Industry Report - Chemicals in China.pdf
China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 1 MarketLine Industry Profile Chemicals in China February 2013 Reference Code: 0099-2021 Publication Date: February 2013 WWW.MARKETLINE.COM MARKETLINE. THIS PROFILE IS A LICENSED PRODUCT AND IS NO T TO BE PHOTOCO PIED China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 2 EXECUTIVE SUMMARY Market value The Chinese chemicals market grew by 27.7% in 2011 to reach a value of $1,022.3 billion. Market value forecast In 2016, the Chinese chemicals market is forecast to have a value of $1,920.6 billion, an increase of 87.9% since 2011. Category segmentation Commodity chemicals is the largest segment of the chemicals market in China, accounting for 75.4% of the market's total value. Geography segmentation China accounts for 59.8% of the Asia-Pacific chemicals market value. Market rivalry The chemicals market has been relatively resilient in most countries during the global economic downturn, with a majority of countries that did experience a decline in the chemicals market in 2007-2011 expected to return to growth during 2011-2016. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 3 TABLE OF CONTENTS Executive Summary2 Market value 2 Market value forecast.2 Category segmentation2 Geography segmentation 2 Market rivalry .2 Market Overview .7 Market definition7 Market analysis .7 Market Data8 Market value 8 Market Segmentation .9 Category segmentation9 Geography segmentation 10 Market Outlook 11 Market value forecast.11 Five Forces Analysis 12 Summary 12 Buyer power.13 Supplier power 14 New entrants .15 Threat of substitutes.16 Degree of rivalry17 Leading Companies18 BASF SE 18 Sinochem Group .23 Sinopec Shanghai Petrochemical Company Limited28 The Dow Chemical Company .32 Macroeconomic Indicators.38 Country Data .38 Appendix.40 China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 4 Methodology 40 Industry associations41 Related MarketLine research41 China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 5 LIST OF TABLES Table 1: China chemicals market value: $ billion, 200711.8 Table 2: China chemicals market category segmentation: $ billion, 2011.9 Table 3: China chemicals market geography segmentation: $ billion, 2011 .10 Table 4: China chemicals market value forecast: $ billion, 201116 .11 Table 5: BASF SE: key facts .18 Table 6: BASF SE: key financials ($).21 Table 7: BASF SE: key financials ().21 Table 8: BASF SE: key financial ratios21 Table 9: Sinochem Group: key facts23 Table 10: Sinochem Group: key financials ($) .25 Table 11: Sinochem Group: key financial ratios 26 Table 12: Sinopec Shanghai Petrochemical Company Limited: key facts 28 Table 13: Sinopec Shanghai Petrochemical Company Limited: key financials ($) 29 Table 14: Sinopec Shanghai Petrochemical Company Limited: key financials (CNY) 29 Table 15: Sinopec Shanghai Petrochemical Company Limited: key financial ratios .30 Table 16: The Dow Chemical Company: key facts .32 Table 17: The Dow Chemical Company: key financials ($) .36 Table 18: The Dow Chemical Company: key financial ratios 36 Table 19: China size of population (million), 200711 38 Table 20: China gdp (constant 2000 prices, $ billion), 200711 .38 Table 21: China gdp (current prices, $ billion), 20071138 Table 22: China inflation, 200711 39 Table 23: China consumer price index (absolute), 200711 .39 Table 24: China exchange rate, 200711.39 China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 6 LIST OF FIGURES Figure 1: China chemicals market value: $ billion, 200711 .8 Figure 2: China chemicals market category segmentation: % share, by value, 2011 .9 Figure 3: China chemicals market geography segmentation: % share, by value, 2011 .10 Figure 4: China chemicals market value forecast: $ billion, 201116 11 Figure 5: Forces driving competition in the chemicals market in China, 201112 Figure 6: Drivers of buyer power in the chemicals market in China, 2011 13 Figure 7: Drivers of supplier power in the chemicals market in China, 2011 14 Figure 8: Factors influencing the likelihood of new entrants in the chemicals market in China, 201115 Figure 9: Factors influencing the threat of substitutes in the chemicals market in China, 2011 16 Figure 10: Drivers of degree of rivalry in the chemicals market in China, 2011 .17 Figure 11: BASF SE: revenues oil and gas companies are essentially offering the same raw materials meaning that price becomes a major factor when choosing a supplier. By buying raw materials in the open market, chemical manufacturers have little control over the price and may need hedging strategies in order to minimize the impact of price volatility. For other chemicals, minerals and sea water are among the most important inputs. For example, sodium chloride can be formed by evaporating sea water or obtained from halite mines; it is then used in the production of sodium carbonate, sodium hydroxide, and chlorine etc. Sulfur, a key starting material for base chemicals such as sulfuric acid, is also obtained by mining. Again, relying on mining companies who supply many different industries, and are usually exceptionally large can increase supplier power. Overall, supplier power is assessed as moderate. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 15 New entrants Figure 8: Factors influencing the likelihood of new entrants in the chemicals market in China, 2011 SOURCE: MARKETLINE M A R K E T L I N E Chemicals do have some uses in their own right - for example, some base chemicals may be used as household cleaners, such as sodium hydroxide or ammonia, but more commonly they are used as raw materials for the manufacture of more valuable products. As a result, they are produced in bulk, and scale economies are highly important if the available margins are to be worthwhile. Entering the chemicals market requires large amounts of capital to set up high-volume production plants. The capital intensity and importance of scale economies generally restricts market entry to medium-sized and large companies. Furthermore, the presence of very strong, multinational incumbents provides a further obstacle to entering this market. While many of the processes used to manufacture chemicals were originally developed in the early twentieth century and are in the public domain, incumbents often own significant IP assets and non-patented in-house expertise, which allow them to enhance their production processes. New players may find it difficult to replicate this knowledge. Particularly for a large-scale market entry, access to suppliers can be problematic. Because of the volume of raw materials used, it is preferable to locate near to their sources. Furthermore, in many parts of the world, governments place fairly stringent regulations on the production of chemicals. Compliance increases costs and thereby decreases the likelihood of new entrants. On the other hand, factors favoring market entry include the fact that chemicals, within the respective segments, are usually undifferentiated commodities: a new player can make products indistinguishable from those of the incumbents, which means that provided they are not tied into contracts with existing suppliers, buyers are just as likely to opt for the new player if presented with cheaper option. On balance, there is a moderate likelihood of new entrants. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 16 Threat of substitutes Figure 9: Factors influencing the threat of substitutes in the chemicals market in China, 2011 SOURCE: MARKETLINE M A R K E T L I N E Chemicals are fundamental to a wide variety of downstream businesses due to their nature as a raw material for a vast variety of products. As a result there are few, if any, substitutes for chemicals. Furthermore, buyers generally require chemical products with a specific composition. In situations where a buyer can choose between different but related chemicals, it is likely that the same market player manufactures them. Overall, the threat of substitutes is weak. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 17 Degree of rivalry Figure 10: Drivers of degree of rivalry in the chemicals market in China, 2011 SOURCE: MARKETLINE M A R K E T L I N E There are a relatively small number of very large multi-national corporations and numerous medium-to-large companies active in the chemicals market. Generally speaking, in terms of rivalry the large size of a majority of market players is offset by the small number of chemical manufacturers. However, as manufacturers of chemicals produce commoditized products, it is often difficult for players to differentiate and offer strong incentives for their customers not to switch to rival companies, thus increasing rivalry. Due to the technical nature of the manufacturing process of chemicals, fixed costs are high which makes it difficult to exit the chemicals market and increases rivalry as a result. Storage costs are another factor driving rivalry as they are high due to the hazardous nature of chemicals. Furthermore, the lack of diversity for many companies also creates a competitive environment. Rivalry is alleviated somewhat due to the ease in which players are able to expand production in times of high demand. Overall, rivalry is assessed as strong. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 18 LEADING COMPANIES BASF SE Table 5: BASF SE: key facts Head office: Carl-Bosch-Strasse 38, Ludwigshafen 67056, DEU Telephone: 49 621 60 0 Fax: 49 621 60 425 25 Website: www.basf.com Financial year-end: December Ticker: BAS Stock exchange: Frankfurt SOURCE: COMPANY WEBSITE M A R K E T L I N E BASF operates through subsidiaries in more than 80 countries across the globe. Central to the company's operations is the Verbund structure. Verbund is BASF's approach to vertical integration, which involves linking plants in a production Verbund to create efficient value-adding chains from basic chemicals to higher value products. At Verbund sites, BASF uses by-products of chemical reactions, which might otherwise have to be disposed of as raw materials for other processes. The company operates six Verbund sites worldwide, the largest of which is in Ludwigshafen, as well as about 370 other production sites. The company operates in Europe, North America, Asia Pacific, South America, Africa, and the Middle East. BASF operates through six business segments: performance products; chemicals; oil and gas; functional solutions; plastics; and agricultural solutions. These six business segments contain 15 divisions that manage 72 global and regional business units. The performance products segment of BASF is organized into five divisions: dispersions and pigments; care chemicals; nutrition and health; paper chemicals; and performance chemicals. The dispersions and pigments division manufactures resins, polymer dispersions, and fiber bonding products. It also manufactures pigments (including effect pigments), dyes, preparations, light stabilizers, photo-initiators, and formulation additives. The division offers products for coatings and paints, adhesive, printing, packaging and construction industries. The care chemicals division manufactures products used for hygiene, personal care, home care, industrial and institutional cleaning businesses, as well as for technical applications. These products mainly include polymers, surfactants, chelating agents, ultra-violet (UV) filters, super-absorbents, emulsifiers, emollients, active ingredients, micronutrients, biocides, optical effect products, waxes, esters, amides, silicates and metal surface treatment products. The nutrition and health division caters to the food and feed; flavor and fragrance; and pharmaceutical industries. Products manufactured by this division are additives for the food and feed industries, such as vitamins, carotenoids, sterols, enzymes and organic acids. It manufactures aroma chemicals such as geraniol, citronellol and linalool. For the pharmaceutical industry, this division manufactures active ingredients and excipients like caffeine, ibuprofen and pseudoephedrine as well as binders and coatings for tablets, synthesizing pharmaceutical substances and intermediates for its customers. The paper chemicals division focuses entirely on the business with the paper industry. This division manufactures products such as dispersions for paper coating; functional and process chemicals; and kaolin minerals. China - Chemicals 0099 - 2021 - 2011 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 19 The performance chemicals division offers solutions for the following industries: plastics processing; fuel and lubricant; oil and mining; municipal and industrial water treatment; leather; and textile. It manufactures antioxidants, light stabilizers, pigments and flame retardants for plastic applications. For the automotive industry, this division manufactures fuel and lubricant additives, engine coolants, and brake fluids. It manufactures process chemicals for the extraction of oil, gas, metals and minerals. The division provides chemicals and package solutions for water treatment, and auxiliary agents for the production and treatment of leather and textiles. The chemicals segment of BASF produces a range of products from basic petrochemicals and inorganic chemical to higher-value intermediates. This segment is organized into three divisions, namely, inorganics, petrochemicals, and intermediates. The inorganics division provides a range of basic products and specialties for use in BASF's Verbund and for manufacturing specialties for the electronics, pharmaceutical, automotive and other industries. The company's most important basic products are ammonia, methanol, caustic soda, chlorine and standard alcoholates as well as sulfuric and nitric acid. The specialty chemicals manufactured by the division are salts, metal systems, organo-metallic compounds, and products for the semi-conductor industry. The petrochemicals division offers a range of basic chemicals and specialties used within BASF's Verbund. These products are also used by chemical and plastics industries; and detergent, automotive, packaging and textile industries. They are further used in the production of paints, coatings and cosmetics as well as oilfield, construction and paper chemicals. Basic c
