10 September 2007 00:00 [Source: ICB]
China prepares the ground
China's chemical industrial parks offer easy access to other markets and improved local economies through domestic and foreign investment
CHEMICAL MANUFACTURERS looking for a site in China will not be frustrated by a lack of choice. The country has wholeheartedly embraced the concept of industrial parks, and though the number devoted to chemicals is but a small fraction of the total, the Chinese enthusiasm for large public projects has ensured an ample supply.
The industrial parks have proven their value. The central government in Beijing emphasizes their use in promoting the efficient allocation of resources and protection of the environment, while city and provincial governments - the main driving force behind their rapid proliferation - recognize an enticement to domestic and foreign investment in the local economy.
In the 1990s, Shanghai established numerous industrial parks when it was given the lead in opening up the entire Yangtze River Valley to the global economy. They included the Shanghai Chemical Industrial Park (SCIP) for petrochemicals as well as eight to 10 other parks supporting sectors such as automobiles, telecommunications, pharmaceuticals and fine chemicals, power and electrical equipment and household appliances.
Some 6,500-7,000 similar parks operating at the national, provincial and local levels have sprung up all across China, providing Western and other foreign chemical companies investing in the country the sort of facilities and services they would enjoy in their own domestic markets.
Around 20 are chemical industrial parks (CIPs), which have been set up as satellites of the Economic and Technological Development Zones (ETDZ), or which are run as independent entities.
Most are managed at the provincial level, but three of the biggest CIPs - SCIP, Nanjing Chemical Industrial Park (NCIP) and the chemical industrial park of the Tianjin Economic and Technological Development Zone (TEDA) - have been established under national regulations. These national level CIPs offer the particular attraction to foreign firms that whereas their management is influenced by the policies of local municipal governments, plant and other approvals can be more quickly and easily obtained than elsewhere.
Other parks remain competitive, however, because of the easy access they provide to many markets. Jiangsu Yangzte International Chemical Park, already the biggest distribution center for fine chemicals and petrochemical products in the Yangtze River Valley, expects total investment in the site to rise from $1bn (€730m) in 2005, to $30bn by 2010. Current tenants include multinationals such as Dow Chemical, DuPont, Dow Corning and Chevron-Phillips of the US, and Asahi Kasei and Mitsui Chemicals of Japan.
OPPORTUNITIES FOR INTEGRATION
Logistics and the availability of raw materials have been key factors behind decisions to invest in other major parks.
"Our site at Nanjing Chemical Industrial Park enjoys excellent logistical conditions due to the large amount of investments made local governments, include natural gas pipelines, highways, railways, a harbor and a bridge across the Yangtze River," says Johnny Kwan, chairman of BASF Greater China, which has a 50/50 joint petrochemical venture at Nanjing with China National Petrochemical Corporation (Sinopec).
"Another factor is the proximity to customers, as the Yangtze River Delta is the most economically active area in China," he continues. Nanjing "is linked to other cities by an extensive rail network and other transport infrastructures."
A major benefit of industrial parks is the provision of shared utilities such as power, steam, water and recycling facilities, which are in many cases supplied by foreign companies.
SCIP has set up joint ventures with Suez Group, the French-based international industrial services company, in water supplies, water treatment and waste incineration. It has another joint venture with SembCorp of Singapore for cogeneration and a collaboration with Vopak of the Netherlands for storage facilities.
There are also opportunities in chemical industrial parks for more backward and forward integrations between companies in the CIPs. Earlier this year Dow was able to choose SCIP as the location for its first world-scale glycerin-to-epichlorohydrine plant with a liquid epoxy resin unit because critical raw materials could be supplied on the site by Shanghai Chlor-Alkali Chemical and its subsidiary Tianyuan Group Huasheng Chemical.
Degussa is establishing its own specialty chemical production site at SCIP, at the core of which will be an integrated production facility for methyl methacrylate (MMA) and methacrylic specialties and polymer. The company opened a polyester and colorants plant at the site in mid-2006.
The availability of centralized utilities and integrated production helps chemical industrial parks achieve the sort of high health, safety and environmental standards which is expected of them by the Chinese government.
"As a state-owned industrial park, the Nanjing Chemical Industrial Park offers high regulatory transparency and consistently high environmental, health and safety standards," says Hanspeter Enzmann, general manager of Ciba Specialty Chemicals' site at NCIP, where the company is constructing a pigments plant. "Although industrial parks must invest more in order to achieve compliance with particularly high regulatory standards, they can compensate for this through economies of scale, enabling them to remain competitive against local competitors."
Owing to their position as centers of excellence for the Chinese chemical industry, the leading CIPs are able to forge ties with universities and attract qualified staff.
SCIP has a close collaboration with East China University of Science and Technology, which helps to provide training courses through the Shanghai Petrochemical Academy (SPA). Bayer MaterialScience, which is planning to invest $1.8bn in new or expanded polyurethane and polycarbonate facilities at SCIP, has a "Bayer Class" training scheme at the academy.
"As a founder-sponsor of the SPA, Bayer has partnered with the academy to establish the "Bayer Class," which offers specialized technical training for students," says Klaus Jaeger, site manager of Bayer Integrated Site Shanghai (BISS). "At present close to 20 per cent of the staff at BISS are graduates of the Bayer Class."
The Chinese policy on industrial parks has been strongly influenced by concepts of integrated industrial production pioneered in Japan, North America and Western Europe, especially Germany.
Its industrial parks strategy has also become an important component in the Chinese concept of a Circular Economy, which was drawn up in the 1990s with the objective of trying to reconcile rapid industrialization with the need to protect the environment.
At the center of the Circular Economy is the aim of Cleaner Production, which embraces the three Rs of reduction, reuse and recycle. The conventional material-flow pattern of "resource-products-waste" would be replaced by one of "resource-products-renewed resource."
Industrial parks and local industrial clusters would promote the reuse and recycling of resources through networks of companies able to exchange materials.
In 2002 the 16th National Congress of the Chinese Communist Party agreed to a framework for the Circular Economy, which included the Cleaner Production Promotion Law. This introduced a system of cleaner production auditing and cleaner production centers, many to be based in industrial parks.
The congress set a target of quadrupling China's GDP by 2020, while achieving a 20% reduction in pollution. Unfortunately, although the economy has quickly expanded, pollution has become a serious problem, with contamination of land, water and air getting worse rather than better.
China's State Environmental Protection Administration has even taken recent action against some industrial parks polluting major river systems. On the whole, however, the main industrial parks, especially the chemical industrial parks, have been able to set relatively high standards in the use of resources and environmental conservation.
BASF sees similarities in the concept of the Circular Economy and the philosophy behind its own Verbund integrated production strategy. BASF has established its Verbund system at the Nanjing Chemical Industrial Park in a 50:50 joint venture with Chinese National Petrochemical Corporation.
"We fully support the principles of the Circular Economy, or three Rs," states Johnny Kwan, chairman BASF Greater China. "Industrial and chemical parks, if properly planned and managed, can bring a lot of synergies in emissions reduction, energy efficiency and safety management, in comparison with stand-alone or scattered facilities.
"Our verbund joint venture at Nanjing Chemical Industry Park is a reflection of our support for the concepts of enhancing energy efficiency and reducing emissions," he continues. It is modeled on the Verbund concept originating from BASF's headquarters in Ludwigshafen, Germany.
"At our verbund sites, production plants, energy and waste flows, logistics, and site infrastructure are all integrated, so that chemical processes consume less energy, produce higher yields of products and conserve resources."
Learn more about clean production in China at www.chinacp.com
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
Sample issue >>
My Account/Renew >>
Register for online access >>
|ICIS Top 100 Chemical Companies|
|Download the listing here >>|
Asian Chemical Connections