Gypsum wallboard or drywall got name-checked by the commander-in-chief of the US last week. President Joe Biden announced during his State of the Union Address to the US Congress on 7 February 2023 that he was going to require that, “all construction materials used in federal infrastructure projects to be made in America.” He then expressly mentioned wallboard along with lumber, glass and fibre-optic cables before adding the catchy sound-bite, “American roads, bridges, and American highways are going to be made with American products as well.” Although for the wallboard sector he might as well have been saying that American walls are going to be made from American wallboard.
Biden’s focus on gypsum wallboard and other building materials is linked to the US$1.2Tn Infrastructure Bill that was signed in late 2021. The White House Office of Management and Budget (OMB) issued guidance in mid-2022 on how the spending should be targeted at US manufactured construction materials. At that time it excluded steel, cement, aggregates and additives but included non-ferrous metals, plastic and polymer-based products, glass, lumber and wallboard in its category of ‘construction materials’ that should be sourced locally. Its definition of ‘construction materials’ meant that the manufacturing process for the construction material occurred in the US. Although combining some of the materials above as a composite would then be classified as a ‘manufactured product,’ at which point, 55% of the total costs of the components would have to be mined, produced or sourced in the US to meet the so-called ‘Buy America’ preference. The new bit following Biden’s recent speech is that the OMB has released further guidance for the ‘construction materials’ mentioned above. So far, so much legalese.
Canada-based manufacturers of building materials are understandably wary of this kind of talk. However, ‘Buy America’ has been around since the 1930s and there have often been ways around it. As Jean Simard, the president and chief executive officer of the Aluminium Association of Canada, told CBC, in practical terms, the math is on Canada's side. "Canada represents about 70% of total US imports. That's not going to change."
Data on how much wallboard is actually exported from Canada to the US is hard to find but the former’s wallboard sector is about 10 times smaller than the latter’s. Most of the gypsum producers in Canada are owned by international companies with a presence in the US also. This created an interesting situation in October 2022 when CertainTeed Canada welcomed the Canadian International Trade Tribunal's ruling in favour of six provinces and territories' anti-dumping measures on imports of gypsum wallboard from the US. CertainTeed is owned by France-based Saint-Gobain, which also runs Continental Building Products. Together, Saint-Gobain is the second largest wallboard producer in the US by installed capacity. It seems unlikely that the current US rhetoric will reduce Canada’s exports of crude gypsum south of the border. Data from the United States Geological Survey (USGS) shows that the US imported 1.57Mt of crude gypsum from Canada in the first nine months of 2022, an increase of 12% year-on-year from the same period in 2021. Imports from Mexico had been similar so far in 2022, although they are down compared to 2021.
The other reason Biden may have mentioned wallboard specifically in a patriotic speech may have been in relation to the long-running defective China-based wallboard story from the early 2000s. Although the legal cases associated with this have mostly died down, one popped up in early February 2023 when Knauf and its China-based subsidiaries managed to avoid a product liability claim because the Florida-based plaintiff had waited too long. Knauf now owns the US’ largest wallboard producer, USG.
It is worth remembering that the US remains the largest wallboard market in the world by production capacity. So calls by a politician to ‘Buy America’ may be more for the ears of voters rather than industry. Although that’s not to say that the situation won’t change in the future. The examples above also show that the US may have been guilty of dumping wallboard upon its neighbours and that the two largest producers in the US are both foreign owned. The other thing that Joe Biden said in his State of the Union Address was that buying American was “totally consistent with international trade rules.” This comment may have been made in response to European criticism of some of the implications of the Inflation Reduction Act with its incentives for industrial supply chains supporting renewable energy production and electric vehicles, be they based in the US or in ‘friendly’ countries. The wallboard sector seems unlikely to be caught up in this directly but protectionism is in the air. How this manifests in corporate strategy over the next few years may be telling.
