Overview

• Hong Kong exports a wide range of building materials and hardware, with major categories including electrical apparatus, building hardware, and steel/iron and wood/board for building. While there are a number of manufacturing establishments still maintaining their operations in Hong Kong, the export sector is dominated by re-exports.
  

• Amid the growing quality consciousness of overseas buyers, many companies have strengthened their quality assurance systems by adopting the ISO 9000 series. Meanwhile, in view of keen competition, Hong Kong companies have diversified their businesses to higher value-added products which meet international standards, such as BS of the UK and ASTM of the US.
  

• Product-wise, demand for do-it-yourself products for interior decoration is gathering strength. High density fibreboards with enhanced fireproof, waterproof and scratch resistance characteristics are also well sought after.
  

• Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland agreed to give all products of Hong Kong origin tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin, will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. 

Industry Features

Hong Kong exports a number of building materials and hardware. The largest export item is electrical apparatus for building, including air-conditioning machines, relays, switches, electric conductors, electric insulators, wires and cables. Hong Kong also exports a variety of building hardware like nails, screws, nuts, hand and machine tools, sanitary ware and locks and keys. Meanwhile, steel/iron such as steel tubes and steel pipes for building, as well as wood/board for building, including fibreboards, wooden doors and wooden window frames, also share a significant portion of total exports. Other smaller export items include plastic tubes, plastic pipes, paints, wallpapers, tiles, floor coverings, sheet glass, lime, cement, marble, stone, sand and gravel.

The industry is characterised by dependence on imported raw materials and semi-finished goods. While there are a few companies still maintaining the manufacturing operations in Hong Kong, a significant portion of their domestic output is meant for local construction.

For production of building materials and hardware requiring large space and special treatment, most Hong Kong companies have relocated their production facilities to the Chinese mainland on the grounds of cost and environmental considerations. Offices in Hong Kong are mainly responsible for quality control, management, marketing and logistic support. In the wake of the relocation, these companies have been re-classified as non-manufacturing establishments, despite the fact that they have manufacturing activities across the border.

The success of Hong Kong’s building materials and hardware industry lies in efficient management. Against the fast changing markets, Hong Kong companies emphasise quick response to ensure effective marketing services to their customers, and to monitor the changing product trends. Moreover, due to the growing quality consciousness of overseas buyers, many companies have strengthened their quality assurance systems. This is evidenced by a growing number of Hong Kong companies adopting the ISO 9000 series, which is an internationally recognised standard for quality management system.

Performance of Hong Kong's Exports of Building Materials and Hardware ^

The Chinese mainland is the largest export market, sharing more than half of the total exports. Sales to the mainland increased by only 3% in 2008 and dropped by 23% in the first eight months of 2009, partly due to the slowing real estate investment in the second half of 2008 and the first half of 2009. Exports were also affected by the rise of local Chinese suppliers, which have posed a threat to Hong Kong companies in the mainland market.

Sales Channels

Hong Kong exporters of building materials and hardware usually sell their products directly to constructors, builders, real estate developers, architects and relevant sub-contractors in overseas markets. Some companies also sell to specialised importers, who then distribute the products to their clients.

As for the Chinese mainland, local government bodies are among the major buyers of building materials and hardware. Other potential buyers include state-owned and private real estate developers, builders and sub-contractors. Hong Kong companies also sell to commercial project owners who have been authorised to conduct infrastructure and construction projects in the mainland and other Asian countries, as well as construction project developers who undertake private real estate development projects.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of building materials and hardware to explore market opportunities.  Important trade fairs related to the industry include the National Hardware Show in Las Vegas, Hong Kong International Building and Decoration Materials & Hardware Fair, and Light+Building in Franfurt. Business missions organised by the Hong Kong Trade Development Council to specific markets also provide opportunities for Hong Kong companies to establish connections with overseas buyers.

Industry Trends

Environmental protection has increasingly affected the production of building materials and hardware. Against this background, many manufacturers have begun to review their production facilities and processes in order to comply with such regulations. The introduction of management system complying with the international environment standards, notably the ISO 14000, is likely to be a focus of the industry.

Meanwhile, on the back of keen competition from the mainland and Southeast Asia in the low-end market segment, Hong Kong companies have diversified their businesses to higher value-added products. Compliance with BS of the UK and ASTM of the US are the cutting edge of companies selling higher-end building materials and hardware, especially to western markets. But buyers in Asia outside Japan are still more cost-conscious, who are sourcing mainly for mass construction projects in the region.

CEPA

On 18 October 2005, the mainland and Hong Kong agreed to further liberalise the mainland market for Hong Kong companies under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III).  The mainland agreed to give all products of Hong Kong origin tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin, will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.

The promulgated rules of origin for auto parts and related items to benefit from CEPA's tariff preference are basically adopting the criteria of principal manufacturing process, change in tariff heading and the value-added content requirement.  Detailed information is available from the following hyperlink:
http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2009.pdf

General Trade Measures Affecting Exports of Building Materials and Hardware

Initiation of anti-dumping proceedings in western countries against goods originating from the Chinese mainland, including certain building materials and hardware, has been a concern for Hong Kong companies with sourcing or production activities in the mainland. For instance, the US has imposed anti-dumping duties on the mainland-origin steel concrete reinforcing bars.  Meanwhile, the EU has anti-dumping duties against steel ropes and cables and certain stainless steel fasteners originated in the mainland.

Product Trends

Alongside a steady growth of the markets for building materials and hardware, there is an increasing demand for do-it-yourself (DIY) products for interior decoration. As a result, demand for floorings, wall coverings, paints and fittings serving for DIY purposes, as well as hardware and electrical tools like electric screwdrivers, drill drivers, hand pumps and DIY home security systems, is gathering strength. Moreover, building hardware is increasingly designed with emphasis on easiness of installation and maintenance.  Products like parts and accessories for sanitary ware and domestic drainage systems have become standard-sized items, thus facilitating repairing and replacement by users.

With the advancement of technology, durability of items like wooden boards has been enhanced by improving fireproof, waterproof and scratch resistance capabilities. In addition, moulded kitchen sinks of fibreglass have become popular, due mainly to its seamless surface, durability and easiness to clean.  New types of materials are continuously being adopted. For example, foam metal, especially aluminium, is beginning to be applied as building materials.