Real estate and infrastructure are the main demand markets for sand and gravel aggregates, with sand and gravel aggregates for infrastructure accounting for more than 60%, sand and gravel aggregates for real estate accounting for about 20%, and some civil markets. Since 2021, the prosperity of the real estate market has been declining, resulting in a sharp decline in the demand for sand and gravel aggregates for real estate. Cement Big Data Research Institute estimates that 3.117 billion tons of sand and gravel aggregate will be used in real estate in 2021, with a year-on-year decline of 14.8% and 12.9% in 2022 and 2023 for two consecutive years. Recently, the real estate policy good frequency, in this series of good policies, can really drive the sand and gravel aggregate market demand to stop falling and stabilize?
Figure 1: Demand Trend of Aggregate for Real Estate
Data Source: Cement Big Data (https://data.ccement.com/)
Real Estate Increment Policy is the Key to Stimulating the Demand for Aggregate Market. On October 17, the Ministry of Housing and Construction briefly summarized the "combination boxing" of the stable real estate policy as "four cancellations, four reductions and two increases". The real estate policy has gradually shifted from increment to both increase and deposit, and strictly controlled the direction of increment. For the sand and gravel market demand, the impact of the real estate stock market is not obvious, and the incremental market is the key to drive the sand and gravel demand to stabilize. The "four cancellations" and "four reductions" policies in the "442" policy are all destocking in the stock market, and only the "two increases" are related to the incremental market, focusing on the driving effect of the "two increments" policy on the demand of the sand and gravel market.
Incremental policy one, through monetized resettlement and other means, the implementation of 1 million new urban village renovation and dilapidated housing renovation
policies is still in the initial stage. The policy can be compared to the transformation of shanty towns before 2024. According to the historical data of the Ministry of Housing and Construction, the transformation of shantytowns in China before 2024 can be divided into four stages: pilot, start-up, acceleration and ebb. At present, there is still a big gap between the transformation of 1 million urban villages and the transformation of dilapidated houses compared with the transformation of shanty towns in the start-up stage and the peak stage, which is still in the early stage of the pilot or start-up stage.
Table 1: Newly added 1 million units of urban village renovation and dilapidated housing renovation VS shantytown renovation
Data source: Cement Big Data (https://data.ccement.com/)
The annual demand for new aggregate is less than 20 million tons. Limited impact. The Ministry of Housing and Urban-Rural Development pointed out that there are 1.7 million urban villages to be renovated in 35 large and medium-sized cities across the country, and 500,000 dilapidated houses to be renovated in cities across the country. The 1 million units proposed this time are aimed at the more mature projects. According to the requirements, the reconstruction methods of urban villages are divided into three categories: demolition and new construction, renovation and upgrading, and combination of demolition and integration. The qualified urban villages should be demolished and newly constructed; the unqualified urban villages should not be pushed forward forcibly, and regular renovation and upgrading should be carried out to provention and control potential risks; the combination of demolition and integration should be implemented between the first two categories. According to the spirit of the policy, the proportion of demolition of old villages in cities should not be higher than 20%, and according to the experience of transformation in various places, the proportion of demolition of old villages can reach about 60%. Accordingly, the proportion of demolition and new construction is divided into 20%, 40% and 60% according to pessimism, neutrality and optimism, and the rest is rectified. There is not much demand for sand and gravel aggregate materials for rectification, and the focus is on demolition and new construction. According to 100 square meters/set of new construction, the new construction area is 2000, 4000 and 60 million square meters. By analogy with the completion time of the shed reform project, the pilot or start-up stage will take about 3-4 years to complete a stage goal. Assuming that the allocation is completed in 4 years, the consumption of cement for housing construction per square meter is 0.2 tons, the ratio of commercial concrete cement to aggregate is 0.32: 1.8 (i.e. 1: 5.625), and the consumption of aggregate for housing construction per square meter is about 1.125 tons. Then the new construction area of new real estate and the annual demand for new sand and gravel aggregates are as follows:
Table 2: Estimation
of demand for new sand and gravel aggregates for 1 million units of urban village reconstruction and dilapidated housing reconstruction Data source: Cement Big Data (https://data.ccement.com/) 0HTML0U NK14 incremental policy two, the "white list" project credit scale will be increased to 4 trillion yuan 0 HTML 0 UNK1 5 commodity housing project loans are all included in the "white list", 1.77 trillion yuan of incremental funds is the key to stimulate the demand for sand and gravel aggregates. 0 HTML0 UNK1 6 As of October 16, the approved loans for "white list" real estate projects reached 2.23 trillion yuan, and by the end of 2024, the credit scale of "white list" projects will increase to more than 4 trillion yuan, with an increase of 1.77 trillion yuan. In the past, one of the necessary conditions for "white list" projects was that real estate development projects must be under construction, including projects that can resume work immediately after short-term shutdown but can be completed and delivered after funds are in place. This means that it is the end of the project that has been nearly completed before. Previously, most of the "white list" project funds were used to repair projects such as "guaranteed delivery" and "uncompleted residential flats" which were difficult to repair, rather than those newly developed projects. In the later stage of the project, the demand for aggregate materials is not much, and the incremental driving effect is very limited. On October 17, the meeting of the State New Office announced that the financing mechanism of real estate "white list" projects would be further optimized, and all loans for commercial housing projects would be included in the "white list", which would be followed by 1.77 trillion yuan of incremental funds, so that part of the funds could flow into newly started commercial housing projects, thus stimulating the demand for aggregate materials. 0 HTML 0 The annual increment of aggregate demand brought by the UNK1 of 71.77 trillion yuan is 62-155 million tons. HTML 0 UNK1 8 assumes that 1.77 trillion yuan of incremental capital flows into new commercial housing projects according to pessimistic 20%, neutral 30% and optimistic 50%. In real estate development projects, the cost of construction and installation accounts for 70% of the total cost of real estate development, and the cost of commercial housing construction and installation is 1200-1800 yuan per square meter (calculated at an average price of 1500 yuan per square meter). From the perspective of construction cycle, it usually takes 2-3 years from the "new start" to the "completion" of real estate, which is the main period for the use of aggregate materials. Annual increment of aggregate demand is: 0 HTML0 https://data.ccement.com/ 9 Table 3: Estimation of aggregate demand driven by 1.77 trillion yuan of incremental capital 0 HTML0 UNK2 0 Data source: Cement Big Data (https://data.ccement.com/) 0 HTML0 UNK2 1 Despite the favorable real estate policies, However, the increase of real estate is strictly controlled, and the demand for sand and gravel aggregates is limited, so we need to be cautious about the influence of the policy on the market. 0 HTML0 UNK2 2 The author estimates that the demand for aggregate for real estate in 2024 will be 2.017 billion tons, which is 297 million tons less than that in 2023. It is estimated that the demand for aggregate in China in 2024 will be 13.5 billion tons, which is 1.6 billion tons less than that in 2023. The total annual increment of aggregate demand brought by 1 million urban village renovation and dilapidated housing renovation projects and "white list" projects is 68-172 million tons. The year of 2024 has come to an end, and the increment of this part of sand and gravel aggregate has little impact on the demand for sand and gravel aggregate in 2024. It is expected that the demand for sand and gravel aggregate in 2025 will be partially boosted, but according to the demand volume of sand and gravel aggregate in the past, the pulling effect will not be too large. 0 HTML0 UNK2 3 Table 4: Annual demand increment of sand and gravel aggregate brought by two incremental policies (100 million tons/year) 0 HTML0 UNK2 4 Data source: Cement Big Data (https://data.ccement.com/) 0 HTML0 UNK2 5
