.” As the professional manufacturer of complete sets of mining machinery, such as sand washing machine, Henan Hongxing is always doing the best in products and service. dryer machine:http://www.hx-china.com/15.html
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As the movement of people from rural areas to the towns continues, the government is doubling its investment in water conservation projects to CNY4trn over the next decade.
Favoured regions for construction growth are the east and south as there is less of a fall in new infrastructure projects in these areas. The main developments are expected in the provinces of Gansu, Jilin, Anhui, Fujian, Shanxi and Shandong. In terms of new fixed asset investment (FAI) project startups, it is eastern China that has seen the most robust growth of 44 per cent. This is good news for Anhui Conch and CNBM. Sinoma is set for a harder time in the north as more than a 40 per cent decline in project FAI startups is forecast by the BOCI for the provinces of Ningxia, Beijing, Inner Mongolia, Sichuan, Guizhou, Liaoning and Henan.
West China Cement has begun to supply the Southern Shaanxi Resettlement project that requires approximately 1.2-1.4Mta of cement between 2011-20 and the Hanjiangto Weihe River Water Transport project which also started construction in 3Q11 and will be completed in 2020. These large-scale projects will also be of value to other producers in Shaanxi such as Jidong Cement, Conch, Shengwei Cement and Italcementi.
Less-favoured regions for FAI project starts include, Ningxia, Beijing, Inner Mongolia, Sichuan, Guizhou, Liaoning and Hennan. This is where Sinoma is most exposed, although Shanshui Cement and Conch also have capacity there.
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