Gypsum industry news

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.

Two news stories to note over the last two months indicate growth in the gypsum wallboard market in Romania. Firstly, Knauf announced plans in mid-October 2022 to build a new 30Mm²/yr gypsum wallboard plant at Huedin in Cluj County. Then, Germany-based Grenzebach’s local subsidiary revealed that it had broken ground on the construction of an upgrade to its Iasi production centre.

Knauf’s announcement follows work by the existing wallboard producers with plants in the country to increase their own local capacity. Saint-Gobain started building a new production line at its Turda plant in mid-2021 at a cost of Euro45m. It hopes to have the project completed by April 2023. Etex started work in mid-2022 on a Euro6m sludge drying unit at a coal-fired power plant in Oltenia that will supply synthetic gypsum for use at its Turceni plant. It is also working on logistics upgrades to Turceni and a separate plaster plant at Aghiresu.

Graph 1: Growth rate of the construction market in relation to market volume in selected emerging countries, 2020 – 2030. Source: Saint-Gobain financial report using data from IHS.

An indication of Saint-Gobain’s interest in the Romanian market can be seen in its universal registration document for 2021 where it outlined its strategy. It presented a graph of forecast growth rates in construction markets in selected developing markets between 2020 and 2030. The countries that are underlined in Graph 1 (above) are those where Saint-Gobain made large acquisitions or investments in 2021. Romania is interesting on this graph because it is the European country with the largest predicted growth rate. It also has a relatively low market volume suggesting potential for market growth, although note that the graph only shows selected countries.

Another reason why Knauf might be interested in Romania is that it is the largest country in the European Union in which the company does not have a wallboard plant. Knauf’s own take from its press release about why it decided to build a plant in Romania was that local per capita consumption of gypsum wallboard was around 3m²/yr compared to at least 6m²/yr in more mature markets elsewhere in Europe.

Etex’s subsidiary Siniat Romania reported a 20% year-on-year rise in turnover to Euro60m in 2021. This compares to a 24% rise in turnover to Euro307m by Saint-Gobain Romania. Andrei Popa, Etex’s Country Sales Manager Romania & SEE, told Agenda Constructiilor that Siniat Romania’s turnover grew by 25% year-on-year in the first eight months of 2022. However, it is unclear what difference Etex Group’s acquisition of insulation producer URSA in June 2022 made to the figures in Romania. Popa also revealed that the rise in turnover so far in 2022 was mainly down to price rises. This in turn had been promoted by mounting energy costs, particularly gas. The company described itself as a ‘big consumer of gas’ and reported that the price had risen seven times over the past year. One more point of interest to mention is that Popa described Etex as one of the largest exporters in the country, with 40% of local production sent over national borders. This also aligns with what Knauf said about its new plant. It intends to deliver half of the production from its proposed plant at Huedin to Hungary, Serbia and the Republic of Moldova. The other half will serve the domestic market in the north of Romania with imports from Bulgaria expected to continue to supply the south of the country.

The data above suggests why Saint-Gobain, Etex and Knauf have all invested in wallboard production units in Romania over the last two years. The local market has growth potential and the companies are also focused on exports to neighbouring countries. All this investment may also have contributed to Grenzebach’s decision to enlarge its production site at Iasi too. The ‘fly in the ointment’ here in the short term is the disruption to energy markets caused by the war in Ukraine. Siniat Romania mentioned its concern over gas prices above. Saint-Gobain also made similar comments on a general basis for Europe in its nine month financial results in late October 2022. It said that it was preparing continuity plans for its gas-consuming plants in Europe but added that its gypsum wallboard production lines were ‘extremely flexible.’ However, Romania is better prepared for problems with gas supplies compared to elsewhere in Europe because it produces around 90% of its requirements locally. Despite energy concerns at the moment, the long term potential for the wallboard market in Romania remains promising.

Earlier this month the German Gypsum Association (GIPS) gave its approval for an inventory of natural gypsum deposits in Germany that was presented at the Conference of Economics Ministers that took place in early July 2022. The Federal Commission on Geosciences (BLA-GEO) had previously been given the job of taking an inventory of deposits and this was then put in front of the policy makers. The association’s stance was all about securing future supplies. In its view there will be no large-scale alternatives to natural gypsum supplies in the foreseeable future due to low recycling rates and falling production of flue gas desulfurisation (FGD) gypsum as coal power plants are shut down. So a list of where natural gypsum might be found is the start of conversations about which ones might be mined. Readers who are interested can download the inventory of German gypsum deposits here.

Security of supply of raw materials has been in the air since the end of the coronavirus lockdowns started to cause supply chain disruption around the world and the Russian invasion of Ukraine further exacerbated this and rocked energy markets. Part of the reaction to this new reality could be seen in a conference that the Federal Institute for Geosciences and Natural Resources (BGR) and the German Resource Research Institute (GERRI) ran, also in early July 2022. The state of German gypsum supplies was presented at this event too. The BGR-GERRI conference came up with a ten-point plan to strengthen the supply of raw material. Some of these recommendations were to grow domestic raw material extraction, expand recycling and the circular economy and keep supply chains closer internationally, ideally within Germany and Europe.

A focus on gypsum supplies isn’t restricted to Germany though. The issue arose in late July 2022 during an earnings call for US-based Eagle Materials’ first quarter results. These kinds of questions from analysts about supply of raw materials are common for a public company but it reinforces the general declining trend around the world of synthetic gypsum supplies. Craig Kessler, the chief financial officer of Eagle Materials, mentioned that a scarcity of synthetic gypsum might be creating cost pressures for other gypsum wallboard producers. Although he was quick to describe his company as a “natural gas or natural gypsum oriented business.” The wider picture in the US is that the ratio of natural to synthetic gypsum production has grown over the last decade. United States Geological Survey (USGS) data shows that it was 37% / 49% in 2011 compared to 53% / 32% in 2021, with the remainder imported in each year.

One more point to make here is that many of the new gypsum wallboard plant projects announced in the over the last few months have involved recycling in one form or another. For example, Siniat’s forthcoming wallboard plant in Bristol in the UK aims to achieve 30% post-consumer gypsum recycling. CertainTeed’s current upgrade plans for its Palatka plant in Florida are also recycling-based. Similarly, the subsidiary of Saint-Gobain also completed an upgrade in June 2022 to allow more recycling at its Nashville plant in Arkansas.

Finally, some of the thinking in Germany and elsewhere has been influenced by the current geopolitical situation in Ukraine. However, one potential consequence of prolonged disruption to European energy markets could be a delay to the decline of coal power plants as plant lifespans are elongated or even new ones built. This in turn could mean more synthetic gypsum supplies in Europe in the short to medium term. How all of this plays out in the placement of new gypsum wallboard plants in Europe over the next few years will be interesting to observe.

Winstone Wallboards has been in the spotlight in recent months over ongoing supply issues of gypsum wallboard in New Zealand. Many places around the world have suffered from similar shortages of building materials following the coronavirus lockdowns. However, the shortages in New Zealand have started to generate a considerable response, as we detail below.

Rightly or wrongly, Winstone Wallboards’ dominance in the market locally has been perceived as part of the problem. It operates the country’s only two wallboard plants and it is frequently reported to hold around a 95% share of the market. It is also currently building a new 10Mm²/yr gypsum wallboard plant at Tauriko near Auckland. Commissioning is planned for mid-2023. Once completed the company will have a total national wallboard production capacity of around 40Mm²/yr.

The current problems date back to the start of the coronavirus pandemic when New Zealand started implementing its lockdowns and residential renovation work increased. The issue then gained prominence in September 2021 when Winstone Wallboards started issuing regular supply updates on its website as the government began to relax the lockdown at that time. It says that order volumes more than doubled from November 2021 to February 2022 as customers started to bring forward their orders to cope with general building material shortages. It coped for a while by using its inventory stock and by bringing in imports from Australia but the latter stopped in November 2021 due to shortages there also. So it proposed introducing an allocation model from July 2022 whereby customers could place orders no more than one month in advance. It then says it worked on increased output through plant and process upgrades with the installation of a heat exchange system for its Auckland plant planned for July 2022 and by securing further imports from an Australian producer for the second half of 2022. As of late June 2022 it expected the market to return to equilibrium by October 2022.

Unfortunately, some consumers have been vocal about their unhappiness with the supply situation. Rental property developer Simplicity Living took to the press to complain about the delays in June 2022. It added that it had started importing its own wallboard from Thailand instead. The story then became nastier when Simplicity Living alleged that Winstone Wallboards’s parent company, Australia-based Fletcher Building, was blocking imports of certain colours of wallboard. Fletcher Building clarified in the same article that it had trademarked “specific” shades of blue, green, mauve and pink to differentiate its products in the marketplace. This, of course, will be familiar to insulation sector readers of Global Gypsum as Owens Corning is arguably the world’s most famous and successful example of how to copyright a colour. It’s unclear how much of an impediment Fletcher Building’s colour trademarks have been to imports to New Zealand. The company did say in an investor presentation in late June 2022 that it had granted 10 trademark royalty-free licenses so far to allow other companies to import wallboard. To give readers an idea of the amount of attention being focused on Winstone Wallboards and its connected companies, when a shipment of wallboard was delivered early to a construction subsidiary of Fletcher Building, apparently breaking the company’s own supply rules, a video of the incident started circulating on social media before being picked up by national news channels.

Government oversight then stepped up a notch in late June 2022 with the formation of a ministerial taskforce to tackle the wallboard shortage. It plans to troubleshoot the regulation of alternative plasterboard products, look at ways to streamline the use of products that are currently untested in the New Zealand market, provide advice on building consent and explore new distribution models, amongst other goals. Alongside all of this, the New Zealand Commerce Commission started a market study into residential building supplies in November 2021. Its aim is to look into any factors that may affect competition for the supply or acquisition of key building supplies. A draft report for consultation was scheduled for release in July 2022 and the final report should be due in December 2022.

Winstone Wallboards’ woes are clearly down to the disruption caused to supply chains by the coronavirus pandemic. However, fairly or unfairly, its local market dominance has exposed it to most of the blame for the situation in the eyes of some of the New Zealand public. Its products are so integrated into the usage of wallboard in the country, for example, that the Gib brand is specified by name in many of the region’s building consent application documents. The government has now become involved adding further to the public scrutiny. Structural changes may or may not be required at some or multiple levels of the New Zealand wallboard market to fix the current crisis. Yet, funnily enough, in one interview Fletcher Building chief executive officer Ross Taylor raised the issue of customers developing the ‘fear factor’ in response to hearing about shortages and then buying more than they might need. This may sound familiar because it is exactly what happened at the start of the worldwide coronavirus lockdowns when people started panic buying toilet-roll. Whatever else is happening in New Zealand, human nature can’t be helping either.

Members of Eurogypsum, the European Gypsum Association, gathered at the Les Atelier des Tanneurs in Brussels on 27 - 28 April 2022 to formally celebrate the 60th Anniversary of their association, despite a delay of 12 months due to Covid restrictions. Over two days, they participated in meetings and panel sessions reminiscent of pre-pandemic times. Attending the Open Congress session on 28 April 2022, Global Gypsum found the event to be very dynamic and surprisingly open.

The Open Congress began with welcomes from the moderator, Knauf Insulation’s Sian Hughes and outgoing Eurogypsum President Emmanuel Normant, of Saint-Gobain. He introduced the past 60 years as one of ‘enormous change’ for the sector, but this was not meant to be a retrospective. Turning to the next 60 years, Normant said that gypsum’s inherent benefits, including its low embodied CO₂ emissions, recyclability, high degree of safety and ease of use, would make it even more crucial to global development in the future than in the past.

A series of quick-fire presentations from the industry’s big hitters then highlighted a wide range of ways to increase the sustainability of our sector.

Saint-Gobain’s Klaus Birk introduced Gyproc's project to switch its Fredrikstad wallboard plant in Norway to use a 100% electric wallboard production process by 2023. This will use renewable energy, predominantly sourced from hydroelectric power, and lead to a 70% drop in CO₂ emissions. This approach could be applicable to any wallboard plant with access to sufficient renewable power.

Knauf's Jörg Demmich then spoke about a project to extract gypsum from the ‘waste’ from the lithium production process. Even the best lithium ores only contain 3 - 6% lithium by mass, leaving 94 - 97% currently unused. As electric mobility grows, by-product gypsum from the lithium sector could partly offset the expected fall in flue-gas desulphurisation (FGD) gypsum supplies.

Iryna Yermakova introduced the Etex Group's approach to the wallboard plant of the future. One area she highlighted was the potential for prefabrication at the wallboard plant before panels reach the job site. This has the potential, on some projects, to save up to 10% of the wallboard cost, transport cost and CO₂ emissions of the board used. Surely a quick win for contractors.

Nikolai Halle from Cobuilder introduced the Define tool, freely-available to the construction sector. Define will act like the Swift payment system, but for sustainability data instead of financial data. This would unify different sustainability metrics to cut through the confusing terms used by producers and reveal the 'real' performance of different products, rather than how effectively their attributes are marketed.

The keynote presentation, from the former European Commissioner for the Environment Janez Potočnik – ‘The Father of the Circular Economy’ - then highlighted why innovation is key, not only to the future of the gypsum sector, but to the planet itself. At current rates, the mass of man-made material will be three times larger than all biomass by 2040.

To avoid this, Potočnik argued that the entire economy needs to become service-based, rather than product-based. Under such a model, wallboard producers would become part of the ‘building envelope services sector’ rather than selling wallboard. The desire is then to sell wallboard with a long service life, that can be repurposed and recycled, rather than selling ever-increasing volumes of board.Taking this approach across the entire economy would help society to maximise gross domestic product while reducing environmental impacts, eventually decoupling them from each other entirely. Potočnik concluded that nature is already the 'perfect' circular economy. Humans just need to reintegrate into it.

To say that the panel discussion that followed was ‘lively’ would be an understatement. Member of the European Parliament Iskra Mihaylova, speaking the day after Russia halted gas supplies to her native Bulgaria, said that talk of energy independence and solidarity was 'not enough' and that Europe needed to act on the European Union Green Deal, particularly with a view to energy and resource efficiency and security.

Josefina Lindblom, the European Commission’s Policy Officer for Sustainable Buildings for Circular Economy, introduced what she hoped would become the next buzzword: ‘sufficiency’ - properly taking pause to consider what is truly required of new buildings. This includes the need to apply full circularity to renovation projects.

Adrian Joyce, from the European Alliance of Companies for Energy Efficiency in Buildings, asked the audience to think not in terms of 'energy efficiency,' but 'conservation of energy.' The two terms are subtly different, with the latter akin to ‘sufficiency.' Both point to the need to reduce the use of resources, not just the effectiveness which we use increasing amounts of resources.

Tristan Suffys, Secretary General of Eurogypsum, said that gypsum is well suited to fit into the low-CO₂, low-resource-use sector of the future. He called for re-use of derelict buildings, re-purposing and optimising the use of space by building above existing buildings.

The Open Congress drew to a close with a speech by the incoming President of Eurogypsum (and Head of Corporate Social Responsibility at Etex) Jörg Ertle. He told Eurogypsum members that the 'doors' marked 'Green Deal,' 'Decarbonisation,' and 'Recycling' were all 'open' and that they should be making the most of the opportunities behind each. From Global Gypsum’s perspective, it seems that they have burst through each of the doors into the rooms behind. Some are even measuring up for wallboard.

In conclusion, it appears that the European wallboard sector is at the start of a major increase in sustainability efforts. This will be backed by politicians who are keen to decouple their economies from Russia’s and a public that is increasingly asking for change. And, with three major global producers - Knauf, Saint-Gobain and Etex - based in Europe, between them sharing 47% of the world’s wallboard capacity, we can expect to see these innovations spread to other regions rapidly.

Here’s to the next 60 years!