Basic chemical industry

The basic chemical industry refers to the general term of the industry of synthetic ammonia, sulfuric acid, calcium carbide, caustic soda and other chemicals produced by chemical processes through coal, phosphate rock, lithium ore, fluorite and other raw materials. Basic chemical is a bridge connecting energy, all kinds of basic raw materials and downstream segments of the industry.

According to the characteristics of chemicals, the basic chemical industry can be divided into nine sub-categories: fertilizers, organic products, inorganic products, chlor-alkali, fine and specialized chemicals, pesticides, daily chemicals, plastic products and rubber products.

The basic chemical industry is highly related to other industries and is an indispensable part of the national economy. At present, our country has formed a complete industrial chain with relatively complete types and a basic chemical industry system of considerable scale.

In a sense, the overall strength and technical level of the chemical industry will also affect the overall level and competitiveness of a country's industry to a certain extent, and the manufacturing of basic chemical raw materials is an indispensable important material in the chemical industry chain.

The "basic" characteristics of the basic chemical industry determine that its downstream demand distribution is especially wide, including the textile industry, real estate industry, automobile industry, building materials decoration, etc., and the change in the prosperity of the main downstream industries also has a significant impact on the prosperity of the chemical industry.

In recent years, the overall prosperity of the basic chemical industry has improved, and the revenue and net profit have continued the trend of year-on-year growth. The reason why the industry can maintain a high level of profitability is mainly due to the strong resilience of upstream chemical demand brought about by macroeconomic stabilization, the continuous high pressure of environmental protection leads to further contraction of the supply side, and the strong support of commodity prices for the upward trend of chemical prices.

(1) Industry development pattern and characteristics

The basic chemical industry in our country developed earlier and has a higher degree of marketization, mainly dominated by state-owned enterprises and large private enterprises. In addition, compared with many foreign multinational chemical enterprises, there is still a large technological gap in the production process of our chemical industry, and the economic added value of products is low.

Overall, our national basic chemical industry has the following characteristics:

1, the industry product system is relatively perfect. As the basic industry of industrial production, our country's basic chemical industry started earlier and developed rapidly. At present, the overall technical level, process and output have reached a higher level, and a relatively perfect product system has been formed.

2, energy saving and consumption reduction become one of the main competitiveness of enterprises. The basic chemical industry process technology is relatively mature, with the characteristics of large batch, few varieties and large energy consumption. Enterprises with larger production capacity have stronger energy saving and consumption reduction capacity, larger space and more obvious cost advantages in production. Therefore, energy saving and improving resource utilization have gradually become one of the main competitiveness of enterprises in the industry, and this trend also forces enterprises in the industry to improve production efficiency by improving the production process, adjusting the product structure, improving product capacity and other ways, while reasonably reducing raw materials and energy consumption to maintain product market competitiveness.

3, downstream applications are becoming more and more extensive, and the development momentum of the industry is good. The basic chemical industry is one of the basic industrial industries, and the downstream enterprises have almost penetrated into all fields of the national economy, and played an important supporting role in the development of the entire national economy.

4. Obvious regionalism. Basic chemical products generally have the characteristics of large weight and inconvenient transportation, especially the transportation cost of dangerous chemicals is high, and enterprises close to the raw material supply or the target market have a more obvious cost advantage. Therefore, the market competition in the basic chemical industry has obvious regional characteristics.

(2) Industry competition

The chemical industry in our country belongs to the industry with a high degree of marketization. The competent government departments have formulated and carried out macro-control of the industry in accordance with the national industrial policy, and the industry associations have self-regulated management. The business management and production and operation of the enterprises in the industry are carried out in a market-oriented way.

Our country's chemical industry started earlier, but the starting level is not high, and each subdivision industry still has the characteristics of small scale, large number and low level of device technology to varying degrees.

In recent years, due to internal and external factors such as mergers and acquisitions in the industry and environmental protection verification, the pace of industrial capacity adjustment has accelerated, and industrial concentration has increased.

(3) Major leading companies in the industry

At present, there are many enterprises engaged in basic chemical industry, and there are mainly such companies (only citing cases, there may be some omissions, and they are not recommended as targets) :

Jinhe Industrial Co., LTD. (002597) was founded in 2006, headquartered in Chuzhou, Anhui Province, and listed on the A-share of small and medium-sized board in 2011. It is an enterprise specializing in the production, research and development and sales of fine chemical and basic chemical products, biological and new material products. It can be classified into food additives, bulk chemicals, pharmaceutical intermediates, functional chemicals and intermediates, etc.

Juhua Stock (600160) was founded in 1998, headquartered in Quzhou, Zhejiang Province, and listed on the main board A shares in 1998. It is a domestic leading fluorine chemical and chlor-alkali chemical comprehensive supporting fluorine chemical manufacturing enterprises. Its main business is the research and development, production and sales of basic chemical raw materials, food packaging materials, fluorine chemical raw materials and follow-up products. With chlor-alkali chemical industry, sulfuric acid chemical industry, coal chemical industry, basic fluorine chemical industry and other necessary industrial supporting system, and on this basis, formed a complete fluorine chemical industry chain including basic supporting raw materials, fluorine refrigerant, organic fluorine monomer, fluoroppolymer, fine chemicals, etc., and involved in the petrochemical industry.

Founded in 1997 and headquartered in Jiaxing, Zhejiang Province, Xinhua Shares (603867) was listed on the main board A shares in 2019. Xinhua Shares is a national high-tech enterprise engaged in fatty amines, organic solvents, flavors, hydrogen peroxide and other fine chemical products. The main products include fatty amines, organic solvents, flavors, phosphorus chemical products, hydrogen peroxide, ammonia, surfactants and so on.

Xinghua (002109), founded in 1997 and headquartered in Xianyang, Shaanxi Province, was listed on the A-shares of the small and medium-sized board in 2007. It is A large-scale chemical enterprise with the production and sales of coal chemical products as its main business. Its main products are the production and operation of synthetic ammonia, methanol, methylamine and DMF with coal as raw material by utilizing Shaanxi's superior resources.

(4) Major obstacles to entry into the industry

1. Financial barriers.

Basic chemical products generally have the characteristics of large output, high energy consumption, capital intensive and economy of scale. Therefore, the state vigorously supports basic chemical enterprises in industrial policy to become bigger and stronger in order to change the pattern of low industrial concentration and dispersed layout. At present, relevant industrial policies encourage and guide the improvement of the minimum standards for single-line production scale, and strive to eliminate small enterprises with backward technology, high energy consumption and heavy pollution. The main products synthetic ammonia, nitric acid, sulfuric acid and other continuous production equipment requires a large scale of fixed assets investment,

To ensure stable product quality and safety and environmental protection. At the same time, as the hazardous chemicals industry needs professional storage equipment for product storage, it also needs to be transported by professional transportation companies with hazardous chemicals transportation qualifications. Therefore, large-scale capital investment constitutes a barrier to new entrants in the industry.

2. Environmental barriers.

The chemical industry attaches more importance to environmental protection than other industries, and the chemical industry is also the key monitoring industry of the environmental protection department. With the continuous improvement of environmental protection requirements in our national industrial policy, new chemical projects must meet more stringent environmental protection standards, and new entrants must increase investment in energy conservation and environmental protection, constantly optimize and improve the production process and comprehensive utilization of energy, and reduce pollutant emissions. The environmental protection measures taken by new projects and projects in production to meet the national environmental protection requirements, as well as the corresponding environmental protection equipment and personnel investment, all constitute barriers to entry for industry participants.

3. Technical barriers.

The chemical industry has high requirements on production process and technology, and the production process of different kinds of chemical products is different. Small differences in the parameters of the chemical reaction process can cause large differences in product safety, quality, energy consumption and yield. For example, the synthetic ammonia plant has the characteristics of high temperature and high pressure reaction and complex process flow, and can achieve continuous and safe production through key processes such as gas full low conversion, alkane/alkylation net gas, and pressure change decarburization. Therefore, only chemical enterprises with rich experience in production organization, mature process and technical team can continue to maintain a dominant position.

In the storage and transportation of chemical products, especially for hazardous chemicals, professional storage and transportation equipment must be used, and it must be operated by qualified personnel in strict accordance with safe production and safe transportation regulations. The storage and transportation of chemical products is one of the important links in the safe production of chemical enterprises.

Therefore, enterprises engaged in the production of chemical products need to have reliable complete sets of production equipment, accumulate rich production experience, and have a large number of experienced technical teams and engineering forces. All these set up high technical barriers for potential entrants.

4. Channel barrier.

The downstream customers of large chemical enterprises are mostly large and medium-sized production enterprises, which strictly control the quality of raw materials to ensure the stability and reliability of product quality. Suppliers with mature technology and a certain production scale can gain more first-mover advantages by occupying the market first, often maintaining a continuous cooperative relationship with customers. In addition, the quality of chemical products is relatively high, and most product sales have certain regional characteristics, which requires suppliers to have stable product supply capacity and timely after-sales service, and maintain good cooperative relations with customers. With the first-mover advantage of products and stable purchase and sales channels, the strategic cooperative relationship established between manufacturers and downstream enterprises often has a large degree of exclusivity, and if new competitors want to enter the industry, they will pay greater channel costs.

(5) Industry advantages and disadvantages

1. Favorable factors

1) Policy factors: In recent years, in order to cooperate with and promote the structural adjustment of the national economy, the relevant state authorities have issued a series of guidelines and policy measures, so that the chemical industry as a whole ushered in a new situation of development reform and structural optimization and upgrading. From the perspective of industrial policy, the state encourages enterprises in the industry to accelerate technological upgrading by focusing on the improvement of product quality, supports the development of basic chemical products from industrial grade to electronic grade, pharmaceutical grade and food grade, and promotes the significant improvement of the quality level of bulk basic organic chemical raw materials, key synthetic materials and special fine chemicals. At the same time, it supports the implementation of technological transformation in the fields of raw material optimization, energy saving and consumption reduction to improve the overall development level and economic benefits of enterprises.

In the future, the chemical industry will further develop to the advanced model of refinement, continuity and scale, and products with high technological added value, high environmental protection and safety and wide application fields will become the main source of profit for the leading chemical enterprises in the industry; Chemical enterprises with high pollution, high energy consumption, backward production capacity and production process equipment will be accelerated. The change trend of the above industry policy will strongly promote the integration and development of the chemical industry.

2) Market factors: With the continuous growth of our national economy, the scale of the overall chemical industry has maintained a stable expansion rate. It is expected that in the next few years, the total output value of our country's chemical industry will further increase the proportion of the world, and most chemical products, especially new chemical materials and high-end special chemicals, will have stable market demand. The steady growth of total consumption, the continuous improvement of refinement rate and the upgrading of industrial structure are all favorable factors to ensure the growth of market demand.

2. Unfavorable factors

On the one hand, because the production process of chemical products is prone to produce harmful waste substances, some products and waste are also hazardous chemicals, the competent authorities for different product categories, from the process design, licensed production, production, supply and marketing, storage, transportation and other aspects of the chemical enterprises to implement stricter regulatory measures. With the deepening of supply-side reform since 2016, industrial structure adjustment and environmental supervision have continued to increase the operating requirements and pressure on chemical enterprises. In the short term, the continuous investment in safety, environmental protection and industrial upgrading has caused no small pressure on the improvement of the operation and profit of some chemical enterprises.

On the other hand, although the chemical industry in our country has developed rapidly, there is a certain gap between the technical level and the international advanced level. Due to the low added value of chemical products technology in our country, the profitability of enterprises is limited, and some enterprises can not afford the large amount of capital and talent costs required for the research and development of new products and new technologies, resulting in the lack of scientific research and technology reserves. Therefore, insufficient investment in research and development has become an unfavorable factor restricting the sustainable development of our country's chemical industry, and has limited the development speed of our country's chemical industry to a certain extent.

Finally, a simple analysis of the industry profit level change trend and reasons.

From the perspective of industry profit level, the chemical industry has developed rapidly in recent years, and the overall scale has continued to grow. In 2019, the listed companies of "chemical raw materials and chemical products manufacturing" in the industry classification of the CSRC achieved operating income of 1.2 trillion yuan and total profit of 43.84 billion yuan.

The price of chemical products is greatly affected by market supply and demand in the short term, and the long-term trend is greatly affected by production costs and macroeconomic, and the profit level of the industry generally fluctuates with the change of macroeconomic.

At the same time, product profit margins vary greatly according to chemical varieties, uses and technical levels. In particular, for fine chemical products, the gross profit margin of products with technical advantages and high added value is higher than the average level of the industry. Although the general production process technology of basic chemical products is more complex, the single-line production capacity is usually larger, and the competitive advantages of enterprises with good cost control, safety and environmental protection measures are in place, and are close to the target market or raw material origin are more obvious