Deep Analysis of China's Building Waterproofing Industry Development Direction!

Waterproof materials are finishing materials used to prevent groundwater, rainwater, or air moisture from seeping into the building structure. They are primarily applied in roof construction, underground projects, bathrooms, and exterior walls in residential construction; in infrastructure projects such as railways, highways, tunnels, subways, urban comprehensive pipelines, and water conservancy engineering. During construction, waterproof materials form a protective layer on the building surface to achieve effective waterproofing and anti-leakage performance. Therefore, the quality of building materials directly affects structural integrity and service life.

Domestic waterproof materials are mainly divided intomembranesandcoatingstwo major categories.According to performance, waterproof materials can be classified into flexible and rigid types. Flexible waterproofing refers to using membranes, rubber sheets, etc., as the waterproof layer; rigid waterproofing uses materials like waterproof mortar, fine stone concrete, etc., as the waterproof layer. By type, domestic waterproof materials are primarily two categories: waterproof membranes and waterproof coatings.

■ Waterproof membranes can be further categorized into SBS/APP modified asphalt membranes, high polymer waterproof membranes, etc., suitable for large flat areas. Commonly used in roofs, basements, high-speed rail, expressways, tunnels, bridges, and other large-scale projects. These materials offer excellent aging resistance, crack resistance, and durability.

■ Waterproof coatings can be classified based on composition into solvent-based coatings and water-based coatings. They are suitable for any shape and irregular surfaces, commonly used in small residential buildings, apartments, bathrooms, balconies, and home renovation. These materials feature strong breathability and easy repair after damage.

Waterproof membranes account for about 70% of the market, followed by waterproof coatings.Currently, the main products in China’s building waterproofing materials market include:SBS/APP modified asphalt waterproof membranes, high polymer waterproof membranes, waterproof coatings, and self-adhesive membranes.

According to data from the China Building Waterproofing Association, these four types account for 36.06%, 11.16%, 25.89%, and 22.64% respectively, totaling 95.75%. Among them, waterproof membranes remain the dominant type, accounting for 69.86%, while high polymer membranes represent only 11.16%, relatively low but with outstanding properties such as long lifespan, excellent aging resistance, and durability—making them the future global trend in waterproof membrane development.

Modern waterproof materials originated in Europe and were first produced and applied in China during the 1940s. Modern building waterproofing began with the discovery of asphalt, which was used as a waterproof material. Asphalt derived from petroleum was originally developed in Europe and introduced to China in the 1920s. By the 1940s, it had been domestically produced and applied. For a long time, asphalt was the sole waterproof material available. Its high impermeability and strong air-tightness allowed for multiple layers (e.g., two-coat, three-coat) application, significantly improving construction quality.

Since the 1980s, China has developedthree-component styrene-butadiene rubber (SBR), chlorinated polyethylene (CPE)-styrene copolymer, and polyvinyl chloride (PVC)high polymer waterproof membranes, independently developing SBS and APP modified asphalt waterproof membranes. Adding high polymers like SBS or APP to asphalt improves temperature resistance and durability.

Modified asphalt waterproof coatings have seen rapid development since the 1970s, followed by widespread use of high polymer coatings. Recently,new-generation modified asphalt waterproof materials and TPO waterproof sheetshave increasingly replaced traditional waterproof materials, becoming the primary trend in the building waterproofing industry.

The upstream of the building waterproofing industry includes asphalt, petrochemicals, and petrochemical raw materials. Among these, asphalt accounts for the highest proportion in raw material costs.

Over 80% of waterproof companies’ production costs come directly from raw materials, including asphalt, liquid rubber, base oil, SBS/APP modifiers, rubber latex (including non-volatile latex), basic oil, polyolefins, stone powder, and various chemical additives. Among them, asphalt accounts for the largest purchase volume and cost, roughly one-third of total raw material expenses.

Due to the upstream raw materials being mostly bulk chemicals, waterproof companies generally have weak pricing power. However, large enterprises enjoy certain procurement advantages through centralized purchasing.

The downstream of the building waterproofing industry includes real estate, infrastructure, and rooftop solar systems. Among them, real estate applications dominate.

Waterproof materials are widely used in housing renovations, large municipal projects, high-speed rail bridges, underground pipelines, water conservancy works, and emerging BIPV/BAPV solar roofing systems, collectively shaping market demand across these sectors.

Rising real estate concentration drives increased demand for concentrated procurement in the waterproofing industry. In recent years, real estate developers have steadily improved their concentration levels, shifting from fragmented to refined operations. Consumers now care not just about location and living area expansion but also about overall living quality.

High-quality waterproof materials extend building lifespan, enhance comfort, and reduce maintenance costs. As consumer demand for home quality increases, property developers increasingly prefer well-known, high-reputation brands with proven product quality. These leading companies will accelerate market share capture, driving industry consolidation and increasing concentration.

The new waterproof standards are expected to accelerate market purification and boost industry concentration. In October 2022, the Ministry of Housing and Urban-Rural Development officially issued the 'General Code for Building and Municipal Engineering Waterproofing,' effective from April 1, 2023. The code mandates that design work must meet:

Underground projects: not less than the structural design lifespan; Roofs: not less than 20 years; Interior projects: not less than 25 years.

Prior to the new standard, the typical warranty period for waterproof projects was 5 years. Products meeting only this requirement will be quickly phased out.High environmental protection, high durability, high recyclabilityproducts are expected to gradually dominate the market. Leading companies with R&D capabilities and superior product portfolios will gain early advantages, rapidly capturing market share. Smaller firms with lower production capacity and inferior product quality will gradually be eliminated.

Production company profit margins are highly sensitive to crude oil price fluctuations, typically lagging by 1-2 quarters. Since upstream raw materials are mostly petrochemical products, their prices are strongly correlated with international crude oil prices. Thus, corporate profit margins are heavily influenced by crude oil volatility.

According to data from the Head Office Research Institute, in 2020, due to pandemic effects, crude oil prices dropped from $64/barrel to $43/barrel. CR3 waterproof material average prices also fell from ¥10.17/m² to ¥8.48/m², severely impacting industry profitability.

Using Eastern Oil & Gas as an example, historical data on crude oil prices and enterprise profit margins showthat enterprise profit margins typically lag behind crude oil price movements by 1-2 quarters.In the second half of 2022, crude oil prices began declining from highs. If prices remain at current levels, historical data suggests that 2023 corporate profit margins could see significant recovery.

Main application areas for building waterproof materials areresidential construction, infrastructure, and urban renewalsectors.According to the China Building Waterproofing Association statistics, current demand distribution is 40%, 40%, and 20% respectively. Residential construction includes real estate, other residential buildings, with real estate accounting for 60%-70% of total residential demand. Infrastructure includes transportation networks, pipelines, water conservancy, high-speed roads (bridges, tunnels, provincial/highway-level roads), etc.

Inrooftop distributed solarsystems, waterproof membranes are widely used.Based on our calculations, the post-standard market potential is approximately ¥17.65 billion.Residential, infrastructure, renovation (only calculating roof repairs, excluding major renovations), and rooftop solar markets are estimated at ¥8.15 billion, ¥6 billion, ¥3 billion, and ¥500 million respectively. If considering old renovations and underground/interior projects, the total market space will expand further.

The new standards will primarily drive growth in the residential sector. After implementation, key changes include:

(1) Explicit requirements for waterproof design lifespan.The new standard does not differentiate by level but uniformly requires roof waterproofing to last no less than 20 years—significantly higher than the previous standard 'Level 1: ≥20 years, Level 2: ≥10 years.' Interior waterproofing must last no less than 25 years, and underground waterproofing must not fall below structural lifespan.

(2) Increased number of buildings classified as Level 1 waterproofing.According to GB50178 standards and the internationally recognized classification method based on annual rainfall, roof and exterior wall waterproofing environments are categorized into three types: Type I (annual rainfall ≥1300mm), Type II (400mm ≤ annual rainfall<1300mm）、ⅲ类（年降水量<400mm）。>

The new standard applies Level 1 waterproofing to all public buildings with annual rainfall above 400mm, including roofs, exterior walls, and interior structures. According to estimates by Li Xianzhi, Vice Chairman of the China Building Waterproofing Association, after implementation,nearly 80%-85% and aboveof buildings nationwide may be classified as Level 1 waterproofing requirements.

(3) Increased number of layers and courses required.Roof projects: Level 1 waterproofing increases from two layers tothree layers(with at least one layer being a membrane); Level 2 waterproofing increases from one layer to

two layers

(with at least one layer being a membrane).Underground projects: Level 1 waterproofing adds one more layer compared to current standards, with higher requirements for joint sealing. Exterior wall projects: Level 1 waterproofing requires at least two layers for frame-filled or solid wall structures; closed panel walls must meet Level 1 requirements. Interior projects: The new standard only specifies Class A projects. 95% of interior projects should be Level 1 waterproofing. Bathrooms and balconies require two layers, with overall requirements raised.

Waterproof materials are used throughout both construction and finishing stages. Waterproof membranes are used for underground structural waterproofing and roof waterproofing, closely tied to new construction volumes. Waterproof coatings are commonly used in small residential buildings, apartments, bathrooms, and balconies for finishing-stage applications, with demand growth closely related to the pace of finishing work.

Currently, waterproofing material costs account for about 1%-2% of total construction costs in China, significantly lower than the 6%-7% in developed countries. According to Zhiyan Consulting, in the residential sector, waterproofing occupies 36% of roof, 32% of basement, 10% of bathrooms/balconies, and 22% of other areas.

Based on the following assumptions:

(1) Ratio of waterproof material demand between construction and finishing phases remains 7:3;

(2) Waterproof material cost ratio is between 1% and 2%, increasing by 0.5% annually;

(3) Based on association data, waterproof material demand for real estate accounts for 60%-70% of total residential demand. We assume 65% of total residential demand, and this figure remains unchanged;

(4) Roof construction cost per square meter is set at ¥2,243 (average for first and second-tier cities), as of 2022;

(5) Market size = Real estate area × Average construction cost × Waterproof material cost ratio ÷ Real estate demand ratio;

(6) Roof projects: Assume 80% of Level 1 waterproofing after the new standard, with 10% each for Level 2 and Level 3. Level 1 roof waterproofing increases from two layers to three (with at least one membrane layer); Level 2 increases from one layer to two (with at least one membrane layer). Under pure cost increase scenarios, roof waterproofing demand is projected to grow by over 50%;

(7) Underground projects: Level 1 underground waterproofing adds one more layer compared to current standards, while Level 2 and Level 3 changes are minor. Assuming 80%+ of buildings will be classified as Level 1 after implementation, currently only 35% meet Level 1 standards. Under pure cost increase scenarios, roof waterproofing demand is projected to grow by over 60%;

(8) Exterior wall projects: Current standards lack strict requirements for exterior wall waterproofing. Increases mainly stem from new standard requirements for buildings with annual rainfall >400mm, requiring Level 1 waterproofing. Concrete exterior walls need one layer, masonry walls need two layers, thus adding 1-2 layers of waterproofing;

(9) Interior projects: After new standard implementation, bathrooms and balconies must have at least two layers of waterproofing, an additional layer compared to current standards. Currently, only 35% of projects meet Level 1 standards. After implementation, 95% of interior projects should be Level 1. Under pure cost increase scenarios, interior waterproofing demand is projected to grow by 95%.

Post-standard residential market potential reaches ¥8.15 billion, up 48%. Based on prior assumptions, in 2022, roof, basement, and bathroom/balcony waterproofing market sizes were ¥1.99 billion, ¥1.78 billion, and ¥550 million respectively. Based on prior calculations, post-standard increases in the above segments are projected at 50%, 61.5%, and 95%. Assuming full implementation of the new standard in 2023 without considering construction and finishing stage rework,2023 roof, basement, and bathroom/balcony waterproofing market sizes will be ¥3 billion, ¥2.87 billion, and ¥1.07 billion , bringing the total residential market potential to¥8.15 billion

, representing a 48% increase.

Dual policy support will drive real estate recovery. In 2022, the real estate market faced weak sentiment and reduced activity. From January to December 2022, new residential floor area, completed floor area, and sales area declined by 39.37%, 14.98%, and 24.30% year-on-year, respectively—all sharply down.

Multiple ministries continue to release supportive policies. Q4 2022 saw a noticeable upgrade in the 'Stabilize Real Estate' policy strength. Credit, equity, and bond financing channels ('Three Pillars') have prioritized domestic demand, with central economic meetings proposing to elevate 'support for home improvement' to the top priority. On January 5, 2023, the People's Bank of China announced adjustments to the mortgage interest rate mechanism, lowering the first-home loan rate and interest rate. Support for second-home purchases is also reasonable.Dual policy support will help the real estate industry recover.In January-February 2023, completed floor area rose by8.0%, marking the first year-on-year increase since 2022. This represents a 23 percentage point rebound from the full-year 2022 decline. Sales area and new construction area grew by -3.6% and -9.4% respectively, showing signs of stabilization.

With sustained implementation of the 'Ensure Delivery' policy and continuous policy support from the demand side, new construction and completion activities are expected to continue recovering. The waterproofing market within the residential sector will also expand further.

The renovation market is substantial. Leakage issues in residential buildings have become one of the main problems in China’s construction industry. According to the 2020 'Building Industry Development Statistical Analysis Report,' the total existing residential construction area exceeds 700 million square meters, with an estimated combined leakage rate over 63%.

Renovation market demand includes B-side old district renovations and C-side second-hand homes, elderly housing upgrades. Currently, 80% of waterproof products in Europe, America, Japan, and other developed countries are used for renovation and maintenance of existing buildings.However, in China, 95% of waterproof material producers 95%of their products are used in new construction markets.Renovation markethas vast untapped potential.

Policy-driven expansion of B-side old district renovation demand. In 2020, the 'Guidance on Fully Promoting Old District Renovation Work' proposed renovating 390,000 old districts by 2020, affecting nearly 7 million residents.

By 2022, the framework, policy system, and operational mechanism for old district renovation were basically established. By the end of the '14th Five-Year Plan,' efforts will focus on completing the renovation tasks for old districts built before 2000.

According to Ministry of Housing and Urban-Rural Development statistics, there are approximately 1.6 million old residential communities built before 2000, covering around 400 million square meters. Since July 2020, nationwide promotion of old district renovations, with new renovation starts in 2020 and 2021 totaling 40,279 and 55,555 units respectively.

The 2021 Government Work Report proposed completing nearly 1.7 million old district renovations by 2025. With accelerated progress, renovation demand will surge, driving expansion of the waterproofing industry.

C-side second-hand home upgrades have growing demand. Renovation market potential is expected to reach ¥3 billion.China's residential construction area has been at high levels from 2009 to 2021, accumulating massive stock. Future increases in building age will unleash significant renovation demand.

According to the China Building Waterproofing Association, the average maintenance cycle for roofs is 6-8 years. Within the next 10 years, annual maintenance demand is projected at 4-5 million square meters. According to Zhiyan Consulting data, repair costs are 3-4 times the initial installation cost. Assuming only roof repairs are considered, a 50% repair rate, our calculation shows that 2022 renovation market demand was approximately ¥2 billion. Considering the 50% increase in roof waterproofing materials under the new standard, the market potential is estimated at ¥3 billion.

January–February 2023 infrastructure investment growth continued from 2022 highs, maintaining stable momentum. Public infrastructure investment and private infrastructure investment rose 12.2% and 9.0% year-on-year respectively, sustaining 2022's high levels.

Looking at infrastructure investment breakdowns, power, heating, gas, and water production and supply investments continued their high-growth trend in 2022, rising 25.4% year-on-year (19.3% for the full year). Transportation, warehousing, and postal services rose 9.2%. Water conservancy, environmental protection, and public facility management rose 9.8%. Infrastructure will remain a stable source of investment and steady growth driver.

Special-purpose bonds are expected to maintain momentum. In 2023, local government special-purpose bond limits are ¥3.8 trillion, up from ¥3.65 trillion in 2022—a 15 billion increase.

Among these, according to local fiscal forecasts, advance disbursement of new special-purpose bond amounts reached ¥2.19 trillion, up 50% from ¥1.46 trillion in 2022. The 2022 special-purpose bond issuance was relatively ahead of schedule.The upward trend is expected to continue. The second quarter or upcoming special-purpose bond issuance is likely to peak, accelerating physical project execution, providing strong support for waterproof material demand.

Infrastructure market potential is approximately ¥6 billion. The new standard's growth primarily impacts the residential sector. According to the China Building Waterproofing Association, main application areas are residential, infrastructure, and urban renewal, with demand ratios of 40%, 40%, and 20% respectively. Assuming these ratios remain constant, using 2022 as the baseline, based on our prior estimation of residential market potential:The 2022 infrastructure market potential was approximately ¥5.52 billion. Considering the high growth in infrastructure investment, the market space is expected to expand further. Assuming a 10% growth rate, the 2023 market potential is projected to exceed ¥6 billion.

"Building + Solar," rooftop distributed solar systems are divided into BIPV and BAPV. Distributed solar power plants refer to facilities installed near user sites, operating in a way where users generate and consume electricity themselves, with surplus power fed into the grid. These systems are characterized by on-site power generation and balance regulation within the distribution network.

Based on design, construction, and installation methods, they are categorized into BAPV (installing photovoltaic panels on existing buildings) and BIPV (integrated building-solar systems). Both forms utilize rooftop resources to implement distributed solar power generation.

BIPV is one of the main applications for integrated building-solar systems, combining power generation and building functions. Compared to BAPV, it offers superior aesthetics, higher safety, and longer lifespan. Current BIPV system design lifespans are 25 years or more. Roof waterproofing directly affects system longevity. Once leakage occurs, the photovoltaic equipment must be dismantled for repair, significantly impacting long-term operation costs.

Policy-driven expansion of distributed solar deployment.In June 2021, the National Energy Administration issued the 'Notice on Reporting Pilot Projects for Distributed Solar PV Development in Prefectures (Cities, Districts),' specifying that the installable solar PV ratio for government buildings should not be less than 50%; schools, hospitals, village committees, and other public buildings should not be less than 40%; industrial factory rooftops should not be less than 30%; rural residential rooftops should not be less than 20%.

In October 2021, the State Council released the 'Notice on the Action Plan for Carbon Peak Before 2030,' stating that by 2025, the renewable energy substitution rate in urban areas should reach 8%, and new public buildings and factories should achieve a rooftop solar coverage rate of 50%.

Rooftop solar waterproofing market potential is approximately ¥500 million.According to national statistics and calculations by the China Academy of Building Sciences, China currently has about 800 million square meters of existing building roof area, with approximately 100 million square meters added annually.Assuming TPO waterproof membranes cost ¥40-50/m², annual new market potential is approximately ¥500 million.

Source: Future Intelligence