The status and development trends of the wallboard industry in China

In the 1970s China began independent design and manufacture of gypsum wallboard production with a capacity of 4MM²/yr. In 1979 Beijing New Building Materials Company Ltd (BNBM) was established, pioneering the large-scale production of gypsum wallboard in China. It introduced the first modern, 20MM²/yr wallboard production line in the country and is now the market leader in China.

Compared to developed countries, China's paper-coated gypsum wallboard industry started comparatively late but developed very rapidly. With the rapid development of the economy, of the construction industry and the need to refurbish a large number of buildings, the market demand for paper-coated gypsum board has begun to surge during the 11th Five-Year Plan period. Wallboard has now become the dominant material for non-load bearing walls and suspended ceilings in China.

Policy facilitates rapid development

In 2008 2.5BnM² of wallboard was sold in the US, but the figure was only 1.1BnM­² in China. This is because real estate developers, especially builders in small towns and rural areas who are used to using clay bricks and air-entrained bricks, are suspicious or even unaware of the benefits of wallboard. This is understandable given that in China wallboard has been promoted almost exclusively to developers of large public and civil constructions. Its use in the civilian building market did not receive any promotion until the second half of 2007.

In the past government policy did not offer enough attention to the popularisation of gypsum board. Although some laws and regulations have been promulgated, they are not that forceful and there are no specific measures to ensure implementation. There is therefore a certain gap to developed countries that have specified the use of wallboard at the design stage for certain types of buildings since the early days.

China's current situation has many similarities with that of Japan at the end of the 1970s and the early 1980s. Gypsum board is still seen as an 'exotic' product introduced from America and the country is facing a rapid economic development and fast growth period driven by the real estate industry. Another similarity is that China is increasingly aware of its need to increase energy-efficiency and environmental responsibility. Based on these similarities, especially the last point, we estimate that in the next 10 years, the Chinese wallboard industry will experience rapid development.

In recent years, the Chinese government has continuously promulgated relevant laws and policies, especially a series of policies and laws enacted in 2008 represented by the Energy Conservation Law of the People's Republic of China, which raised energy saving to the height of law level. This law is similar to the Japanese Energy Conservation Law of 1979, which encourages the use of new types of wall materials in newly built buildings and the reconstruction of existing buildings.

Capacity and forecasts

From 2004 to the present, the production capacity of gypsum board in China has increased year-on-year. Driven by economic development, the capacity increase is forecast to retain its momentum. According to our estimation, Chinese consumption of gypsum board will reach 3m²/capita/yr by 2013 and then double to 6m²/capita/yr by 2020. At present, the figure is only 1m²/capita/yr, meaning that 200% and 500% growth could be seen by 2013 and 2020 respectively.

In 2009 despite the problematic macro-economic situations affecting other regions around the world, the coated gypsum board industry has continued to grow rapidly in China. For the period 1 January 2009 to 30 June 2009, the whole industry grew 30.6% compared to the same period of 2008, growing far more rapidly than other sections of the building materials industry.

Table 1: Chinese gypsum wallboard capacity from 2006 to 2010 (est.)

Prohibit solid and limit clay

The Chinese governmental policy of 'prohibit solid' and 'limit clay' will further facilitate the rapid development of the gypsum board industry. Prohibit solid means to prohibit the solid brick, while 'limit clay' means to limit the use of hollow bricks. In 2010, China was forecast to achieve its goal of 'prohibiting solid' and new types of wall material accounted for 55% of sales.

At present, the 'prohibit solid' policy has already made good progress and with the sound implementation of the policy certain cities have already begun to 'limit clay.' In the future the policies will expand from cities into rural areas and gypsum board will be able to enter the wide rural area market and civilian market.

Transition to residential construction

Demand for wallboard is mainly driven by the real estate industry, which can be sub-divided into residential and non-residential segments. From the current statistics, 80% of the gypsum board in China is consumed by non-residential buildings, while residential consumption only accounts for 20%.

To the countryside

In 2010 the area that was built on in China for the first time was around 0.8BnM² and policies encouraging the use of new building materials in the countryside will increase it further. Based on the calculation that a two-floor building of 200m² uses 100m2 of wallboard (only considering the demand for ceiling board) and 10% of newly built houses adopt gypsum board under the policy, the rural housing market will require 80MM­² of wallboard, accounting for 5.33% of the total domestic demand (based on 2009 consumption). The demand can be estimated for different percentage uptake by new rural residential developments, as shown in the table above.

Table 2: The possible wallboard demand generated by rural adoption of gypsum wallboard.

The development of BNBM

BNBM was incorporated in 1979. Foreign gypsum companies only started to enter the Chinese market from 1997 onwards, meaning that BNBM gained the early advantage. The result is that BNBM gained the lion's share of the local gypsum market. In 2007 and 2008, BNBM took up 34% of the market share and its market share increased further to 40% in 2009. The main competitors of BNBM are three multinational companies, but these only account for around 10% of the Chinese market when their shares are combined.

Research and development

Aside from being the market leader, BNBM is the only company in the Chinese building materials sector to have a national level technology centre and post-doctoral research centre. It is also the only company within the industry to assume the key technologies and research and development projects as part of the 11th Five-Year Plan. In terms of independent intellectual property rights and technology patents, BNBM ranks among the top five in Beijing and first among the building materials industry.

BNBM has mastered the main technology required for wallboard production and has successfully manufactured the first Chinese wallboard production line with independent intellectual property rights. This line adopts 100% Chinese equipment and has a capacity of 30MM²/yr, adopting 100% FGD as raw material, which has reduced production costs by 6%.

BNBM is also the only company in China that can continuously produce gypsum board thicker than 25mm. Also, the four-hour fire duration technology of the steel structure gypsum board fire proof wall technology enables BNBM gypsum board to reach national A-level fire-proof standards. Moreover, the 66dB wallboard sound insulation technology makes the product's performance higher than the requirements of five-star hotels for partition walls. BNBM has also developed 'double proof' gypsum board and 'phase-change' gypsum board.

Market reach in China

BNBM's Dragon brand gypsum board and Taishan gypsum board have a market presence in northern, eastern central, southern, south-western and south-eastern China, whereas its foreign rivals are concentrated in central China. BNBM's presence in these areas currently limits the multinationals to the existing area.

Expansion and product distribution

In 2005 BNBM restructured itself and acquired Shandong Taihe Group, the national key manufacturers of new building materials and the largest paper-coated gypsum board producer in China. This merger between the top-two in the Chinese industry allowed BNBM to become unparalleled in the paper-coated wallboard industry.

In 2007, it began a national production line layout and began to move toward the Yangtze Triangle region and the Zhujiang Triangle region by relying on the market in northern China. By the end of 2007 BNBM's capacity reached 400MM²/yr and sales exceeded 300MM²/yr.

In 2008 BNBM started to establish a wallboard production base in the eastern, central, southern, southwest and northeast regions of China. By the end of 2008, those production bases began to complete and started trial production in succession. BNBM's wallboard capacity reached 560MM²/yr and sales were 323MM²/yr.

In 2009 the construction of another 10 large scale gypsum board production lines were initiated with capacity reaching 720MM²/yr and sales of 475MM²/yr. In 2010, the gypsum board production capacity of BNBM was forecast to reach 1BnM²/yr with sales of 600MM²

In 2011, BNBM's capacity is forecast to reach 1.2BnM­²/yr and the estimated sales volume will reach 880MM²/yr. By 2012, BNBM gypsum board capacity will reach 1.5BNM²/yr and BNBM will become the largest gypsum board group in the world by capacity.

According to BNBM, "In stark contrast to BNBM's rapid expansion, the three multinationals are suffering the effects of the prolonged economic turmoil in developed markets and are unable to attend to the Chinese market sufficiently."

Promote new

BNBM follows the government policy of 'promote new' and is seizing the opportunities of the residential construction market as it gradually becomes mature. Besides the national layout of new production lines, BNBM is also in the process of developing sales and distribution networks. Also, BNBM is starting to exploit 'second-tier' cities and their suburb markets and develop emerging market and blank markets to create market space for the future capacity expansion. BNBM's sales network is expanding from medium-sized and large cities to small cities and towns.

BNBM is committed to developing new building materials and energy- and space- saving housing systems to provide new products and technologies for the energy-saving objectives of China's construction boom.