FocusChina aims to boost specialty chemicals industry

04 September 2009 20:14  [Source: ICIS news]

By Feliza Mirasol

NEW YORK (ICIS news)--The Chinese government is attempting to change the make-up of its chemical industry by expanding production of specialty chemicals, industry sources said on Friday.

“The Chinese government has been trying to raise specialty chemicals’ share of the market to 45% as part of its efforts to transform the industry,” said Li Wang, managing director, Asia, for global consulting firm Kline.

China is now the world’s second largest specialty chemical market, behind the US, according to the consultancy.

However, specialty chemicals still comprised less than 40% of the total chemicals market in China in 2008, he added. In more developed markets, specialty chemicals generally make up 60-70% of the market.

China is fostering the industry by opening itself up to firms like BASF, Clariant and Wacker Chemie, which are building plants and expanding expand existing ones that will serve specialty chemical markets in Asia, Kline said.

“It is principally consumer demand for differentiated products that is driving the chemical market towards specialties. Chinese consumers are increasing their purchasing power,” said Zheng Daqing, senior vice president and member of BASF’s Greater China Country Board.

In 2005–2020, China will have added around 500m consumers with annual incomes of at least $10,000 (€7,000). These consumers are asking for higher quality products, like light-weight cars, high quality pharmaceuticals and construction materials for energy-efficient buildings, according to Daqing.

Both local Chinese companies and multinationals are fostering the development of the specialty chemical sector in China in response to this growing consumer demand, he added.

“The market potential is still at a relatively early stage and is expanding rapidly. International companies like BASF can help provide the knowledge of efficient and modern processes, access to the latest technology and global standards for quality and environmental protection,” he said.

Specialty chemicals are expected to continue growing at over 20%/year over the next five years in China, much faster than the economy as a whole, according to Kline.

“The sector is extremely fragmented due to low barriers to entry and intense competition. Most players are small, privately-owned companies making only a handful of products,” Wang said.

“High quality, large-scale and technologically sophisticated chemical production is relatively weak, and the country relies largely on imports for these products,” he added.

The Chinese government is aiming to reduce reliance on imports and develop the country’s chemical industry into a global leader. It is particularly interested in fostering the adoption and development of key fields and technologies, Wang added.

“The government is open to foreign investment in many areas that require more specialised technology that China does not possess,” Wang said.

($1 = €0.70)

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By: Feliza Mirasol
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