Under chemical industry reorganization, what kind of chemical plant can survive?
In the past two years, the chemical industry has had a difficult time, and the explosion in Jiangsu Xiangshui Chemical Industrial Park only added insult to injury!
In the face of environmental and safety inspections, what should chemical companies do? China’s chemical enterprises are struggling to find a way out.
In the post-industrial era, the basic variables of industrial economy have changed qualitatively: new technology, new technology, new material and new concept have “cut through” traditional development path, and the chemical industry faces epoch-making adjustment in its own development. Under such circumstances, what kind of chemical plant can survive?
The reorganization is sweeping the industry.
Over a month after the explosion in Xiangshu, Jiangsu province began to overhaul its chemical industry. Recently, strict measures have been proposed in Jiangsu province to promote regulation and improvement in accordance with laws and regulations, reduce the number of chemical production enterprises in coastal areas and reduce the number of chemical production enterprises in environmentally vulnerable areas.
According to the file, Jiangsu province will decrease its chemical enterprises to less than 2000 by 2020, and to 1000 by 2022. In addition, the number of industrial park will be reduced from 50 to 20.
As a major province of chemical industry, Jiangsu province occupies the second place in China in terms of total output value of chemical industry. Therefore, such a overhaul for Jiangsu is no easy task.
However, the nationwide reorganization of the chemical industry has begun long before. One hundred and sixteen industrial parks have been banned in Tianjin province in 3 years, and more than 100 have been rectified in Guangdong province.
At present, among the 676 chemical industrial parks in China, the output value of about 50 billion yuan accounts for around 7%, and that of less than 10 billion yuan accounts for about 60%. By the end of 2018, there had been 1,176 enterprises in need of relocation and reconstruction, among which 479 had moved to other places, 360 had been improved on the spot, and 337 had been closed or withdrawn. Among them, there were 1,089 small and medium-sized enterprises and large enterprises with significant risks and hidden dangers.
The chemical industry is in trouble.
The chemical industry is in a dilemma.
Domestically, facing both supply-side structural reform and environmental protection campaign, which, starting from 2016, reached their peaks in 2017, and in 2018, more measures are taken to promote the reform and campaign. For example, 11 provinces and municipalities around the Yangtze River Economic Belt such as Hubei and Jiangsu have ordered chemical plants to stop working or limited their production in order to improve the environment.
In 2019, a new round of environmental inspection has been launched by the Central Committee of CPC. Environment is the bottom line, so every chemical enterprise must struggle to survive.
Externally, the chemical industry is heavily affected by the trade friction between the United States and China.
At the beginning of the trade friction, the US imposed additional tariffs on more than 180 chemical products and China imposed over 90. Then the product list worth $16 billion from the US contained $2.2 billion chemical products, and China expanded the number from 90 to 108. China even used natural gas as a weapon to crack down Trump’s ambition to make the US the controller of energy.
Amid the trade friction between China and the United States, styrene polymers, polyisobutylene and other chemical products have been “double-killed”: they are imposed both import and export additional tariffs. China’s petrochemical industry, which mainly focuses on processing trade, not only has a big increase in raw material import cost, but also has a narrow export path of low-profit commodities. It is obvious how tough its situation is.
America’s initial list of $200 billion in taxes covers 1,363 chemicals and plastics. If the two countries fail to reach an agreement, chemical companies could face more trade barriers and tariffs.
In conclusion, under the supply-side structural reform, the environmental protection campaign, as well as the increased cost due to trade frictions, the chemical industry is having a wolf by the ears.
Chemical industry plays an important role in traditional industrial economy.
“Without chemicals there would be no industry.” With the rise of iron and coking industry, synthetic dyes and synthetic spices were created, and rubber tires were also put into production. Then there was the first roar of the steam engine.
Up to now, all aspects of living, from clothing, food, household to transportation, are fundamentally dependent on raw materials and auxiliary materials provided by chemical industry. It is the development of chemical industry that enables human to enjoy great material wealth.
In other words, chemical industry is not only the core of industrial economy, but also the pillar industry of national economy. “He who gains the chemical gains the world.” The United States, Britain, Germany, or France, which old industrial powers did not take advantage of the chemical industry to promote their industrialization?
Because of its value, China used to attach great importance to the chemical industry, be it “prioritizing the heavy industry” in 1950s, real estate investment boom in the early 1990s, or using infrastructure to promote the production capacity of coal and steel. In history, China’s industry was driven by heavy industry for four times, and objectively, it became the engine of China’s economy.
From 2000 to 2016, the global share of China's chemical production capacity increased from less than 9% to more than 36%. Correspondingly, China’s manufacturing output in 2005, 2008 and 2010 respectively surpassed that of Germany, Japan and the United States, and China’s global share increased from 8.5% to 30.9% in 2000 to 2016.
Martin Brudermüller, chairman of the executive board of the German chemical giant BASF Europe, predicts that China’s share of global chemical production will rise to nearly 50% by 2030.
However, history always moves forward as tough as people walking on a sharp knife, and we must sacrifice something in return for development. It is true of the chemical industry.
In a sense, the combination of environmental pressure and trade friction is a stress response to the rapid development of China’s chemical industry.
On the one hand, as the cost of extensive development and undertaking low value-added production capacity at the bottom of the global chemical industry chain, China has experienced a lack of product competitiveness, serious homogenization, and structural surplus, and it also taken the irreversible damage to the environment caused by pollution. The amount of waste water, waste gas and solid waste discharged by China’s chemical industry accounts for 16%, 7% and 5% of the total amount of waste water, waste gas and waste residue, ranking 1st, 4th and 5th respectively.
The negative spillover of low-end overcapacity and pollution force the top-level design to be restrained through supply-side reform and environmental supervision, and guide the industry to break through the structural barriers.
On the other hand, China is a latecomer. That means every step of China’s chemical industry development is at the cost of the interests of the original market players. The process of “replacing” is unlikely to be a gentle breeze, but only through bloody competition like “the achievement of a General costs many soldiers’ lives” can China finally realize the counterattack at the bottom.
And now every sector in China’s chemical industry shows great progress, such as Wanhua Chemical specializing in MDI, Zhejiang Satellite Petrochemical specializing in acrylic acid, Anhui Wanwei specializing in VAC , China Jushi specializing in glass fiber. They are leading the world in production capacity and techniques. They develop from nothing to where they are now, becoming strong competitors of old chemical powers in the world.
It is no wonder that the United States, which has always regarded chemical industry as the “trump card” of the manufacturing industry, has repeatedly pressured China’s chemical industry as it continues to move up the industrial chain after China has taken over the basic production capacity.
Time is changing.
With the late “liquidation” of China’s chemical industry both at home and abroad, the cost of environmental protection, production, and tariff make the production of low-profit chemical commodities in China unsustainable, and it is inevitable for chemical enterprises to set off another round of capacity transfer in order to cut costs.
However, the industrial base of countries in Southeast Asia and South America is backward, and how can the vulnerable environment bear the pollution caused by extensive chemical development?
Is it really time for the chemical industry to be abandoned, when late movers undertake low-end chemical capacity by cheaper labors, achieve industrial update, and therefore subvert previous industrial model? In fact, in the post-industrial era, the basic variables of industrial economy have changed qualitatively: new technology, new technology, new material and new concept have “cut through” traditional development path, and the chemical industry faces epoch-making adjustment in its own development.
1. New technology lays a foundation for the transformation of traditional chemical industry
The development of technology breaks the boundaries of all industries and accelerates the cross-industry integration. Biochemical engineering starts from the deep fermentation technology of antibiotics, and gradually improves the system due to the technologies of biocatalysis, conversion and separation, etc., while the rise of genetic engineering and other technologies opens up new areas for the joint development of biology and chemical industry. Among them, the biomass refining technology in Germany is second to none. For example, BASF uses biomass to produce succinic acid and Süd-Chemie AG transforms “liquid beet” into a kind of raw material, leading the research level.
2. New technology advances the transformation from large-scale chemical industry to fine chemical industry
Chemical industry is originated from large-scale refining and chemical synthesis industry based on petrochemical industry. As the technology updates, it is possible to carry out deep processing of products, so as to facilitate the formation of a precise chemical system with large chemical products as raw materials, complex molecular structure, strong commodity and high added value of products. The United States, Western Europe and Japan, which benefit from first-mover advantages, still represent the highest level of fine chemical industry in the world today. Compared with China, whose rate of fine chemical industry is 48%, their rate has reached about 70%.
3. New materials promote the development and derivation from energy chemical industry to new material chemical industry
The emergence of new materials breaks through the shackles of the chemical industry about the traditional gas and oil and its derived energy, broadens its extension space, and forms advanced chemical materials with excellent performance or special function. For example, in the field of lithium electricity, the application of new materials such as silicon-carbon composite cathode materials, lithium titanate and graphene has formed different development paths, making the lithium market thrive.
4. New concept leads the chemical industry from linear to circular development
Lucid waters and lush mountains are invaluable assets. The concept of sustainable development in the post-industrial era has gradually entered people’s mind. Under this concept, the philosophy of industrial development is upgraded from “only looking at the present, not the future” to one of green and recyclable.
China has designed the recycling of chemical industry, optimized the relationship between the upper, middle and lower reaches of the chemical industry chain, realized the comprehensive utilization efficiency of resources through waste retreatment, and built an ecological recycling system of industrial association and resource sharing, which has come into effect in Hebei and Jilin provinces.
On the one hand, the importance of supply-side reform and national competition is being emphasized in an unprecedented way. On the other hand, the industry itself has a disruptive development trend to open up new competitive tracks. The chemical industry has undoubtedly entered a sensitive period of industry reorganization and global pattern adjustment.
As the chemical industry enters “troubled times”, it is inevitable that the price will plunge and fluctuate widely, and old industrial powers will be replaced by new leaders.
As the chemical industry breaks through the traditional pattern and is strongly related to new technologies, new concepts, new processes and new materials, the future subversion of the chemical industry will come from the outside, and the comprehensive industrial and technological advantages of the pan-industry will form the foundation for the development of the whole industry.
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