Imagine if France, Taiwan or the United Arab Emirates eliminated their carbon dioxide emissions in a couple of years — and no one noticed. Something similar is happening with China’s construction sector.
Cement production has been collapsing ever since the real-estate bubble popped in 2021. Despite signs that the housing market might finally be stabilizing, the decline has accelerated this year: First-half output fell by 10.8 percent from a year earlier. That suggests the full-year total would be in the region of 1.85 billion metric tonnes — roughly 20 percent below the average 2.34 billion tonnes in the decade through 2021 and the lowest since 2009.
In climate terms, that is a hugely significant drop. Concrete is one of the most polluting materials. For every 100 tonnes of Portland cement, about 57 tonnes of carbon dioxide is released into the atmosphere, and the sector worldwide accounts for about 8 percent of emissions. China consumes half the total, so a 20 percent fall in local cement output translates into a decline in global carbon pollution of nearly 1 percent.
There is little sign of a stimulus sufficient to cause a blowout second half. Shares in major cement producers have fallen since the close of the Chinese Communist Party’s Third Plenum meeting last week, indicating that investors see little reason to expect government support. Furthermore, usage of building materials so far outstrips what we see in every other major economy that it is hard to see it ever regaining the levels seen in the past.
That 1.85 billion tonnes of likely production for this year, for instance, translates into about 1.32 tonnes per person — between three and five times higher than in other industrialized nations. China’s in-use cement stock — a measure of all the material in buildings, roads and structures — was about the same in 2013 as the roughly 15 tonnes per person in the US. Since then, it has approximately doubled. Even if output slows drastically from here, China would be left with far more concrete, in both absolute and per-capita terms, than any major nation the world has ever seen.
The country’s building boom has gone on for so long that we tend to see it as an unchanging fact of nature. That leads analysts to underestimate the extent to which its passing is changing the world as dramatically as its initiation.
If you are wondering, for instance, why the market keeps overestimating Chinese oil demand, it is worth considering the trajectory of two products refined from crude: asphalt and jet fuel.
For many years, China consumed as much of the former (used by builders in surfacing roads and roofing materials) as the latter (used in flying planes around). While jet fuel has bounced back, as people start traveling again after COVID-19, construction-exposed asphalt seems to have reset at a permanently lower level.
That is what you would expect in the aftermath of a once-in-history orgy of house building. If you are anticipating that every economic indicator would revert to the trendlines of the 2010s, you are going to be disappointed.
All roads to net zero run through China. With about one-third of the world’s carbon pollution and more than half of its annual renewable power installations, it is the biggest contributor to a warming planet and the place where we are most likely to turn a corner on centuries of emissions.
Where the cement sector leads, the rest of industry would follow. That would result in a more balanced Chinese economy, as well as a healthier planet. Cement’s decline is one burst bubble we should welcome.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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