What are China’s shortcomings in the chemical industry?

PMMA, PPS, aramid, nylon, carbon fiber, chlorinated titanium dioxide, vitamins and other specialty resins/fibers and special chemicals have also achieved technological breakthroughs. Compared with basic chemicals, they have more production know-how and technical difficulties, either through independent research and development or through digestion and absorption after the introduction of technology, the road of domestic substitution is getting wider and wider. Although China has achieved so many achievements, the import and export trade deficit of China's petroleum and chemical industry in 2018 was still 283.25 billion US dollars. In addition to the 305.96 billion US dollars of oil and gas imports caused by resource endowments, we still need to import up to 78.09 billion US dollars. USD organic materials and intermediates, USD 74.90 billion in synthetic materials, USD 37.01 billion in high-end chemicals and USD 6.03 billion in special equipment. The industrialization scale and product quality of some key material fields are far from meeting domestic needs. According to the 2018 MIIT survey of more than 130 key basic materials, 32% of key materials in China are still blank, and 52% are dependent on imports.

From the segment of domestic imported chemicals, the import of organic raw materials of $78.09 billion is mainly PX, propane, styrene, coal, and natural rubber. Most of them are caused by resource endowments, like oil and gas. The import space of other companies will gradually shrink with the development of local enterprises; among the $74.9 billion imported synthetic materials, the imports of polyolefins and ethylene glycol in the primary form also originate from resource overflow arbitrage in the Middle East and the United States. Up to $32.4 billion of high-performance synthetic resins, $9.6 billion of synthetic rubber and 5.3 billion of high-performance synthetic fibers are highly dependent on imports. In addition, $37.01 billion of high-end chemicals is another important area of our imports. Among them, in addition to rubber products, mainly coatings, inks, pigments, and special applications including binders, single crystal silicon chips and many preparations. From the perspective of dependence on imports, high-performance synthetic materials and high-end specialty chemicals are the shortcomings of the domestic chemical industry and key breakthrough areas in the future.

Shortcoming 1: high-performance synthetic materials

From 2008 to 2016, the domestic synthetic resin, synthetic rubber, and synthetic fiber monomer markets grew rapidly with CAGRs of 9.7%, 11.9%, and 9.8%, respectively. Although local companies have made great breakthroughs in many synthetic material fields, In 2018, China still imported 49.6% HDPE, 60% PC, 100% adiponitrile, 60% EVA, 49.9% synthetic rubber, 40% MMA, 37.6% ABS resin, 36.7% nylon 66, etc. Taking more than 20 million tons of polyolefins imported each year as an example, half of them are high-end products, including polypropylene pipe materials, capacitor film materials, polyethylene automobile tank materials, gas pipeline materials, and automobile bumper materials. Chemical products, high-performance metallocene series polyolefin elastomers, high rigidity and high impact co-polypropylene, and various modified resins are still mainly imported. Unlike basic chemicals and general-purpose products, technology can often be mastered through reverse development of processes and devices. These differentiated and refined markets require more original development to break through.

Shortcoming 2: high-end special chemicals

Our shortcomings in the field of high-end specialty chemicals mainly include two directions. One is the high-end products in the traditional fine chemical industry, which include surface treatment materials such as coatings and dyes, as well as new formulations of pesticides and high-end surfactants. The other important direction comes from the gradual shift of domestic application scenarios such as downstream semiconductors, panel displays, and the lithium battery industry, and the import and substitution of electronic chemicals driven by the rise of 5G. Among all new materials in China, the gap between electronic chemicals and foreign countries is the largest. We basically rely on imports in the field of high-generation line panels and electronic chemicals for wafers of 8 inches and above. With the transfer of wafer fabs to China and the rapid development of new energy vehicles, the demand for related electronic chemicals is increasing significantly, and there is huge room for import substitution.