Development status and challenges of China's chemical industry in 2023

Chemical industry is an important industry related to national economic lifeline and strategic security. Since 2010, China's chemical production has become the world's first, accounting for 40% of the world's chemical production in 2018. At the same time, China's chemical industry has gradually developed from "high pollution and high risk" to "green and high-end". Based on the current situation and development trend of the chemical industry, this paper analyzes the challenges faced by the chemical industry in the new economic situation, and explores the ideas to promote the high-quality development of China's chemical industry.

First, the chemical industry development status

The chemical industry covers a wide range of fields, including the manufacture of chemicals and chemical products, the manufacture of coke and refined petroleum products, the manufacture of basic pharmaceutical products and pharmaceutical preparations, the manufacture of rubber and plastic products, the manufacture of paper and paper products, the manufacture of basic metals, the manufacture of other non-metallic mineral products and many other sectors. The chemical industry plays an important role in almost all manufacturing industries, and its industry operation is related to the national economy and people's livelihood.

Affected by the slowdown in global economic growth and the concentrated release of new capacity in the petrochemical industry, the profits of the global chemical industry as a whole have shown a downward trend. In 2019, the overall development of China's chemical industry showed a trend of "stable operating income and slowing down efficiency".

Second, the challenges facing the development of chemical industry under the new situation

(1) The global economic recession has slowed down China's economic growth

Affected by global political, economic and other major factors, the global economy continued to slow down in 2019. According to the International Monetary Fund, the global economy grew by 2.9% in 2019, a further slowdown from 2018 (3.6%).

The global spread of the COVID-19 pandemic in 2020 has also had a major impact on the global economy. On April 14, the International Monetary Fund released its new World Economic Outlook, predicting that the global economy will shrink by 3% in 2020.

China's economic development has also been directly impacted, and the growth pressure has increased, and it is expected to grow by 1.2% in 2020, which is 4.6 percentage points lower than the World Economic Outlook released in January.

(2) Weak market prices for oil and major chemicals

According to the price index of the National Bureau of Statistics, in 2019, the ex-factory price index of the oil and gas extraction industry fell by 3.6% year-on-year; Chemical raw materials and chemicals manufacturing fell 3.9 per cent year on year. The market prices of some major basic chemical raw materials and synthetic materials have continued to fall sharply, and the weak market has led to the overall benefit of the industry continuing to remain low.

(3) The growth rate of production capacity is too fast, and the profit of the industry and the operating rate of the equipment are declining

Relative to the market demand growth, the chemical industry capacity growth is too fast.

On the supply side, if calculated according to the average operation rate of 83% of global refining enterprises, China's refining capacity is about 100 million tons. Affected by various factors such as natural gas, electric vehicle replacement and new energy development, the excess capacity of refined oil products will be very severe.

On the demand side, with the adjustment of national economic structure, transformation and development, and the research and development of alternative energy, the growth rate of China's petrochemical product market demand has slowed down significantly. The growth rate has slowed, the market performance has been weak, and the plant operating rate has declined. According to ACC data, European chemical product production fell by 0.4% in 2019, led by Germany, Belgium and the Netherlands. In Asia, South Korea and Taiwan also saw declines in chemical production in 2019.

A number of large international petrochemical/chemical companies saw their profits decline, with BASF's EBIT before special items reaching 4.5 billion euros in 2019, down 28% year-on-year. Ebit before special items in the first quarter of 2020 was €1.6 billion, down 6% year on year. Sinopec's net profit in 2019 was 57.591 billion yuan, down 8.7% year on year; The net loss in the first quarter of 2020 was 19.78 billion yuan, down 234.5% year-on-year.

(4) Product innovation ability has become the key to winning industry competition

With the increase of market supply, economic development and the enhancement of environmental protection awareness, the market has higher, updated and more detailed requirements for the quality, variety and function of chemical products. Driven by demand, chemical products will develop in the direction of high-end, differentiation and customization. The innovation ability of products will become one of the key factors for the chemical industry to win the market.

(5) The industrial layout continues to develop towards the base, and the industry concentration has been further improved

Intensive management is a major trend in the development of petrochemical industry. Through mutual supply of materials and sharing of public works, resources can be fully optimized and rationally utilized, so as to reduce operating costs and realize intensive management. In the next 2 to 4 years, strengthening acquisitions or asset divestitures between large companies will continue, and many diversified petrochemical companies have begun to focus on specialization and integration.

(6) Cross-border knowledge and technology integration is the key to achieve industry upgrading

The collaborative development between industries is the basis for the digital transformation of the industry, the development of new materials, the recycling of waste plastics and other businesses. Throughout the global chemical industry, new technologies and new products are iterated rapidly and emerge in endlessly. Enterprises need to establish a fast, flexible and forward-looking information acquisition, digestion, absorption, integration, innovation ability system.

Digital technologies will play a revolutionary role in improving performance and transforming the business at all levels. However, at present, most domestic petrochemical enterprises still remain at the level of understanding in terms of digital transformation, and have not given full play to the huge potential of digital technology, and lack of new generation information technology support such as big data and cloud computing.

The development of new materials requires the integration of expertise in chemistry, biology, physics, materials science, engineering and other fields, and the establishment of a close connection with downstream user technologies and businesses in various industries.

Iii. Concluding remarks

Although China is the world's largest petrochemical products production country, but also the world's largest petrochemical products market, but in the era of market globalization, if you want to enhance the industry in the global market competitiveness, you need to adapt to environmental changes, it is impossible to be competitive. Continuously improve the comprehensive competitiveness of the industry through speed, innovation, high quality and low cost. China's chemical industry should develop from large to strong, from technology dependence to technology independence, from the primary stage of deep processing of resources to the middle and advanced stage, from the extensive stage of management to the fine stage. This requires greater attention at the national and corporate levels to several major challenges facing the development of the chemical industry.