Will China be left with just giant chemical companies in five years?

- May 15, 2019-

Over the past decade, severe product homogeneity, overcapacity, and standardization and automation of production processes have decimated upstream chemical producers.Today if someone tell me the cyclohexanone production, production of styrene, butadiene and production of phenol and acetone are small words is very ridiculous, you can say that you basically see in the field of the upstream basic chemical raw materials sales under 100 million small factory, and now the trend is spreading to the downstream chemicals, why is this so?This progress should be accelerated for the following reasons:

The cost of capital is no longer the same

If you are a value below $1, I don't think you could borrow money from a bank to use normal interest, and if you are listed companies, state-owned enterprises or state, you loan from the bank even enjoy preferential interest rates is not have much difficulty, capital use cost differences directly determines the product of the price competitiveness.

 

It is difficult for small businesses to get support and help from upstream suppliers

I know a lot of enterprises, but also know a lot of small business procurement of raw materials is basically in advance or cash to buy, when do you require suppliers especially big suppliers give you the payment days is impossible, even if you are a cash payment at the time of cargo tight also usually don't take the arrival of the goods, and your purchase price is higher than those with peers in the payment days of big, the cost difference between more than one point again.

Small businesses are largely incapable of r&d and innovation

Our country small and medium-sized chemical enterprises basically is given priority to with imitation, see a by large enterprises has generic products selling, not because of your brand, and stability of the products you have to have certain differences at a lower price to sell in the market, and your marketing cost also is higher than your big rivals.

 

Environmental protection -- a powerful tool to kill small and medium-sized chemical enterprises

Last year, more and more strict environmental protection supervision to all levels of local government "to talk about chemical color change", China's chemical industry industry overcapacity is indisputable fact that generally, chemical industry and many backward production capacity is the chief culprit of environmental pollution, not production enterprises with advanced production equipment, in particular, I personally think that the next decade almost all of the chemical production enterprises in China have to into the government set up by the chemical industry park, unless you are a big state or giant foreign companies, they have become a park, if let all large and small chemical enterprises into the garden, should be impossible, also can not reach to the purpose of production capacity,By cutting overcapacity, we mean cutting outdated production capacity and cutting polluting capacity.Big central enterprises or huge foreign enterprises due to management norms, high output value, pay more taxes, governments at all levels not only will not "bite" them, but also desperately encourage them to become bigger and stronger.Small and medium-sized enterprises must have become the target of governments at all levels, and being shut down will become a high probability event.

Conclusion: under the common role of above four factors, does not have the core competitiveness and sustainable development ability of small and medium-sized chemical enterprises, the five years of China's chemical enterprises of the total number of substantially reduced, only weak weak ask, with the rapid soaring industrial concentration, these become "bang big waist round" giant company will use its position in the market and the ability to control to obtain profits they think "reasonable".This has happened in the field of upstream based chemicals, you look at the MDI, you see white, you look again at MMA, in the current environment, even if you have developed a very valuable new products, do you want to own independent played as a child, should be impossible, don't know whether we Chinese chemical enterprises were later buy rely on technology to survive?Because I really don't know.