Chinese industry players may see great opportunities in Sichuan rebuilding projects, as the Chinese government will spend RMB 1.7 trillion over the next three years to rebuild areas ravaged by the Sichuan earthquake, industry experts say.

The magnitude-8.0 earthquake on May 12 this year killed nearly 80,000 people and left about 10 million homeless as villages were razed across a broad swath of South-west China.

The RMB 1.7 trillion investment announced earlier this month will be spent on housing construction, industrial development, environmental protection and big-ticket infrastructure projects including railways and highways, according to Wei Hong, executive vice governor of Sichuan. Industries such as engineering machinery, construction materials and iron and steel will benefit greatly from the newly released plan.

Construction materials

As reported by local media, some major projects involving infrastructure and industrial development will be kicked off before the end of this year.

As various rebuilding projects will soon begin, demand of construction materials such as cement, sandstone, wall materials, wood and timber are expected to surge. In the next few years, the Sichuan rebuilding projects will likely to consume 370 million tons of cement, 20 million cubic meters of timber, 210 billion pieces of standard bricks, and 1.7 billion cubic maters of sandstone, said Wei Hong during a press conference held in Hong Kong earlier this month.

Industry experts estimate that a lack of supply in construction materials will appear this and next year, with about 40 million tons of unfulfilled demand annually.

"Since quality will be an important issue in the rebuilding projects, manufacturers who produce high quality construction materials will see better opportunities," an expert commented.

Major infrastructure projects include Chengdu-Duguanyaun high-speed railway, Chongqing-Lichuan railway, Xian-Chengdu railway, Chengdu-Guangyuan railway, Guangyuan-Langzhong highway, runways at Chengdu Shuangliu Internationl Airport, and the Tingzikou Hydroelectric Project. Meanwhile, major industrial projects include Aba Aluminum Factory, Sichuan Deyang Chemical base, Lanzhou-Chengdu oil pipeline. Also, projects of a batch of schools, hospitals, cultural and recreational facilities as well as other facilities closely related to local people’s living will soon begin in the area.

Iron and steel

Since carmakers, the traditional steel users, has been suffering from sales downturn amid the global gloomy economy, drop in consumption and price of steel materials is seen in the country. Some experts comment that rebuilding projects are likely to change this gloomy situation. According to statistics, steel consumption from rebuilding projects in Sichuan Province will reach 37 billion tons in few years. As construction-used steel materials compose 50% of the country's steel consumption, steel makers in the area including those in Sichuan, Gansu, Shaanxi provinces will benefit from the guaranteed demand of such steel materials.

In 2007, the total annual output of steel rolled out by steel makers in Sichuan, Gansu and Shaanxi amounted 27.47 billion tons. "It means that the 37 billion tons of consumption will be 1.3 times of the total annual output of the three provinces," analyst of Citic Security Zhou Xizeng told the Shanghai Securities Journal during an interview. It will be a great push for the steel production of the three provinces. At the same time, demand in the nearby provinces will also increase. In 2007, steel materials transferred to the three provinces reached 18.55 million tons. Based on this figure, the expected amount of related steel production in area nearby will be boosted to 12-15 million tons.

Engineering machinery

Surging demand in engineering machinery such as engineering machinery such as excavator, bulldozer, derrick truck, heavy-duty truck, etc, is expected due to the ongoing rebuilding projects in Sichuan. Demand of equipment including machines for concrete and earth & stone will also increase in the late construction period. In fact, data provided by the committee of the Second Edition of China Sichuan Engineering Machinery, Construction Machinery and Engineering Vehicles Exhibition has proved this point of view -- the recent sales of engineering machinery in Sichuan has tripled the pervious amount.

Upcoming reconstruction projects in Sichuan Province will include 4.5 million units of housing, 9,700 medical facilities, 11,000 schools and 51,000 km of highways, as reported by local media.

According to some experts, the demand of such engineering machinery as excavator, bulldozer, derrick truck and heavy-duty truck, as well as a huge number of engineering professionals, will surge shortly due to the beginning of the reconstruction projects.

Other industries like chemical and non-ferrous metal are also likely to be among the major beneficiaries of Sichuan rebuilding projects.