BLOG: China’s ever-more sophisticated chemicals markets could entirely serve itself

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

China’s chemicals producers are said to be focusing on being “nimble and agile” in response to weaker demand growth, ample local supply of intermediate chemicals and increasingly sophisticated end-use markets.

This involves producing everything up and down the value chains only when it makes economic sense and increasing the differentiation of grades for a broader range of more sophisticated applications.

Local producers are reported to be tripling their range of polyethylene (PE), polypropylene (PP) and polyurethane (PU) grades as they broaden their licensing of technologies.

A lot of this differentiation is aimed at supplying chemicals and polymers for higher-value downstream industries such as electric vehicles and batteries.

There are said to be plenty of intermediate chemicals available locally that can compete with opportunistic imports.

Local producers of intermediates are also reported to be able to make better domestic netbacks than selling overseas.

Customers of the local intermediate producers increasingly value reliable suppliers who can provide a wider range of grades, technical services and local currency deals, I’ve been told.

The ability of chemicals importers to compete on price alone seems to be under challenge as a sustainable business model.

Future winners in China could be the Tier 1 suppliers. These suppliers would make all the grades necessary to serve ever-more sophisticated local end-use markets, which would require constantly successful R&D and good technical services.

This points towards China becoming a vast continent-sized market that largely serves itself in speciality chemicals and composites, as well as commodity chemicals.

I earlier discussed how self-sufficiency is increasing in commodity chemicals resulting in a pivot by “overseas-based” producers to specialities and composites.

China could become just about entirely self-sufficient in commodity grades of PP, polyethylene (PE) and in paraxylene (PX) and ethylene glycols (EG) by 2030. The latter two chemicals are of course pure commodities.

Note the above phrase “overseas-based” rather than overseas, as the foreign investors in China are in strong positions to take advantage of this vas and rapidly maturing market.

For reasons discussed today, I don’t believe that the pivot by overseas-based producers to specialities and composites will work if it is based on exporting to China.

What should the overseas-based producers do? Pretty much forget China as an opportunity as they focus on the rest of the world.

And here’s the link: https://www.icis.com/asian-chemical-connections/2024/06/chinas-ever-more-sophisticated-chemicals-markets-could-entirely-serve-itself/

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.