Market report

China’s chemical industry: Key market scenarios

| Author / Editor: Ahlam Rais / Wolfgang Ernhofer

China has adopted new national pollution-control standards which aims at shifting the numerous chemical plants dotted all over the country to dedicated green industrial parks that offer specialised facilities for wastewater treatment, water disposal and emission controls.
China has adopted new national pollution-control standards which aims at shifting the numerous chemical plants dotted all over the country to dedicated green industrial parks that offer specialised facilities for wastewater treatment, water disposal and emission controls. (Source: Deposit Photos)

China holds a strong position in the global chemical industry and with the recent market happenings in the country; the Asian country is keen on upgrading its game plan.

In 2017, the world chemical turnover was valued at 3,900 billion Dollars with China responsible for 1,451 billion Dollars. China is the largest chemical producer in the world, contributing 37.2 % of global chemical sales in 2017, according to a Cefic 2018 report. However, there is no doubt that the ongoing China-US trade war will have an impact on China’s petrochemical and chemical sales but will it affect China’s position on the global platform? Guess, only time will reveal this but for now the Asian country has been witnessing a range of market trends and scenarios that will make a significant impact on the future of China’s chemicals and petrochemicals industry.

Focus on environment

China has undertaken strong environmental reforms to make the country a cleaner and safer place to live in. The Asian country implemented the national action plan on air pollution and has also adopted new national pollution-control standards which aims at shifting the numerous chemical plants dotted all over the country to dedicated green industrial parks that offer specialised facilities for wastewater treatment, water disposal and emission controls.

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It is interesting to note that the big upstream petrochemical and chemical plants are not affected by the policy as they were constructed with appropriate facilities such as emissions controls and waste-treatment facilities rather it is the smaller private players that are being affected. Plants that cannot comply with the policy or have technologies that are outdated are being shut down. For instance, in 2018, the government shut down 25 per cent of all the chemical companies operating in the Shandong province.

Business opportunities

The world knows that China is a difficult market to enter and the chemical industry is no different. Till 2015, the industry was spearheaded by the Chinese state-owned companies but since the past few years, the country has opened up its doors to global MNCs as well as privately owned Chinese enterprises to establish new petrochemical and chemical complexes.

The global market knows the importance of this market and hence, it was not suprising to see many global players such as BASF, Exxon Mobil announcing wholly-owned investments to develop an integrated petrochemical complex and a refinery-petrochemical complex respectively in the Chinese province of Guangdong.

The Guangdong province has received a good response from global players to set up their projects as the region comprise only a few heavy industry and the population density in the region is also low. Low labour costs along with economical land costs are the additional factors responsible for the region’s popularity.

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Change in consumer trends

Consumer trends in China have changed in the last few years. With a growing young population that is tech-savvy and uses digital media to order food, groceries and even the latest phone or gadget has opened up huge business opportunities for the packaging industry. However, with climate change becoming a vital focus for everyone on the planet, the demand for innovative and eco-friendly solutions is on the rise. Hence, this scenario calls for the rise of speciality products such as biodegradable polymers that are sustainable and nature friendly.

This applies to other sectors as well such as the Electric Vehicles (EVs) segment. Bloomberg New Energy Finance has forecasted that China’s EV market share will reach 20 % by 2025. This will also generate a huge demand for more sophisticated chemical products.

Research and development

China’s chemical R&D spending has increased significantly as now individual companies are collaborating with government research institutes and universities as opposed to the earlier government control. Chinese research has advanced so much that it can give stiff competition to Western companies. For instance Wanhua Chemical developed its own methylene-diphenyl-diisocyanate (MDI) technology and has gone on to become one of the world’s largest MDI producers in the world. There are many other Chinese companies that deal in fermentation-based products such as monosodium glutamate, vitamin C, xanthan gum and have gone onto become pioneers across the globe.

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As China is one of the biggest markets for chemicals, many global companies have also set up a strong R&D foothold in the country such as Akzo Nobel’s eight million Dollar paint and specialty chemical R&D center in Shanghai. More recently, BASF has launched a new process catalysis R&D facility in Shanghai, China that will work to support the Asia Pacific region’s chemical industry. Arkema has also recently expanded its R&D center in China. In many cases, companies have also developed new materials in the country in collaboration with local manufacturers.

China is undertaking all these measures with an aim to remain a major force in the global space for a long period of time and with such dedicated efforts; the country might just achieve its goal.

This article was first published by PROCESS Worldwide.

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* The author is editor for PROCESS Worldwide.

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