Real estate revival to boost Chinese calcium carbonate demand

By Albert Li
Published: Saturday, 21 May 2016

The recovery in China’s real estate and construction markets is expected to drive up consumption of calcium carbonate materials used in plastic fittings, delegates at the China Calcium Carbonate Industry annual meeting heard in May.

At the meeting held on 16-17 May at the China Inorganic Salt Industry Association in Shijiazhuang, the capital city of Hebei province, attendees listened to predictions that rising demand for plastic windows, doors and pipes for new buildings will shape the Chinese calcium carbonate market over the next few years.

Investment growth in China’s real estate sector rose to 7.2% in January-April this year from 6.2% in January-March, data released by the country’s National Bureau of Statistics in mid-May showed. House prices increased in 65 cities in April, compared with 62 in March, although real estate sales and prices are generally expected to retreat in the second half of this year.

Cunji Wang, who spoke at the event on behalf of the plastic profiles, door and window commission at the China Plastics Association, said that this resurgence in building activity had led to increased consumption of precipitated calcium carbonate (PCC), which is used as filler in plastic fittings.

Chinese output of extruded plastic profiles peaked in 2012 at a capacity of 8.5-8.8m tonnes across 14,000 extrusion production lines. When growth in China’s real estate market began to slow down after 2012, demand for construction materials began to taper and overcapacity soon became evident in the extruded plastics sector. 

Table 1 shows the decline in new real estate development year-on-year in Q2 2015 and the bounce back towards the end of last year. Table 2 shows how output of plastic profiles has tailed off and is yet to rebound.

Table 1. Growth in Chinese building activity (2013-Q1 2016)


2013

2014

2015

Q1 2016 

Newly built real estate (general)

16.1%

-10.7%

-14%

19.2%

Newly built housing

13.4%

-14.4%

-14.6%

14.8%

Source: China Plastics Association 


Table 2: Plastic profile production in
China 2011-2015 (million tonnes)

Year

2011

2012

2013

2014

2015

Total annual production

5

5.2

5

<5

<4.5

Source: China Plastics Association


Plastic yet to perk up

As well as stiff competition between different types of plastic, PCC-filled products are rivalled by aluminium alloys in many applications such as window frames, causing the sector to struggle over the last three years.

Plastic profiles demand usually lags the real estate market by eight-to-12 months, therefore the China Plastics Association expects to see an uptick in consumption either in the final quarter of this year or in the first three months of 2017. This will in turn boost PCC demand, Wang said.

Beyond the near term outlook, it is hoped that China’s 13th Five Year Plan, which runs from 2016 to 2020 and contains a number of large infrastructure and housing development projects, will boost demand further.  

China’s calcium carbonate industry

China’s calcium carbonate industry has expanded rapidly in the last five years. According to Lianyin Tao, vice director of the China Inorganic Salt Association, in 2011, Chinese output of calcium carbonate stood at 15m tonnes, comprising 8m tonnes PCC and 7m tonnes ground calcium carbonate (GCC), accounting for 40% and 14% of global supply of these products, respectively. 

Today, the country has the capacity to produce more than 30m tpa – 10m tpa PCC and and 20m tpa GCC, making up respective shares of approximately 50% and 36% of global output. 

The growth of the sector has been attributed in part to the establishment of industrial clusters around China’s richest limestone resources in Sichuan and Guangxi provinces, although calcium carbonate producers in other areas have failed to keep up with the wider drive for modernisation and greater efficiency.

Actual calcium carbonate production currently stands at around 24m tpa, with capacity utilisation rates hovering between 70% and 80%, owing to the weaker end market conditions experienced during the post-2012 lull in Chinese economic growth.

Calcium carbonate consumption is generally local to supply sources, meaning that global trade of the material is only around 500,000 tonnes, Tao said. Of this China contributed 120,000-130,000 tpa, reserving most of its output for processing into products like paper, plastic, coatings and rubber, which can then be exported at a much higher value than the raw material.

China’s plastic industry is by far the biggest user of calcium carbonate, according to Inorganic Salt Association figures, with a capacity of 15m tpa consuming at least 10m tpa calcium carbonate, accounting for 32% of the country’s overall demand.

Tao called on Chinese calcium carbonate businesses to concentrate on innovation, both in products and in manufacturing machinery to ensure that the industry keeps up with changes in end market demand. 

He also advocated a joined-up approach to manufacturing, ensuring an appropriate balance between PCC and GCC output along with the development of new products such as activated and nano calcium carbonates.

A move away from coal-fired calcining kilns for producing PCC is also needed, Tao said, if the calcium carbonate industry is to comply with new tighter environmental regulations.