LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
WASHINGTON, July 27 (Reuters) – The Biden administration on Thursday continued its push to drive down housing prices, announcing steps to reduce zoning and land-use restrictions that often constrain housing construction, especially in low-income areas, and better protect renters.
The moves, which will also expand financing for affordable, energy efficient and resilient housing and promote commercial-to-residential conversion opportunities, are part of a big White House push to boost the supply of affordable housing.
Inflation in rental markets is decelerating, and data show more apartments will be built this year than any year on record, but housing prices remain high across the country.
“Today’s actions … are a down payment on the historic housing investments proposed in the president’s budget that would boost supply, lower costs and cut dangerous climate pollution, promote homeownership, protect renters, and promote fair housing,” the White House said in a statement.
High housing costs and increased homelessness in cities have caused strife in communities across the country, and could be a salient factor in the 2024 presidential election, in which U.S. President Joe Biden is seeking a second term.
The White House last week announced plans with the Department of Housing and Urban Development (HUD) to reduce or eliminate high application charges for renters and other so-called junk fees that can jack up consumers’ costs by 20%.
On Thursday, it shifted focus to zoning regulations that limit where, and how densely, housing can be built – steps that have limited housing supply, perpetuated historical patterns of segregation, and increased energy costs and climate risk.
“Today, we are acting to increase the supply of affordable housing, which is crucial to lowering housing costs,” Housing and Urban Development Secretary Marcia Fudge said.
As part of Thursday’s actions, HUD announced a new $85 million program to help communities identify and remove barriers to affordable housing production and preservation. Communities with acute needs can apply for up to $10 million in funding.
The money could enable a shift to higher-density zoning and rezoning for multifamily and mixed-use housing, while reducing requirements related to parking and other land use restrictions, the White House said.
The actions come after the U.S. Department of Transportation said it would provide up to $3.16 billion for planning and capital construction projects that prioritize disadvantaged communities and improve access to daily destinations.
The Economic Development Administration (EDA) has also updated the guidelines for grants to emphasize efficient land use and concentrate new developments in areas that are accessible to nearby residential density.
Other measures focused on simplifying underwriting for larger multifamily housing loans and streamlining financing for creation of affordable housing.
The administration will also work to leverage federal funds to support commercial-to-resident conversions, and is setting up a new interagency working group to lead that effort.
Such conversions could also help create zero-emissions housing, which will reduce energy costs for residents and cut dangerous climate pollution, the White House said.
The White House also announced plans HUD to boost protections for renters, including ensuring that renters have an opportunity to address incorrect tenant screening reports and get fair notice in advance of any eviction.
HUD will also provide new funding to tenant organizing efforts, the White House said.
Reporting by Andrea Shalal; Editing by Conor Humphries
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MUMBAI, Feb 14 (Reuters) – Two large companies within India’s embattled Adani Group are likely to repay their short-term commercial paper (CP) debt as they come due over the next few months, instead of rolling them over as is normal, two merchant bankers and a company official directly familiar with the matter said.
The two group companies have about 50 billion rupees ($605 million) worth of CP due to mature through March, data shows, while exchange data shows the flagship Adani Enterprises Ltd (ADEL.NS) has redeemed a total of 2.5 billion rupees of CP since Jan. 25.
That is a day after U.S. short-seller Hindenburg Research accused the group of improper use of offshore tax havens and stock manipulation – allegations the group has denied – that sparked about a $120 billion loss in the group’s market value on concerns including about its ability to refinance debt.
Adani Enterprises and Adani Ports and Special Economic Zone Ltd (APSE.NS) regularly raise funds by issuing CPs – short-term debt instruments issued to meet working capital requirements.
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“We will repay the CPs as and when they mature and are currently not looking to tap the short-term debt market,” an official with one of the companies said on condition of anonymity as they are not authorised to speak to the media.
The official said payments are being made as the securities mature and the company has not got any requests for early redemptions.
“All payments are being made as per schedule,” an Adani group spokesperson said in an e-mail, but did not respond to queries on whether investors are seeking early redemption.
Adani Ports has CPs worth 35 billion rupees due to mature through end March, data from information service provider Prime Database showed.
Adani Enterprises has CP worth close to 15 billion rupees due to mature over February-March and more than 2 billion rupees worth due for redemption from April through January 2024, the data showed.
The Adani Group is unlikely to roll over this debt as it comes due, two bankers said on condition of anonymity as they are not permitted to speak to the media.
“Market sentiment is such that people will be cautious to immediately roll over CPs, and would prefer to cash out. So, we may see them (Adani Group) staying away from the market for some time,” said one banker, who regularly arranges debt issuances for the group.
A second banker, who advises the conglomerate on local borrowings, added the group has not reached out to its bankers asking for a rollover.
“The Adani group generally gets in touch with bankers some days prior to the maturing CPs but has stopped any sort of intimation, hinting that they may look to repay the existing CP holders,” this person said.
Apart from short-term borrowings, Adani Enterprises has not moved forward with plans to launch its debut retail bond issue of up to 10 billion rupees, while Adani Green Energy Ltd (ADNA.NS) has also stayed put on a planned 1.5-billion rupee, 10-year bond offering, according to bankers, including the two mentioned earlier.
“There’s been no communication from the companies on previously proposed bond issuances,” said a merchant banker with a brokerage firm and directly involved in the arrangement.
The Adani Group spokesperson denied media reports that these bond issues have been scrapped, saying this is “speculation” and “not true” in a reply to Reuters’ mail.
($1 = 82.6390 Indian rupees)
Reporting by Bhakti Tambe; Editing by Savio D’Souza
Our Standards: The Thomson Reuters Trust Principles.