Older Industry News (2016-2017)

Dec 28, 2017: The Chinese government will extend a tax rebate on EV (electric, plug-in hybrid and fuel cell vehicles), which was to expire at the end of 2017, until the end of 2020 (Reuters)

Comment MCC: In some way, this is mixed news for those chemical companies supplying materials to the EV market. Of course, the extended tax rebate will likely increase the demand for EV. On the other hand, it is also an indication of the low EV demand from private consumers, and the subsequent struggle of EV makers to meet government targets for EV sales

---

Dec 19, 2017: Xi Jinping launched China´s cap-and-trade program for carbon dioxide emissions. Initially it will only cover power generation.

Comment MCC: While the initial impact will probably be limited due to high emission allowances and restriction to power generation, the scheme may eventually have an impact on petrochemicals as this segment was included in earlier plans for the program. At the moment, however, it seems the government wants to collect experience first by only covering the biggest emission source, power plants.

---

Dec 14, 2017: Beijing Automotive Group plans to stop sales of self-developed conventional fuel-powered cars in Beijing by 2020 and stop their production and sales nationwide by 2025

Comment MCC: Another hint for chemical companies to examine their portfolio for the impact of a shift from conventional to battery-driven cars.

---

Dec 14, 2017: BASF kicked off production of its 140 million euros automotive coatings facility, another factory in Shanghai

Comment MCC: Meanwhile, the automotive industry as a whole obviously remains an attractive customer for chemicals, as the BASF investment shows

---

Dec 14, 2017: Morgan Stanley forecasts 2017 China GDP growth of 6.8% followed by 6.5% in 2018.

Comment MCC: The 2017 figure represents an increase of 0.2% over the previous forecast as Morgan Stanley considers China to make good progress in its key transitions.

---

Nov 29, 2017: According to Yousef Al-Banyan, CEO of SABIC, China will contribute to around 50 percent of all incremental chemicals growth between 2016 and 2025 (Xinhua)

Comment MCC: Assuming this is correct, global chemical companies should maintain or even increase their focus on expanding their China activities.

---

Nov 26, 2017: Tan Jie of Sinopec warns of a price war in polypropylene (CCR)

Comment MCC: As for many other chemical materials, there is a domestic surplus for the lower end grades while high-end grades still need to be imported. Particularly with increasing competition from low-cost imports from the Middle East, domestic producers should therefore focus more on high-end grades to survive.

---

Nov 26, 2017: In Yantai, Wanhua plans to build a 1 million t ethylene cracker, a 400 kt PVC, 60 kt EO, 350 kt HDPE, 450 kt LLDPE, 300 kt/650 kt PO / SM, 80 kt butadiene unit and supporting facilities

Comment MCC: Like many other Chinese chemical companies, Wanhua seems to be interested in pursuing the BASF Verbund concept. Meanwhile, companies such as BASF have already to some extent abandoned this concept, at least in the area of low-end commodities such as PVC. So it remains to be seen whether - coming from chemicals with a limited number of competitors and substantial entry barriers, such as MDI - it is wise to move into surplus areas such as PVC.

---

Nov 23, 2017: Suez and Solvay will supply a brine treatment plant using an advanced oxidation process to Wanhua in Yantai.

Comment MCC: As the regulation in China gets stricter, China will increasingly become an important market for environmentally friendly processes and processes to reduce waste - and as the Wanhua example shows, these can be absolutely state-of-the-art, not just old Western technology.

---

Nov 20, 2017: Chinese automobile producers made 424,000 electric vehicles in the first nine months of the year, but sold only 398,000 (China Association of Automobile Manufacturers)

Comment MCC: Electric vehicles are certainly a very interesting market for many chemicals, yet the demand in this segment so far is largely driven by politics and not by consumer demand, as the recent surplus production shows.

---

Nov 15, 2017: Sales of water-borne paints for industrial use in China will grow 20-30% per year driven by environmental policies and rising consumer awareness (ChinaCoat report)

Comment MCC: While water-borne paints are already firmly established in home decoration, there is still substantial room for growth in industrial applications, for example in furniture and construction.

---

Nov 15, 2017: China accounts for around 12 percent to Evonik's global sales (China Daily)

Comment MCC: While this is roughly in line with the figures of other multinational chemical companies, it is still low compared to the global share of China´s chemical market, which is about 40%.

---

Nov 09, 2017: China's Ministry of Commerce raised the quota for non-state crude oil imports to 142 million tons for 2018, 55 percent higher than for 2017 (China Daily).

Comment MCC: This new figure is about 37% of 2016 crude imports. The increase indicates that the government wants private refineries to play a greater role in the market, possibly as a way to both increase supply security and put some pressure on the petrochemical SOEs. Overall, this increase in supply and in sources of petrochemical raw materials should be beneficial for the chemical industry.

---

Nov 09, 2017: While the global annual growth rate for additive manufacturing is high at around 22%, China´s companies are small (below 300 million RMB) and lag with regard to materials offered (CCR)

Comment MCC: This should be one of the areas for global chemical companies to focus on as it is an area where they should have a substantial competitive advantage, and it is a high growth area as well.

---

Nov 06, 2017: China will remain the key growth market for chemicals and will absorb more than half of the world´s chemical exports, despite a gradual slowdown of the economy (IHS)

Comment MCC: Other sources also emphasize the importance of China for chemicals - for example, according to CEFIC, in 2015 40% of the global chemical sales were in China.

---

Nov 06, 2017: ExxonMobil will build a world-scale petrochemical complex in Huizhou, Guangdong and has already signed a partnership agreement with the city (SCMP)

Comment MCC: The governor of Guangdong was quoted as saying "We will enhance policy support for foreign investors and offer key support to build a world-class petrochemical industry base in the Daya Bay area". It will be interesting to see whether this means a loosening of the current JV requirements for foreign investors.

---

Oct 31, 2017: China issued a new plan to ensure production safety of hazardous chemicals as part of the Five-Year Plan, with the target of decreasing the number of accidents by 10% (CCR)

Comment MCC: While some environmental targets of the government seem ambitious, this is not one of them.

---

Oct 31, 2017: The Shandong government will limit the approval of the production of hazardous chemicals to projects with an investment of at least 300 million RMB (CCR)

Comment MCC: While of course this alone does not guarantee these new plants are safe, it shows that the importance of safety and environmental protection are increasing compared to economics.

---

Oct 31, 2017: Domestic TDI almost doubled between early July and mid-August, partly due to enforced shutdowns or reduced operating rates as a consequence of tightened environmental regulation

Comment MCC: This is just one of many chemicals affected by tightened regulations - many downstream materials such as paper have also increased drastically in price. In the case of TDI, the boom may be short-lived though. While there is an existing domestic capacity of 840 kt, a similar capacity is planned or under construction, so a future glut is likely.

---

Oct 27, 2017: According to a senior official, China will not set a target to double its gross domestic product from 2021 on, and it will put more emphasis on quality of growth (China Daily)

Comment MCC: This statement is well aligned with the increased focus on environmental protection even at the price of slowing down growth, which at the moment is very obvious in the chemical area.

---

Oct 27, 2017: American automaker Tesla is communicating with the Shanghai government about building a plant (China Daily)

Comment MCC: It is possible that Tesla will be given preferential treatment - presumably due to the attractiveness of their technology - by being allowed to build a plant on their own, rather than to be forced into a JV with a local player. This is part of the strong support that EV currently get in China.

---

Oct 24, 2017: According to the Minister of Environmental protection, China's enhanced environmental protection will not slow economic growth

Comment MCC: To me this is too much a politician´s statement - it would be more honest to state that environmental protection may sometimes slow growth, but that this is necessary anyway in order to make growth sustainable.

---

Oct 24, 2017: Sinochem is among bidders for a US$4billion stake in Sociedad Quimica y Minera (SQM), a Chilean company that is one of the biggest global producers of lithium

Comment MCC: Given the rising importance of lithium as a key material for EV batteries, acquiring such a stake would fit well with the pattern of SOEs securing key raw materials abroad by taking equity stakes.

---

Oct 21, 2017: Shanghai plans to promote fuel cells by adding hydrogen refueling stations, setting up an R&D center and attracting suitable companies, with a target of about 30,000 vehicles by 2025

Comment MCC: This is a reminder that despite all the current focus on battery-driven vehicles, it is far from clear that this will be the technology that will win in the long term. Alternatives such as fuel cells do exist, have some basic advantages (though of course also their own issues), and are being explored by the city of Shanghai.

---

Oct 20, 2017: China´s R&D spending was 2.1% of GDP in 2016 (Xinhua)

Comment MCC: Somewhat surprisingly given all the government emphasis on innovation, this is not really a relative increase compared to 2015, and still below the share of countries such as the US (2.7% in 2013), Japan (3.6% in 2014) and Germany (2.9% in 2014). Still, as the basis for this percentage continues to grow, China is and will be an important global contributor to R&D

---

Oct 18, 2017: Most growth in Chinese petrochemical capacity in the last few years has come from private companies, which now contribute 35% of domestic capacity (Shanghai Daily).

Comment MCC: Among the advantages of private players over SOEs mentioned in in the Shanghai Daily article are faster plant setup time (2-3 years versus double the time for SOEs), better incentivation of workers and increasing product quality. Interesting to see such positive statements about private petrochemical companies in a newspaper such as Shanghai Daily.

---

Oct 17, 2017: Shanghai will try to attract more foreign-funded R&D centers via policy and financial support

Comment MCC: In particular, high-level foreign R&D centers in Shanghai will be granted the same privileges as regional headquarters of multinational companies, according to Shanghai Daily. Meanwhile, the issues that sometimes make life difficult for expats in China remain. Maybe that would be a better starting point for attracting investment.

---

Oct 17, 2017: China - via state-owned PetroChina and Sinopec is offering to buy up to 5 percent of Saudi Aramco directly (Shanghai Daily).

Comment MCC: This may indeed a win-win for both parties, allowing China to improve long-term security of its oil supply and helping Saudi Arabia to limit the transparency needs which may arise from a stock market listing of Saudi Aramco. For all other countries, the deal may be less positive.

---

Oct 12, 2017: Chinese Ph.D. graduates are less and less likely to pursue a postdoc abroad after finishing their Ph.D. in China as the local job market is more and more attractive (C&EN)

Comment MCC: An interesting though somewhat indirect indicator that the chemical industry in China is benefitting from China´s focus on science.

---

Oct 11, 2017: China is expected to replace South Korea as the world's largest flat-panel display producer in 2019 (IHS, China Daily).

Comment MCC: Chinese companies are indeed heavily investing in this area, supported by the government. This will obviously shift an even larger share of the market for electronic chemicals to China.

---

Oct 09,2017: BYD inaugurated its expanded battery-electric bus manufacturing facility in Southern California, which is the largest in the US capable of producing 1500 buses per year.

Comment MCC: It seems that the Chinese strategy of supporting key technologies such as electric vehicles is paying off and may indeed lead to China dominating whole industries in the future, such as road transportation.

---

Oct 06, 2017: Great Wall Motor, China's largest producer of SUVs, will buy a 3.5% stake in an Australian lithium mining operation and also buy 75 kt/a of lithium carbonate for 5 years.

Comment MCC: As stock market valuations of lithium producers also show, lithium is getting more expensive as demand for electric vehicles increases. Chinese companies always seem to like upstream integration - in this case this means that a car producer steps into the traditional territory of mining and chemical companies.

---

Sep 30, 2017: The Ministry of Environment Protection dismisses claims that the measures to reduce pollution have led to higher prices for chemicals.

Comment MCC: This is in reaction to a report by automotive supplier Schäffler that the recent measures have cost the industry about 45 billion USD. On the one hand, this is certainly an exaggerated figure. On the other hand, surely the environmental protection measures will have a cost for the industry. It would be more honest to accept that and state that these costs are well worth bearing, rather than denying that they exist.

---

Sep 30, 2017: Li Keqiang stated that China should push for the restructuring of central SOEs including those in the chemical industry, for example by asset restructuring.

Comment MCC: Those of us who have been in China for a longer time will probably no longer put much trust SOE restructuring announcements - better to just wait and see what actually happens.

---

Sep 28, 2017: The NDRC, China's main economic planning body, fined 18 makers of PVC 457 million yuan for colluded on prices 13 times between March and December 2016 (Caixin)

Comment MCC: The companies involved account for 75% of domestic PVC, so their collusion may have had quite a substantial impact on PVC. Interesting that the NDRC now takes a firm stand against violations of China's Anti-Monopoly Law (I guess state-owned entities are excluded from these concerns). Interestingly, modern as these companies are, they used a Wechat group for the price fixing, something that most Western PVC producers probably have not even heard of yet.

---

Sep 28, 2017: Recent State Council guidelines state that hazardous chemicals firms will have to relocate from densely populated areas to dedicated chemical parks, or be shut down by 2025 (CCR)

Comment MCC: This is in line with statements in the current 5-Year Plan, though it adds a timeline to it. For multinational companies, the practical timeline is likely to be shorter - my personal opinion is they will not be allowed to have chemical production outside of chemical parks after 2020.

---

Sep 28, 2017: Clariant and Tiangang will jointly manufacture process and light stabilizers at a new production site in Cangzhou, Hebei province.

Comment MCC: In the recent past, JVs have had a bit of a comeback in the Chinese chemical industry, partly because of some positive experiences with past JVs, and partly because multinationals become more and more aware that their cost structures do not allow them to be competitive in certain lower-end segments of the market. The interesting question for JVs like this one will be whether they will be more like foreign or more like local players, both with regard to costs and quality.

---

Sep 28, 2017: Evonik has started up a new plant in Shanghai for production of of organically modified specialty silicones.

Comment MCC: An obvious step to continue the process of localizing production in a key market.

---

Sep 28, 2017: Government has prohibited the shipment of dangerous chemicals along the Yangtze in the second half of October, the time of the National Party Congress (C&EN)

Comment MCC: While it is understandable that the government does not want to risk such a key meeting overshadowed by accidents, such a measure does not actually increase the trust in the existing regulation - if this was sufficient, then why the temporary additional restrictions? On a longer-term perspective, it will be interesting to see whether there will be a shift from chemical parks along the Yangtze to coastal ones, which would probably be safer and allow the government to avoid measures such as the recent one.

---

Sep 26, 2017: The position paper of the EU chemicals working group highlights the concerns of foreign chemical companies with chemicals regulation, increasing costs and assuring sustainability.

Comment MCC: Given the strong push to move chemical production into chemical parks, within the cost section the part referring to relocation is particularly relevant: "Guarantee Fair and Reasonable Treatment from Local Authorities When Dealing with FIEs Requested to Relocate Their Chemical Facilities". As I have stated before, my guess is that by 2020 there will be no significant chemical production by foreign companies outside of chemical parks any longer.

---

Sep 15, 2017: Ning Gaoning, the chairman of Sinochem, stated that "while focusing on our major business in energy and chemicals, we will also keep exploring different sectors including agriculture, real estate and finance"

Comment MCC: Ironically, Chinadaily continues stating “Sinochem has established five pillar businesses in energy, chemical engineering, agriculture, real estate and finance to further compete with other established global rivals such as Dow DuPont Co and Bayer AG.” To my knowledge, Dow/DuPont or Bayer do not have real estate or finance businesses. One would think that it should be easy for State-Owned Entities to have clear-cut areas of business focus, but it seems it is not that easy.

---

Sep 14, 2017: China plastic demand may rise further as the government will ban waste-plastic imports by the end of this year, which will curb domestic plastic recycling (Reuters)

Comment MCC: It seems that within the last year or two, China´s government has realized that many measures potentially benefiting the domestic environment can also be economically beneficial. Less import of waste plastic = more local production; more electric cars = strengthening China´s position in a promising technology; tightened emission controls = industry consolidation; etc.

---

Sep 14, 2017: China's crackdown on pollution particularly in Shandong is reducing output of chemicals, and fuels as plants curb or cut operations amid random environmental checks (Reuters)

Comment MCC: In particular, teapot refineries and PO producers are hit - and Shandong holds half of China´s PO capacity. Companies affected include Shenchi Petrochemical, Hengyuan Petrochemical Group, Fuyu Chemical, and Aoxing Petrochemical.

---

Sep 13, 2017: China will set a deadline for carmakers to stop selling cars that run exclusively on gasoline or diesel fuel (LA Times)

Comment MCC: No date has been given yet, though China may target similar dates as France and Britain (2040). China may see the shift towards electric cars as bringing a competitive advantage as the country´s position in this technology is globally certainly better than for conventionally powered cars. Of course, such a move will have a big impact on the chemicals needed by car manufacturers.

---

Sep 13, 2017: Air Products will invest USD 500 million for a 60% ownership in a JV supplying syngas to Lu'An Clean Energy Co. for further processing into liquids, based on coal from Lu'An

Comment MCC: This is an interesting expansion of the value chain participation of industrial gases companies, moving from just supplying the gases for coal gasification to actually taking over the syngas production. Of course, it comes with additional risks and additional capital investment, too.

---

Sep 13, 2017: China XD, a plastics compounder with a focus on automotive customers, saw revenue increase by 12% while sales increased by 14% from 1H2016.

Comment MCC: Rising raw materials at competitors Kingfa and Pret were noted as reasons for their lower recent margins, so it is likely China XD suffers from the same effect.

---

Sep 09, 2017: From the end of 2017, China will issue pollutant discharge permits for 15 industries including oil refining, chemicals, APIs, pesticides and nitrogen fertilizers (CCR)

Comment MCC: This represents a substantial tightening of emission control for chemicals producers.

---

Sep 09, 2017: Fujian issued a provincial development plan for the graphene industry, targeting output value exceeding RMB10 billion by 2020 and RMB50 billion by 2025 (CCR)

Comment MCC: The plan has some more specific goals, e.g., related to the number of companies involved etc. It seems that when it comes to promising technologies, the government does not really trust markets to work well on their own – something similar can be observed in many Western countries.

---

Sep 06, 2017: In the ICIS list of top 100 chemical companies for 2016, Sinopec is ranked second after BASF.

Comment MCC: However, Sinopec would only be 9th if ranked by operating profit, indicating that as a state-owned entity it is still driven by other motives than mainly profit.

---

Sep 04, 2017: Heraeus Photovoltaics and JinkoSolar Holding Co Ltd will jointly develop new-generation super PV Cells

Comment MCC: Such cooperations can be very fruitful if (as in this case) they are between leading players at different steps of the value chain (upstream and downstream). More and more, such a cooperation will involve at least one domestic Chinese player. Of course, the photovoltaics sector is particularly suitable due to frequent technological changes and high growth potential.

---

Sep 01, 2017: Municipal Beijing issued fines of around $12.6 million in a total of about 7700 cases of pollution during a 100-day campaign (Shanghai Daily)

Comment MCC: This still means that the average fine was below USD 2000. Even assuming that the approximately 6000 high-emission vehicles included incurred very low fines, the average fine for the remaining cases is below USD 10000. Only in 15 cases criminal charges will follow, mostly for illegal discharge of ore tailings. So for many company managers it may still be economically preferable to pollute than to clean up their act.

---

Aug 31, 2017: Quotas for electric, applicable to all carmakers, will be pushed back one year and will now start in 2019 with 8% followed by 10% and 12% in subsequent years.

Comment MCC: Not unlike the situation in Europe, car makers seem to have lobbying power to tweak legislation if it is regarded as too tough. Still, the targets will be hard to achieve, and will create a massive push for materials going into EVs.

---

Aug 31, 2017: BYD´s sales of EVs fell 18% yoy from 1H2016 to 1H2017

Comment MCC: Both in buses and in cars, the government is trying to somewhat reduce the massive subsidies going into EVs. However, this is unlikely to indicate a longer-term downward trend for EVs.

---

Aug 31, 2017: A third draft of the new substance notification guidance is expected soon

Comment MCC: The chemical industry seems to have some success in lobbying for reducing some data requirements, particularly for lower-volume chemicals.

---

Aug 29, 2017: Sinopec´s EBIT for chemicals increased by 34.9% year on year in 1H 2017, contributing strongly to the overall increase in company performance.

Comment MCC: Mr. Wang Yupu, Chairman of Sinopec, stated, "During the first half of 2017, we fully implemented value-oriented growth, innovation driven development, integrated resource allocation, openness to cooperation, and green, low-carbon development strategies and achieved solid operating results. " This is an assembly of buzzwords and phrases that would make a seasoned consultant feel proud. So at least in this respect, Sinopec is already truly a world-class company.

---

Aug 26, 2017: Saudi Aramco is reportedly in talks with CNPC to invest into a refinery in Yunnan, an investment that failed to materialize 6 years earlier.

Comment MCC: As Caixin points out, China has been leaning towards Russia as the main supplier of crude oil recently, giving Aramco an incentive to stabilize sales to China via participation in oil refining.

---

Aug 23, 2017: Shandong province enacted stricter measures related to the safety management of hazardous chemicals in order to reduce accidents (CCR).

Comment MCC: Still, the fines of between RMB 10,000 and 30,000, for example for not installing automatic control systems, are quite low. So it still seems that the Shandong government is reluctant to clamp down on violations - though chemical managers may be deterred by criminal responsibilities being applied if the violations constitute crimes.

---

Aug 23, 2017: The Ministry of Environmental Protection approved the 13th Five-Year Plan for VOC Control, strengthening control in, e.g., pesticides, pharmaceuticals, plastics and coatings (CCR)

Comment MCC: The targets set for 2020 are fairly specific and challenging - e.g., a reduction of VOC of more than 30% in pesticides, pharmaceuticals and plastic products, potentially forcing producers to switch to products and processes with lower VOC emissions

---

Aug 23, 2017: China´s production of ion exchange resins increased by 5.1% in 2016, reaching about 270 kt (CCR)

Comment MCC: The industry is profiting from increased demand in water treatment, adsorption processes and catalysis. However, it is still fairly fragmented, with about 40 players, of which only about 10 have capacities above 10 kt.

---

Aug 16, 2017: According to the IMF, China's economy will expand at an average pace of 6.4% annually from 2017 through 2020, compared with an earlier 6% estimate

Comment MCC: While this sounds good, the IMF also warns about growing Chinese debt. Their forecast is that total household, corporate and government debt will increase to almost 300% of gross domestic product by 2022 from 242% last year.

---

Aug 10, 2017: Tianjin is aiming to lower air pollution indicator by a quarter this winter via closing down polluting factories, enforcing load shedding on heavy industry, and other measures

Comment MCC: Presumably programs such as this could also affect selected chemical companies, similar to the way that aluminium producers in the same area have been asked to reduce production by 30% in the winter heating months.

---

Aug 04, 2017: Unreported hydrogen peroxide caused two explosions in a freight train in southwestern China (Caixin)

Comment MCC: This highlights China´s problem in implementing regulations. There are still strong incentives for shippers to disregard these regulations as long as they are enforced only occasionally. Though there is a trend towards better implementation, there is still a long way to go.

---

Aug 04, 2017: The Economist reports that by the end of the year, China will no longer accept imports of 24 categories of waste as part of a campaign against yang laji or “foreign garbage”

Comment MCC: While the Economist worries about the impact on foreign trade, to me this seems like a reasonable measure. Clearly, a country that has started to position itself as a responsible actor with regard to the environment should not be the dumping ground for the trash from other countries.

---

Aug 04, 2017: China will overtake the United States as the world's biggest oil importer this year (Reuters)

 

Comment MCC: As refining capacity in China will increase further, this will limit the import markets for chemicals directly derived from refineries. In particular, this should hurt Korean chemical producers, who will need to find other markets.

---

Aug 03, 2017: China has issued regulations to strengthen scrutiny over overseas investment by state-owned enterprises (Caixin)

Comment MCC: Specifically, officials may be held accountable for decisions that led to financial losses if the officials were negligent in performing their duties or where deals were done in violation of regulations - a regulation that could limit the amount of M&A done by state-owned enterprises overseas.

---

Jul 25, 2017: The C&EN list of the biggest 50 global chemical companies has only one Chinese entrant, Sinopec at no. 3.

Comment MCC: This is a consequence of the mixed businesses of some of the other big Chinese players such as Sinochem, Petrochina and ChemChina, which makes it hard to determine their chemical sales (for Sinopec, these are indicated separately).

---

Jul 25, 2017: The Fortune 500 list of biggest global companies lists 7 chemical ones, with BASF coming in first at no. 126 and Chemchina as the only Chinese entry at 211.

Comment MCC: While at first glance this seems to show a relatively minor importance of the chemical industry in China and globally, it is a bit misleading. Number 3 and 4 in the global list are Sinopec and Petrochina, which are not categorized as chemical companies despite activities in the segment. Similarly, Sinochem (at no. 143) is not listed as a chemical company. So the low Chinese rankings reflect the more blurred business models rather than a lower importance of chemicals.

---

Jul 25, 2017: Before 2010, more than 70% of China's EO capacity was held by Sinopec and PetroChina but this fell to about 50% in 2016 (Reportbuyer)

Comment MCC: This is a trend valid for many other chemicals as well - the state-owned chemical companies have lost market share, primarily at the expense of domestic private enterprises

---

Jul 25, 2017: In the ICIS list of top 100 chemical distributors (based on 2016 sales), Sinochem Plastics is the highest ranked Chinese entry at no. 6, with about 1.9 billion USD sales.

Comment MCC: Interestingly, this is the only Chinese entry in a list of more than 250 global companies. This reflects the relative immaturity of the Chinese distribution market - domestic companies are less likely to outsource distribution to third parties than elsewhere in the world.

---

Jul 24, 2017: Wison Engineering has been awarded an EPFC contract for one section of a LDPE project in Texas by Formosa Plastics Corporation

Comment MCC: This is the first contract that the Chinese chemical engineering company has won in the Americas, indicating the ongoing internationalization not only of Chinese chemical companies but also their service providers such as engineering companies.

---

Jul 22, 2017: Singapore-listed DMF producer Jiutian Chemical´s stock rose by 17% due to an announced significant rise in revenue and profit.

Comment MCC: Sounds good but this reflects an increase of only 0.01 SGP dollar, and the price to sales ratio of the company is 0.39 compared to an industry average of 2.81. From such a starting point, it is not so difficult to come up with good news.

---

Jul 22, 2017: "In North America, people want a new car smell and will even buy a ‘new car' spray to make older cars feel new and fresh. In China it's the opposite." (The Sun)

Comment MCC: An interesting observation from a rather unlikely source. But it shows the differences in customer perception and requirements quite nicely. While there is a certain amount of trust in chemical regulation in the Western world - allowing people to enjoy the smell of a new car - this is entirely lacking in China. Anything that smells chemical is presumed to be bad. Based on past experiences in China, this seems justified.

---

Jul 22, 2017: China XD will invest in 300 kt of biological composite materials and in 3D printing

Comment MCC: Perhaps the company is worried about limited growth prospects in their traditional area, automotive plastics. Somewhat unusual for a Chinese chemical company, they seem to have a relatively clear strategy of diversifying into non-auto applications.

---

Jul 22, 2017: Pan-Asia PET Resin (Guangzhou) will invest US$3.8 billion to build a polyester plant complex in Jizan, Saudi Arabia, next to a new Saudi Aramco refinery and PX plant (CCR)

Comment MCC: If going ahead as planned, by mid-2020 the plant will produce 2.5 million t/a of PTA and 1 million t/a PET resin - a large plant by any standards, and one with good chances of success due to the presumed combination of access to cheap raw materials and the key Chinese market. Investments like this may in the future more and more exclude Western chemical companies from some chemical value chains for which these two factors are the most important ones. Traditional contributions of Western players - such as capital and technological know-how - are now available to Middle Eastern and Chinese players directly.

---

Jul 22, 2017: Wanhua accounts for 58% of China´s domestic MDI capacity of about 3.1 million t/a (CCR)

Comment MCC: Wanhua is truly one of the big success stories in China´s chemical industry. When I came to China in 2004, they were a minor MDI producer with very low quality. Now they are the global market leader.

---

Jul 22, 2017: For caprolactam, average annual growth rates during 2010-2016 were 32.1% for capacity and 24.8% for output (CCR)

Comment MCC: A typical example for the vast increase in production and the even bigger increase in capacity. Another typical aspect is that while China has already achieved self-sufficiency for lower-end caprolactam, some high-end varieties are imported

---

Jul 17, 2017: Ecolab China will expand its food safety business from southern China to the northern part of the country, and will set up a production base there.

Comment MCC: According to Ecolab, the food safety business is growing at more than 10% annually in China. In particular, the spread of global fast food brands - with their high requirements for hygiene - represents a big opportunity for players in this area.

---

Jul 14, 2017: According to a Lubrizol manager, China´s chemical regulation suffers from unclear implementation rules, layers of bureaucracy and limited support for business confidentiality (C&EN)

Comment MCC: As pointed out by the same manager during a recent conference, this means that significant resources are required to comply with the laws. This mirrors earlier criticism stated by the Chemical Working Group of the European Chamber of Commerce. Indeed, the rules seem complex and not easy to understand - clarification and simplification could probably facilitate compliance and even improve the overall environmental situation.

---

Jul 12, 2017: Salaries in major cities in China have declined quarter on quarter (zhaopin.com). The average Shanghai professional service salary now is 13,161 RMB

Comment MCC: Labor costs in big cities are already quite high compared to neighboring countries, and many companies have reacted by shifting labor-intensive work abroad or to smaller cities in China. For chemical companies, the effect is often more of an indirect one: the share of labor as part of total costs is low, but some customer industries such as textile are strongly affected.

---

Jul 07, 2017: According to a BP report, China became the world's largest renewable energy producer last year, contributing 40% to global growth last year

Comment MCC: At the risk of repeating myself, China is serious about renewable energy, and any chemical company offering products for this segment should look into China as a very promising market.

---

Jul 07, 2017: In the ranking of the top 100 global coatings companies just published by Coatings World, Shanghai Huayi Fine Chemical is the highest-ranked company headquartered in China, at no. 28 of the list

Comment MCC: Even in China, large segments of the coatings market are dominated by the big global players such as PPG and Akzo, while the local producers are small and do not have much market share outside of China. Incidentally, Shanghai Huayi Fine Chemical is a subsidiary of state-owned Shanghai Huayi - not a private company, as stated in the CW report.

---

Jul 06, 2017: Volvo Cars said yesterday it plans to phase out production of conventional petrol-only cars from 2019, with all new models to be either electric or hybrid (Shanghai Daily)

Comment MCC: It seems electric cars are not a fad but are here to stay, and China is trying to become the global center for these cars. Chemical companies are well advised to check how the increasing demand for electric vehicles will change demand for their own products, particularly in the Chinese market.

---

Jun 30, 2017: DSM expects more than 10% yoy growth of China sales in Q2 2017. China now contributes 12% of global DSM sales.

Comment MCC: DSM´s strategy to focus on high-end materials and specialty chemicals for consumer and food products seems to pay off as it is aligned with China´s shifting focus on consumption and on innovation.

---

Jun 30, 2017: Brenntag will buy specialty chemical distributor Wellstar (Hong Kong) and its 3 Chinese subsidiaries. Wellstar focuses specialty pigments, resins and additives in China.

Comment MCC: This strengthens Brenntag´s standing in specialty chemicals distribution, a segment with considerable growth potential in China. Interestingly, for the acquisition Brenntag employs the same two-step approach successfully utilized in the earlier acquisition of Zhongyun: Buying 51% in the first step and 49% a few years later. This is mainly to give the previous owners an incentive in the health of the business, thus keeping them from immediately setting up a new company in the same area.

---

Jun 28, 2017: China appointed Li Ganjie as Minister of Environmental Protection on Tuesday, replacing Chen Jining, who became Acting Mayor of Beijing in May.

Comment MCC: Li Ganjie has a strong background in environmental protection and has been a vice minister in this agency before. In addition, the fact that the previous holder of the position got transferred to the important position of mayor of Beijing indicates that the importance of environmental issues within the government has increased

---

Jun 27, 2017: A US court has ordered Syngenta to pay US$218 million to 7,000 Kansas farmers after selling them genetically modified corn seeds not approved for export to China (Shanghai Daily)

Comment MCC: This is a curious case given that Syngenta is now being bought by Chinese state-owned ChemChina. Even more curious is the statement given by Syngenta afterwards: "American farmers shouldn't have to rely on a foreign government to decide what products they can use on their farms".

---

Jun 23, 2017: Eastman Chemical launched a new bioplastic material at the Chinaplas trade show made 50 percent from trees from sustainably managed forests (PlasticsNews)

Comment MCC: Personally I am a bit skeptical about the environmental benefits of such partly biobased materials. But the fact that Eastman launched the material at Chinaplas is an indication that environmental aspects become more and more relevant in the Chinese market (while possibly becoming less relevant in the US under the Trump administration).

---

Jun 23, 2017: The Ministry of Environmental Protection will issue around 800 new standards from 2016 to 2020, particularly for discharge of pollutants that have become effective for more than five years (CCR)

Comment MCC: Chemical companies will be wise to follow these developments - both to be able to produce in the future and to capture new business opportunities that may arise from these new rules.

---

Jun 23, 2017: The Ministry of Environmental Protection approved the environmental impact assessment report for a 600 000 t/a CTO project of Qinghai Mining

Comment MCC: While the environmental restrictions for such projects have become much stricter, this indicates that in principle the government keeps pursuing CTO. So the future of this technology in China will mostly be determined by economics. And these should be relatively favorable in a place like Qinghai, where coal prices are very low due to the lack of local users.

---

Jun 23, 2017: Exports of textile auxiliaries from China to Vietnam increased by 31% in 2016 (CCR)

Comment MCC: As salaries in China have risen, the textile industry has partly shifted to lower-cost countries, in particular Vietnam. These export figures reflect this trend.

---

Jun 21, 2017: Chinese e-commerce company Jingdong (jd.com) and Mitsubishi Chemical will cooperate to raise vegetables in hothouses for fresh delivery to Chinese consumers (Nikkei)

Comment MCC: Interesting business area for a chemical company, and not one particularly highlighted on Mitsubishi´s website. Maybe an indication of a greater flexibility to expand chemical businesses into related services - Mitsubishi is already active in, e.g., agricultural materials, environmental services and packaging (including food).

---

June 21, 2017: SINOPEC and Linde have established a EUR 145 million 50:50 JV to supply industrial gases to customers within the Ningbo Chemical Industrial Zone

Comment MCC: This is already the sixth JV between the two companies, so the past experiences must have been acceptable to both parties. For Linde, to cooperate with a state-owned giant certainly facilitates their business in Ningbo while engaging a global industrial gases companies helps the government promote Ningbo as a leading petrochemical production center.

---

June 19, 2017: In China, 41% of lithium carbonate goes into batteries compared to 27% globally. China needs to import a large share of this, and demand will increase at 20% annually (Research and Markets)

Comment MCC: While I have had my share of disappointments with market studies by these all-round providers, probably the basic trends are still correct, highlighting the high importance of China for all kinds of materials related to electric vehicles.

---

June 19, 2017: A Xi'an court sentenced seven people, including the heads of two environmental protection branches, to prison terms for falsifying air quality data (Xinhua)

Comment MCC: According to the court verdict, the accused interfered in the data collection of air quality, and used cotton to fill sampling instruments to lower pollution data. A much simpler way to improve pollution data than actually stopping pollution, and hopefully one that will no longer work in China.

---

June 16, 2017: Dow CEO Liveris stressed the positive links between the US and China: "Success for one means opportunity for the other", "The US benefits when the Chinese people thrive" (Xinhua)

Comment MCC: Liveris heads US president Trump´s manufacturing council - hopefully he can convince Trump of the statements made in his Xinhua interview.

---

Jun 14, 2017: Chinese plastics recyclers are struggling with uncertainty about their businesses as the government tightens import controls of plastics for recycling from overseas (PNC).

Comment MCC: Xi Jinping recently stated that one should protect the environment "like one´s eyes". It is heartening to see that this turns into actual implementable policy. And there may be an upside for plastics recyclers as Xi´s initiative also aims to raise the domestic rate of plastics recycling.

---

Jun 14, 2017: China remains the world's largest market for plastics and will account for more than half of the total global increase in demand for polyethylene to 2021 (IHS/PNC).

Comment MCC: This is probably valid for most segments of the chemical industry. So China is still the place to be for chemical companies.

---

June 13, 2017: On June 8th, 2017, ChemChina announced that it had completed the second settlement acquisition of Syngenta at $43 billion.

Comment MCC: Finally.

---

June 13, 2017: Kemira opened its new AKD emulsion and cationic rosin production lines (for use as sizing agents in paper products) in Nanjing

Comment MCC: This is an indication of both the ongoing localization of production (more and more also for higher-end products) and the growth the paper and packaging industry in China sees due to the massive increase in e-commerce.

---

Jun 08, 2017: Xi Jinping stated that China will actively develop clean energy and improve energy efficiency to push green development and lifestyles

Comment MCC: While this may sound relatively meaningless, it is important to remember that China has pledged to cut its carbon emissions per unit of GDP by 60-65 % from 2005 levels by 2030, and to raise the share of non-fossil energy use in total consumption to about 20%. So there should be a substantial market for chemicals and chemical technologies that help achieve this target.

---

Jun 07, 2017: China will launch its nationwide carbon emissions trading system by November at the very earliest, not in the first half of 2017, as originally scheduled (Reuters)

Comment MCC: While the government seems committed to establish the trading scheme in principle, they are struggling with a number of issues such as data availability, incorporation of existing pilot schemes and quota assignment. So even November 2017 might be too optimistic.

---

June 07, 2017: Eight people have been killed in an explosion of a liquefied gas tanker and fire at the Linyi Jinyu Petrochemical Co. plant in Shandong province (Xinhua)

Comment MCC: And as usual, this news is accompanied by the following statement: "The plant's owner was later detained by police".

---

June 07, 2017: The Ministry of Environmental Protection issued Emission Standards for Air Pollutants in Coatings, Ink and Adhesive Industries (CCR)

Comment MCC: These will come into effect July 1, 2017 for newly established firms and January 1, 2019 for existing ones, once again indicating that measures to reduce air pollution are being taken more and more seriously in China.

---

June 07, 2017: Covestro will significantly expand its polycarbonate capacity to 600 kt/a, shortly after doubling its Shanghai production capacity to 400 kt.

Comment MCC: As there will be a number of local players entering the PC market, this step aims at cementing Covestro´s leading position and enabling economies of scale. Local players will enter the market with much lower capacities.

---

June 7, 2017: In 2016, China´s coatings production increased by 7.2% by volume and 5.6% by value (CCR)

Comment MCC: Of course, this is already a far cry from the double-digit growth rates observed until about 2012, though still better than in Western markets. The stronger growth of volume than value is an indication of price pressure affecting the industry, though pass-on effects of raw materials prices also play a role.

---

Jun 06, 2017: A report estimates that the 2016 domestic market for bio-plastics in China was 130 kt with another 160 kt exported, and a growth rate of 13% (Research and Markets)

Comment MCC: Indeed, so far there is limited consumer demand for bioplastics, so local demand is primarily coming from government initiatives such as the replacement of non-biodegradable plastics bags in Jilin province. In contrast, export markets are primarily driven by consumer demand in Western export markets, for example in areas such as plant containers. This points to a broader fact: In the West, environmental issues are generally taken most seriously by individuals and only later and reluctantly picked up by governments, while in China the top-level government often takes the leading role.

---

Jun 04, 2017: The M&A Panel of the China Securities Regulatory Commission has approved the merger of Adama Agricultural Solutions with Sanonda, a domestic pesticide producer

Comment MCC: As also observed in the Economist recently, agrochemicals are currently undergoing a wave of mergers both on the international level (Bayer-Monsanto, DuPont-Dow) and on the Chinese one (Adama-Sanonda, which will is part of ChemChina, followed by ChemChina-Syngenta and probably later by ChemChina-Sinochem).

---

Jun 03, 2017: BASF opened a Shanghai plant for 15 kt tons of emollients and waxes, to be used in the cosmetics segment

Comment MCC: As China shifts from investment to consumption and consumers adopt higher standards, the cosmetics segment remains an attractive area of the chemical industry. As Shanghai Daily points out, sales of the Chinese market grew 9.1% annually over the past five years compared to a global average of 4.1%.

---

Jun 03, 2017: Air Products will invest in six industrial gas plants in China after receiving multiple contracts from semiconductor and flat panel display manufacturers in China

Comment MCC: The electronics industry is heavily government supported in China via a number of initiatives which in total exceed 100 billion USD. While this is mostly meant to support the establishment of local companies, foreign players such as Air Products can also benefit from this.

---

June 01, 2017: Prices for PVC in Asia have been dropping by about 10% between April and May 2017, as indicated by prices for Formosa Plastics PVC delivered to India (Nikkei).

Comment MCC: Chlor alkali producers in the region face strong demand for sodium hydroxide (used, e.g., in aluminum refining) while the other product of their process (chlorine) suffers from weak demand as PVC sales are being affected by China's slowing construction activities.

---

May 31, 2017: Covestro inaugurated an academy with Tongji University today to develop new materials in buildings and transport, which it will support with an annual 2.3 mio RMB

Comment MCC: Given the huge potential for Covestro´s PU and PC materials in these applications in China, it seems like money well spent - particularly as Tongji is one of the highest-ranked universities in China.

---

May 31, 2017: The theme of the "2017 China Chemical Industry and Chemical Park Forum" (Ningbo, May 2017) was "Standardized Construction & Green Development" (CCR)

Comment MCC: Currently there is a strong push to move China´s chemical industry into chemical parks. This offers a huge chance to standardize the requirements for the large number of parks (more than 500) and thus gain efficiency. It should also offer good opportunities for providers of services to chemical parks, such as safety advice, utilities, logistics etc.

---

May 28, 2017: Xi Jinping stated that China should protect the environment "like one protects his eyes" and treat the environment "like one treats his life." (Xinhua).

Comment MCC: It is good to hear this top-level appreciation of the importance of the environment, and it can only be hoped it will filter down to the lower ranks of government quickly. Unfortunately, so far on the provincial and lower level economic development still seems much more important than the environment, even in relatively developed places like Shanghai. This is exactly the opposite of what Xi Jinping is quoted as saying, namely "China should firmly reject the development model that damages or even destroys the environment and bid farewell to practices that boost short-term economic growth at the cost of the environment"

---

May 28, 2017: While coal-to-olefins projects are slowing down in China, by 2021-2022, there could be about 10 new naphtha crackers on stream (ICIS)

Comment MCC: These new projects are now increasingly being constructed by private companies, not only by PetroChina and Sinopec. Given the better performance of private companies in the past, this will likely mean the efficiency of these new projects will be higher than before. China´s import dependency for some key chemicals such as PP will be further reduced.

---

May 27, 2017: According to a Greenpeace report on emissions from a major chemical park, there is an urgent need for "an integrated and hazard-based approach to chemicals management"

Comment MCC: While it is hard to disagree with the conclusion - and it seems that the government is also leaning in this direction - it seems somewhat strange to deduct such a statement from the inspection of a single chemical park (Lianyuangang, Jiangsu). My guess is that some chemical parks such as the one in Shanghai (Caohejing) already are managed much better. So it may be more of a case of spreading best practice rather than designing completely new systems.

---

May 27, 2017: ChemChina has raised $20 billion to finance the Syngenta purchase. Bank of China is single largest investor providing half of the funding (Reuters)

Comment MCC: With the merger of Sinochem and ChemChina now likely to go ahead, the government no longer has a need to show Ren Jianxin, the ChemChina chairman, his limits. So they gave a state-owned bank the go-ahead for financing the Syngenta deal. It seemed always clear to me that financing would not be a major obstacle as the face loss of backing down from the Syngenta purchase would have been too big a loss of face for China.

---

May 24, 2017: Main business revenue of the petroleum and chemical industry was RMB3 440 billion in Q1 2017, or 12.4% of the profits earned by all sizable domestic enterprises (CCR)

Comment MCC: This shows the high importance of the chemical industry in China compared to that in Western economies.

---

May 24, 2017: CPCIF issued an action plan for "green" development of the chemical industry, according to which by 2020 energy efficiency and pollutant emissions will improve significantly (CCR)

Comment MCC: The plan has specific targets, some of which are fairly impressive, indicating that environmental protection is a serious consideration now: -10% carbon dioxide emission (2020 vs. 2015); - 18% water consumption; waste water treatment rate 100%.

---

May 24, 2017: In April 2017, Qinghai Salt Lake Magnesium Co., Ltd.'s 1 million t/a methanol-to-olefins (MTO) plant was successfully put into operation (CCR)

Comment MCC: Something for the Guinness Book of Records: the highest altitude large-scale MTO plant in the world. At least that is the entry I am hoping for.

---

May 24, 2017: China´s self-sufficiency for Nylon 6 chips has risen from 68% in 2011 to 86% in 2015 (CCR)

Comment MCC: As more than 1000 kt of capacity are to be added in 2016-2017, China should soon cease to be a net importer of Nylon 6 chips as the 2015 sufficiency gap is only about 400 kt.

---

May 24, 2017: China´s consumption of iron oxide pigment decreased by more than 10% from 2015 to 2016.

Comment MCC: A large share of iron oxide pigment is used in construction materials and related materials (coatings), so the shift from an investment-driven to a consumption-driven economy particularly affects this material.

---

May 24, 2017: ChannelNews Asia also reports about a likely merger between Sinochem and ChemChina, to be led by Sinochem´s chief Ning Gaoning

Comment MCC: This could indeed be an elegant way to retire Ren Jianxin, who may be seen as a bit too much of a loose cannon by the government due to his long uncontested leadership at ChemChina.

---

May 20, 2017: One of China XD´s independent directors, Lawrence W. Leighton, resigned from the Company's Board of Directors on May 15, 2017.

Comment MCC: This seems to be a bit of a soap opera. With his resignation, Leighton also ceased to be a member of the Special Committee that was established to evaluate the proposed going-private transaction of the Company. Now only two members (both Chinese judging from their names) will remain on the Special Committee. If I was a minority investor in China XD, I would not feel very comfortable about these recent developments.

---

May 20, 2017: Clariant Business Unit Additives established its first two, fully-owned additive production facilities in a multi-million dollar investment at the Clariant Zhenjiang site.

Comment MCC: Clariant still seems quite bullish about China, with board member Kohlpaintner talking about “China, where the future of our company is going to be decided.” From this perspective, further localization of production in China is certainly reasonable.

---

May 20, 2017: Illegal use of an ultra-large chlorine container by the Lixing rubber plant in Hebei province led to a deadly poisoning incident last week (China Daily)

Comment MCC: It is a positive sign that even such comparatively minor incidents now get press coverage, though of course China Daily also points out that “China saw fewer workplace accidents in the first four months of this year.”

---

May 20, 2017: China's first 6th-generation flexible AMOLED display screen production line, built by domestic screen maker BOE Technology, was put into operation in Chengdu (CNR)

 

Comment MCC: This market currently is served almost exclusively by Korean companies Samsung and LG. China´s government is keen to reduce the reliance on foreign components and imported chemicals in the electronics sector as part of the China's State Council initiative "Made in China 2025"

---

May 18, 2017: According to a State Council decision, China will focus more on manufacturing by integrating the Made in China 2025 strategy with several other initiatives.

Comment MCC: This hints at broader ambitions for Made in China 2025. Even though this initiative is often seen as similar to Germany´s Industry 4.0, it really is on one level lower, focused on upgrading the industry and becoming more innovative rather than on machines communicating directly with each other. The State Council decision seems to acknowledge this distinction and to push China´s industry to adopt more elements of Industry 4.0

---

May 17, 2017: Saudi Aramco, China North Industries Group Corp. Norinco and Panjin Xincheng Industrial Group agreed to build a refining and chemicals complex in northeast China

Comment MCC: Probably a win-win for both parties, with Saudi Aramco securing their sales and China promoting their OBOR initiative and strengthening the economically weak Northeastern part of China. Of course, not much of a win for Western companies, a situation that will probably become more and more common as many chemical technologies are by now widely available and do not require Western input any longer.

---

May 16, 2017: Air Products has been awarded the industrial gases supply for the new memory fab of Fujian Jinhua Integrated Circuit Co. (CCR)

Comment MCC: Electronic chemicals - including ultra-pure gases such as supplied by Air Products - are indeed a major opportunity for chemical companies in China due to the strong government support of developing Chinese capabilities in this area. For critical chemicals and projects such as this one, foreign players are likely to still be dominating for the next few years despite the government efforts to establish local players.

---

May 12, 2017: Sales revenue of Chinese dyestuffs and pigments was up 0.9% in 2016 after an annual average growth of 7.3% from 2012 to 2015 (CCR)

Comment MCC: This chemical segment is probably one of the first ones to suffer from the joint effects of rising labor costs and increasing environmental regulation, both of which shift production to countries with lower costs and restrictions. Some Indian dye manufacturers are earning very good money these days.

---

May 10, 2017: According to the Financial Times, ChemChina and Sinochem are planning to merge next year

Comment MCC: This was already a rumor last year but now seems to be back on the agenda. It fits with the government objective to reduce the number of SOEs and create strong national champions. Another desired aspect may be to reduce the power of Ren Jianxin, the president of ChemChina.

---

May 04, 2017: According to Greenpeace, the contribution of China´s coal-to-chemicals projects to carbon dioxide emissions will increase from less than 1% (2015) to more than 5% of the total in 2020 (C&EN)

Comment MCC: Clearly, almost all coal used in these plants will end up as carbon dioxide, whether immediately (coal gasification) or with some delay (coal-to-olefins, coal-to-ethanol). This puts China in a dilemma as the country is proud of its leading position in coal chemicals and glad to reduce dependency on imported petrochemicals while at the same time trying to become a responsible world citizen (particularly at a time when the US seems to take a different direction).

---

May 02, 2017: Profits of the 3204 A-share listed Chinese companies grew by 11.2% from 2015 to 2016 while revenue grew by 10.2% (China Daily)

Comment MCC: China Daily states that companies in upstream and midstream industries including chemicals made the largest improvement in business performance. They quote an expert ascribing this to successes in reduction of overcapacity, destocking and deleveraging.

---

Apr 28, 2017: SCMP quotes Premier Li Keqiang saying that‘Money is no object' in China's war on smog, and that the government is willing to spend whatever it takes to tackle air pollution

Comment MCC: This should be good news for chemical companies with products used in reducing air pollution.

---

Apr 28, 2017: Sinopec will buy the 50% stake of BP in the JV ECCO for 1.68 bn USD, which will afterwards by fully owned by 3 different Sinopec subsidiaries

Comment MCC: It seemingly is the eventual fate of all JVs in China to be taken over by one of the two JV partners. In this case, this certainly makes sense as foreign ownership (and influence) in this segment of the chemical industry is limited anyway.

---

Apr 28, 2017: In Q1 2017, Sinopec achieved about 33% of its operating profits in the chemical segment, even though these account for only about 15% of sales.

Comment MCC: One needs to keep in mind that even though Sinopec´s chemical portfolio is clearly in the commodity area, this already presents the "specialty" part of their business compared to their other activities, which are mainly in exploration, refining and sale of petrol. So the general trend statement in chemicals that profits are higher the further downstream you go also holds true for Sinopec.

---

Apr 26, 2017: ChemChina confirmed that all regulatory approvals and conditions for the acquisition of Syngenta have been obtained

Comment MCC: So it seems the deal will finally go through, assuming at least 67% of shares will be offered to ChemChina. It seems extremely unlikely that financing will be a problem as this would mean a big loss of face for China.

---

Apr 26, 2017: China´s GDP grew by 6.9% in Q1 2017, and the IMF upgraded its forecast for China's economic growth in 2017 and 2018 to 6.6 and 6.2% (China Daily)

Comment MCC: GDP growth in Q1 is indeed surprisingly high, and the mood related to the economy seems to be cautiously optimistic. In particular, consumption is now clearly the main driver, accounting for 77.2% of GDP in 2016, a surprising 12.6% higher share than in 2016. So chemical companies are well advised to look at consumer products rather than investment goods as their main outlet for chemicals. On a slightly more negative note for chemical companies, services now account for 56.5% of GDP, much more than the 38.7% accounted for by the secondary industry.

---

Apr 26, 2017: In 2016, the review time for patents in China sped up to an average 22 month and is now somewhat shorter than in the US (25 months) and the EU (26 months).

Comment MCC: It is good to see that the constant emphasis of top level government officials on innovation is actually accompanied by some practical steps, such as the hiring of additional patent reviewers. Maybe a model for the US and the EU as well.

---

Apr 25, 2017: According to an auto industry development plan released by three government departments, by 2020, China will produce and sell 2 million NEV (new energy vehicles)

Comment MCC: This is about 4 times the current figure - certainly an ambitious target, but also one that will require substantial input from the chemical industry.

---

Apr 22, 2017: Arkema has expanded its Changshu capacity for polyvinylidene difluoride (PVDF) capacities by 25%.

Comment MCC: This investment reflects a number of trends in China - the focus on specialties (in this case, specialty polymers) of MNCs; the further localization of production capacity targeting the Chinese market; and the growth of markets linked to rising demand from new applications in, e.g., new energy and water treatment.

---

Apr 21, 2017: The number of Chinese outbound M&A deals dropped by 39% by number and 77% by value in Q1 2017 compared to Q1 2016 (Shanghai Daily).

Comment MCC: In particular after the Syngenta deal, regulatory requirements have become tighter, in particular for SOEs. Very likely this will also be reflected in the chemical segment.

---

Apr 20, 2017: Volkswagen brand chief Herbert Diess told Reuters at the Shanghai motor show: "We are convinced China will become the leading market for electromobility"

Comment MCC: Similar statements have been made before, e.g., by the management of Ford. And indeed China seems to support EVs more strongly than any other country, perhaps seeing EVs as a segment in which China can leapfrog to become the leader. This has obvious implications for chemical companies providing materials not only to EV producers but also to the automotive industry in general.

---

Apr 14, 2017: To curb air pollution, Hebei Province, Beijing and Tianjin will enforce a unified standard to reduce the use of coatings and adhesives in construction (China Daily)

Comment MCC: This should give a boost to water-based coatings as the measures target to reduce the amount of volatile organic compounds (VOCs) in manufacturing, storage and in use of construction coatings and adhesives.

---

Apr 14, 2017: The offer of China XD´s chairman and PE firm Morgan Stanley to take the company private has been criticized as being too low by analysts and investors (Plastics News China)

Comment MCC: While the offer is about 30% above the current valuation, this still seems somewhat low given that XD has long been described as undervalued in the US stock market. Probably an immediate re-listing in China after delisting in the US would increase the value by more than the 30% offered by the chairman. 

---

Apr 14, 2017: Operation National Sword 2017 is the name for China's latest effort to crackdown on problem imports of recycled plastics, comprising inspections at 9 ports (Plastics News China)

Comment MCC: This is one of many current activities indicating that indeed environmental concerns are being taken more and more seriously in China. The government seems to see environmental tightening as a way to accelerate innovation, so pursuing this goal also serves this other high-level Chinese goal.

---

Apr 12, 2017: Linzi Butian New Material bought exclusive rights to a CFC-free technology for foaming of PU for 20 years, paying 500 million RMB.

Comment MCC: This is an indication that both intellectual property rights and environmentally friendly technologies are valued much more in China than just a few years ago.

---

Apr 12, 2017: China Car sales fell by 1.7% yoy in the first quarter of 2017 after a yoy rise of 13.7% from 2015 to 2016.

Comment MCC: While there are some special factors explaining the drop, such as a tax change, and March 2017 sales actually increased slightly yoy (+ 1.6%), the data still indicates that the consistent high growth of the Chinese car market is probably coming to an end. Producers of chemicals used in the automotive industry will need to achieve future growth via increasing the value of their products per car, rather than just to rely on volume growth. Fortunately, the trend towards electric vehicles and requirements for reduced car emissions should still make this feasible.

---

Apr 11, 2017: Wanhua will build a $1.1 billion MDI plant in Louisiana, USA (C&EN)

Comment MCC: While this plant had been discussed for a while, Wanhua still made the final decision in a relatively short period of time - a difference from the main competitors. This should give Wanhua a strong presence in the only major market they do not have local presence yet, and allow them to further increase their global market leadership and the current market share of about 24%.

---

Apr 08, 2017: For 2016, a number of coal-to-olefins facilities in China were reported to be profitable despite low oil prices and rising coal prices (CCR).

Comment MCC: Based on this data, it is hard to judge whether these projects are really profitable in a broader sense. The information available does not define profitability in detail, and of course by not including financing costs in the calculation (which amount to about 40% of total costs of such projects), a project may look profitable despite not being a good investment. A number of additional coal-to-olefin projects will come onstream in 2017, however, their business cases were calculated about 5 years ago based on much higher oil prices, so they would not necessarily be started today.

---

Apr 08, 2017: Despite having n-propanol capacity exceeding domestic demand, still about 40% of n-propanol used in China is imported (CCR).

Comment MCC: Reasons for the large volume of imported materials include the low price of imported n-propanol (as it is made from ethylene) and the limited availability of high-end propanol in China.

---

Apr 08, 2017: China turned into a net exporter of acetic acid in 2010 and has remained in this position every subsequent year (CCR).

Comment MCC: This is a familiar story applicable to many chemical products - China starts as a net importer, rapidly builds up capacity, at some point turns into a net exporter and remains in this position forever after (even as a net exporter, China´s acetic acid plants run at only about 70% of capacity). The number of chemical markets for which China is a net importer continues to shrink.

---

Apr 06, 2017: Chengdu-based company Tongwei will invest in a 50 kt high purity polysilicon project and related new energy projects (CCR).

Comment MCC: The portfolio of the company includes feed, pet food, IT, construction and real estate, with chemical materials such as polysilicon now being added. This is a reminder that many Chinese companies are still mostly led opportunistically rather than being driven by an overriding strategy, though to be fair this has been quite successful in the past. For foreign players, it means that competition can develop from rather unexpected corners.

---

Apr 06, 2017: US and EU regulators have cleared the planned takeover of Syngenta by ChemChina under the condition of ChemChina selling certain businesses.

Comment MCC: ChemChina had to sell a number of businesses for which Syngenta is the main branded supplier while ChemChina subsidiary Adama is the main generic producer.

---

Mar 29, 2017: Hengyi Industries Sdn Bhd (Hengyi), a JV of Zhejiang Hengyi and a Bruneian partner, will develop an integrated oil refinery and aromatics plant in Brunei

Comment MCC: This seems like a good match between an oil producer with limited markets and limited technical capabilities and China as a major market and by now with substantial expertise in oil refining.

---

Mar 29, 2017: Air Products withdrew a non-binding offer for the Chinese industrial gases company Yingde (FT)

Comment MCC: Probably the situation - with the ongoing boardroom battle and the other offer for the company by a PE firm - was just too messy for Air Products. The statement by the company itself does not clarify much, unfortunately: Air Products announced it "has determined it is not in the best interests of Air Products' shareholders to continue to pursue an acquisition of Yingde Gases Group Co. Ltd. at this time."

---

Mar 24, 2017: Lanxess China sales grew by 6.5% in 2017 and now account for 13% of Lanxess´ global sales.

Comment MCC: Not a bad growth rate considering the slowdown of the economy and the general underperformance of chemical MNCs in China, though of course 13% is still way below the about 40% share that China has of the total global chemical market (which would be the benchmark number for a truly global company).

---

Mar 17, 2017: An MoU was signed between state oil firm Saudi Aramco and China North Industries Group Corp (Norinco), to examine building refining and chemical plants in China.

Comment MCC: It seems the interests of both countries match well, with Saudi Arabia trying to secure oil sales and China aiming at guaranteeing a stable crude supply. Joint downstream activities will help strengthen these links.

---

Mar 17, 2017: Plastics compounder China XD posted 2016 results (revenue 1.2 bn USD, net income 102 mio USD) and a slightly lower forecast for 2017

Comment MCC: Even though the company achieved revenue and income growth above 20% from 2015 to 2016, it only expects stagnating sales (1.2-1.3 bn USD) and slightly lower income (85-100 mio USD) for 2017. This may reflect modesty, or a slowdown of China XD´s key automotive markets, or maybe even the majority owners interest in a moderate valuation of the company as they have offered to take the company private and buy out current outside shareholders.

---

Mar 17, 2017: Sinopec Shanghai had sales of 66 billion RMB in 2016, a 1.6% decline, while profit increased strongly to 6 billion.

Comment MCC: The increase in profit is mostly the result of lower oil prices, which are not immediately passed on (crude oil costs account for about 40% of company sales). Interestingly, the drop in sales would have been much stronger had it not been for increased trading of petrochemical products - actual production volume decreased by 7%.

---

Mar 15, 2017: BASF will build a new 42 kt/a plastic-additives plant in Shanghai focusing on antioxidants. Production start is to be in 2020.

Comment MCC: China is still where the growth is, particularly in the area of higher-end plastics, e.g., for use in automotive. Electric vehicles are among the drivers for this. As demands on plastics increase, there will be a need for more and higher-end antioxidants - a good reason for BASF´s investment.

---

Mar 15, 2017: Sinopec Tianjin Petrochemicals General Manager Li Yonglin has demanded fewer new refinery approvals in order to reduce overcapacity and waste of resources.

Comment MCC: Sinopec is suffering from competition by the teapot refineries - I am not sure the government is well advised to heed such calls as the above, as waste of resources may not only come from too much but also from too little competition.

---

Mar 15, 2017: China's crackdown of plastics waste imports is getting more stringent, with heightened port inspections, shipment slowdowns and arrests in anti-smuggling campaigns (PNC)

Comment MCC: This is in line with an overall tightening of environmental regulation and particularly implementation in the last year or so. Similar to the situation for chemical production plants, the main target of the measures are smaller recycling plants with limited pollution controls.

---

Mar 14, 2017: China may lower current draft targets for electric vehicles from 8% of automakers' sales by 2018, rising to 10% in 2019 and 12 percent% (Shanghai Daily)

Comment MCC: There is resistance to the current rather aggressive targets from carmakers, and their lobbying power may increase. Therefore an adaptation of the targets - e.g., a lowering by 2% in each year, so that the 2018 target would only be 6% - seems likely. Still, as the EV market share was only 1.8% in 2016, even a lower target will still mean a massive expansion of the market with corresponding markets for relevant chemicals such as battery materials.

---

Mar 09, 2017: According to the ministry of environmental protection, a monthlong environmental inspection of the Beijing-Tianjin-Hebei region exposed over 2,000 pollution problems

Comment MCC: Stricter implementation of existing environmental laws is maybe the most important current trend affecting the chemical industry in China. This should have a major impact, increasing costs particularly for smaller players and levelling the playing field.

---

Mar 06, 2017: China´s average annual capacity growth for PBT was 34.1% in the 2010-2015 period while output increased by an annual 21.7% (CCR)

Comment MCC: As a consequence, capacity utilization dropped from 78% in 2010 to 48% in 2015. A typical example for China ramping up capacity above its domestic needs and eventually becoming a net exporter - in this case starting in 2014.

---

Mar 04, 2017: Chinese contract chemical manufacturer Lianhetech bought UK-based chemical company Fine Industries for 126.5 million USD from its private equity owner

Comment MCC: There is a strong rationale for a leading contract manufacturer to establish a European presence, both to improve market access and gain know-how. Lianhetech has a market cap of about 2 billion USD, so financially the acquisition should not be a big burden for Lianhetech. The sales multiple of 1.98 is very close to the 1.94 multiple given by Stern University for specialty chemicals company.

---

Mar 03, 2017: Sinopec will invest US$29 billion to upgrade four refineries to produce higher-quality fuels. Fuel capacity at the four sites will then reach 130 million tons/year, ethylene 9 mio tons.

Comment MCC: The big petrochemical players such as Sinopec have long resisted efforts to increase fuel standards in China, however, now it seems they finally have to go along with this.

---

Feb 28, 2017: US packaging materials producer Avery Dennison will acquire Chinese Yongle Tape, which which makes cable and insulation tapes and claims to be the world's largest PVC tape manufacturer.

Comment MCC: Interestingly, Yongle´s rationale for the deal is to gain R&D capabilities - frequently the rationale given by Chinese companies to acquire firms overseas.

---

Feb 27, 2017: From 2005-2016, average China hourly manufacturing wages trebled to $3.60 while wages fell from $2.90 to $2.70 in Brazil, from $2.20 to $2.10 in Mexico, and stayed flat in India at $0.70 (FT)

Comment MCC: This is already affecting the chemical segments supplying to labor-intensive customer industries, e.g., textiles, and will continue to do so.

---

Feb 27, 2017: Hedge fund Oasis is trying to get a board seat at industrial gas producer Yingde. The company has two factions fighting for control, neither of which has a clear majority (FT)

Comment MCC: A further complication is the nonbinding takeover offer made by Air Products, an offer that so far seems to have been blocked by Yingde management. Overall, such visible battles are probably a good sign as they indicate a trend towards greater transparency and fewer secret dealings.

---

Feb 27, 2017: China Daily has a report on environmental inspections leading to the shutdown of a number of cement and other companies in Northern China in the fight against smog

Comment MCC: It seems the government is fairly serious this time about implementing environmental regulation - something I hear from chemical clients as well. So the report is not just propaganda but reflects reality. It will be interesting to see how the competitive landscape in China´s chemical industry will change as the result of stricter environmental regulation. Anyone interested in the topic should feel free to contact me.

---

Feb 23, 2017: Business revenue of the 26409 domestic chemical companies with sales above 20 mio RMB grew by 5.3% in 2016 (CCR)

Comment MCC: Profits grew much faster at 11.7%, indicating improving profitability. At the same time, the importance of exports shrank by 7.1% and now accounts for only about 10.6% of total revenue - this is essentially a local market.

---

Feb 23, 2017: CPCIF forecasts a revenue growth of 6-8% for China's petroleum and chemical industry (CCR)

Comment MCC: Given that GDP forecast is only about 6.5%, it will be hard to reach the upper half of the CPCIF forecast.

---

Feb 23, 2017: On Jan 23, 2017, the Chinese government released the "Guidelines for Development of New Materials Industry (2016-2020)"

Comment MCC: New materials is one of the areas which are to get strong support in order to achieve at least 70% local supply by 2020. To that end, the government is establishing various support measures such as preferential tax policies and the establishment of an insurance compensation mechanism for utilizing new materials for the first time - not a bad idea particularly in those areas with a high capital risk, such as electronics.

---

Feb 23, 2017: In January, PPG acquired certain assets of automotive refinish coatings company Futian Xinshi (CCR)

Comment MCC: This move follows a number of much earlier acquisitions in the same segment by PPG´s competitors, such as Akzo´s acquisition of Prime. Most likely the rationale is the same - getting better access to the mid- and lower-end segments of the market.

---

Feb 23, 2017: Apparent consumption of styrene increased at an annual rate of 4.8% during 2010-2015; the forecast for 2016-2020 is 3.5% (CCR)

Comment MCC: A good example of chemical markets that grow much more slowly than GDP.

---

Feb 23, 2017: Jiangsu Sailboat ran a successful 10-day test of its MTO plant in Lianyungang, which with a capacity of 833 kt/a of ethylene and propylene will be the largest global single-train unit.

Comment MCC: While the investment decisions for this project were made when the oil price was much higher, I think it is reasonable to expect further development of MTO in China as the country takes a strong national pride in being the global leader in this technology.

---

Feb 23, 2017: China accounts for 2.5 million tons of the global 22 million tons market of waterborne coatings (Reportbuyer)

Comment MCC: This is a rather low share - only about 11% of the global market compared to about 30% by volume for the whole coatings market. It shows the still rather low penetration of more environmentally friendly products in China. A particular reason may be that waterborne coatings mostly go into construction applications (globally more than 80%), a segment which in China is particularly low-end as most paint work on construction sites is done by low-paid migrant workers.

---

Feb 23, 2017: Albemarle announced that Tianqi's exercise of a previously announced option to acquire a 20% indirect ownership interest in Rockwood Lithium GmbH has been terminated.

Comment MCC: This is interesting as at the end of November 2016 it was still announced that Tianqi was planning to exercise the option.

---

Feb 17, 2017: China XD has received a preliminary non-binding proposal from the chairman and private equity firm Morgan Stanley to acquire all shares and go private.

Comment MCC: Compared to comparable automotive plastics compounders such as Shenzhen-listed Shanghai Pret, the NASDAQ-listed China XD has a low valuation, illustrating that taking the company public in the US was probably not the right decision in the past. Offering a premium of about 30% shows that the current main owners still see substantial upside potential for the company.

---

Feb 14, 2017: Sinochem is in early talks with Noble Group, a HK-based commodity trader, to buy an equity stake (Reuters)

Comment MCC: For me Sinochem has always had a bit of an identity problem, no longer having exclusivity as a chemicals trader but not a proper chemical company either. This looks like the old role might be strengthened again.

---

Feb 08, 2017: The EU will phase out duties on Chinese solar panels and has ended anti-dumping duties on PET imported from China (Shanghai Daily).

Comment MCC: Good to see there is no universal global trend towards protectionism.

---

Feb 07, 2017: A US subsidiary of Kingfa will create new 150 jobs at its Detroit plant (ChinaDaily)

Comment MCC: This is not the only Chinese chemical company investing (and creating jobs) in the US - other examples are Wanhua and Shanghai Pret. It is ironic that this gradually shift of Chinese into "normal" multinational companies happens right at the moment when US president Trump might start a trade war.

---

Feb 06, 2017: China's PV capacity and its increase in 2016 were the biggest in the world, and the country plans to expand its PV capabilities and phase out outdated capacity (NEA/Shanghai Daily)

Comment MCC: While it is not clear whether this strong support of specific technologies will be successful in the long term, it will certainly be a strong push for the specific markets such as PV, which of course is an area with a strong reliance on chemicals.

---

Feb 03, 2017: According to Reuters, ChemChina will get EU antitrust approval for the acquisition of Syngenta after agreeing to minor concessions.

Comment MCC: This will be a relief to ChemChina. Though the financing still does not seem to be fully in place, it is unlikely to be a stumbling block as the face loss for China´s SOEs would be too big.

---

Jan 26, 2017: According to a statement by the Ministry of Finance, the profit of petrochemical SOEs dropped in 2016 while losses were reported in the chemical sector.

Comment MCC: It is important to point out that despite these losses, the chemical SOEs have been losing market share in China. The real fight is between private domestic companies and multinationals - with the private domestic ones gaining share over time.

---

Jan 24, 2017: According to the American Chemistry Council, China chemical production growth will slow from 6.7% in 2016 to 6.3% in 2017

Comment MCC: A decline in growth, but by now from a huge base. And even the growth figure - as the ACC states - is still higher than in any other major country except India, which has less than 10% of China´s base figure.

---

Jan 24, 2017: The Chinese government may broaden the industries targeted for capacity reductions to include autos, new energy and graphene, with the aim of reducing low-end supply (CER)

Comment MCC: All these industries are important customers to the chemical industry. In the future, chemical companies may therefore have to look closer at who they sell to, to make sure these are not low-end customers that might be targeted by capacity reductions later.

---

Jan 24, 2017: Annual Chinese investment in renewable energies will reach RMB2.5 trillion by 2020 based on information in the newly released 13th Five-Year Plan for the energy industry (CCR)

Comment MCC: Obviously, this is a very large amount of money - about 360 bn USD. Chemical companies with any relevant materials for this huge market should consider setting up a dedicated marketing effort to target this market.

---

Jan 24, 2017: China's self-sufficiency for wet electronic chemicals used for cleaning wafers of six inches
or less is around 80%, but for wafers of eight inches or more, it is only 10% (CCR)

Comment MCC: Electronic chemicals is probably the segment in which domestic chemical companies still have the biggest gap to the global standard. It is not for lack of investment or capacity - see the 80% reached for less pure chemicals - but rather a question of technology level. This opens up opportunities for Western companies but has also motivated the government to strongly support domestic companies in the area of electronic chemicals for fear of being too dependent on overseas materials.

---

Jan 24, 2017: China imported 42% of its PE consumption in 2015. Domestic PE production based on coal or methanol accounts for 12.5% of total domestic capacity (CCR).

Comment MCC: Polyethylene is one of the relatively few materials for which China will still rely on imports for at least the next few years. While there is some shift to using domestic coal rather than oil as raw material, the overall share is still relatively low, and further growth of this share is restricted by the unfavorable economics of coal chemicals at the current oil price level.

---

Jan 21, 2017: According to the National Bureau of Statistics, China´s GDP increased by 6.7% in 2016, the slowest in 26 years but above the minimum target of 6.5%.

Comment MCC: Anything else would have been a surprise given the political importance of meeting the target. More interesting is the split between segments - services increasing by 7.8%, industrial 6.1% and agricultural 3.3%. Compared to this, the 8% annual growth target for the chemical industry in the 2016-2020 period looks fairly ambitious.

---

Jan 21, 2017: China´s largest chipmaker will invest US$30 billion on a new semiconductor factory.

Comment MCC: As seen in the related chemical segment of electronic chemicals, the government is pushing hard to reduce its dependence on foreign technology, partly out of economic reasons (huge amounts of money being paid to foreign producers), partly as a consequence of protectionist tendencies in the US, which may increase now that the presidency has changed. The government has already pledged 100 billion yuan to the industry, with the aim of building a "globally competitive semiconductor sector by 2030".

---

Jan 21, 2017: Air Products confirmed its interest in buying Yingde Gases Group at a premium of about 92% depending on the outcoming of a due diligence

Comment MCC: With a reported 69 operating sites and another 11 being established, Yingde would indeed offer Air Products a way to quickly and massively expand its China presence and become market leader.

---

Jan 20, 2017: Chinese chemical firm Zhejiang Jinke has acquired the Slovenian developer of Talking Tom, a computer game, for €1 billion

Comment MCC: Zhejiang so far mostly produces peroxides and activating agents but had already changed its name to Zhejiang Jinke Entertainment Culture from Zhejiang Jinke Chemicals, indicating the shift in focus. While this shift is somewhat extreme, many chemical companies in China also have unrelated activities, particularly in the areas of finance and real estate.

---

Jan 19, 2017: Major SOEs will be forbidden to invest overseas in selected segments including real estate, iron ore, petroleum and nonferrous metal.

Comment MCC: My impression is that of a general unease at the top level of the Chinese government with the recent large-scale acquisitions, particularly the Syngenta one by ChemChina, which so far still does not get outright government support. The negative list is another measure after earlier ones increasing management accountability to increase the barriers for overseas acquisitions of SOEs.

---

Jan 18, 2017: According to a Lucintel report, China´s carbon fiber market will grow at an annual 6.1% to 2020. Industrial applications, e.g., in wind energy and lightweight materials, are the main driver.

Comment MCC: So far, the quality of locally produced carbon fiber tends to be low, more suitable for sports than for industrial applications. So maybe an opportunity for foreign players, though the forecast growth rate is not particularly high given a government target of 6.5% GDP growth in the same period.

---

Jan 18, 2017: Indorama, a major global PET producer, will close down the smaller of its two PET plants in Turkey, with a capacity of about 130 kt of bottle-grade PET.

Comment MCC: Smaller plants like this will be under pressure everywhere as China is now a major exporter of PET (2.1 million tons in 2015) and has a large number of bigger PET producers (13 with a capacity of 1 million tons or more). At the same time, domestic PET demand growth in China is slowing down and likely to fall below 5%, adding to export pressure.

---

Jan 17, 2017: THE IMF raised its forecast for China's economic growth in 2017 by 0.3% to 6.5%, expecting a continuing stimulus policy. The 2018 forecast is 6.0%.

Comment MCC: This means China will remain the main global growth driver for chemicals, particularly as the IMF also lowered the forecast for India to 7.2%, which of course is on a much lower base.

---

Jan 17, 2017: DyStar was fined $3 million for environmental crimes by a Chinese court, and some of the company's managers were sent to jail (C&EN).

Comment MCC: The case illustrates the stricter implementation of environmental regulation in order to improve the environmental situation in China. It also gives some interesting insights into the economics behind such crimes. When Dystar still was owned by German owners, they paid about 430 USD per ton of sulfuric acid to be disposed. After ownership was transferred to an Indian and a Chinese company, local Chinese managers paid a local truck fleet owner about 84 USD per ton to dispose the sulfuric acid into a river - just 20% of the previous disposal cost, but of cause illegal. It is to be expected that some operational costs of local companies will increase at a similar factor as implementation of Chinese environmental regulation gets stricter.

---

Jan 10, 2017: Celanese achieved sales of 1.2 billion USD in China last year, the second year of sales growth above 20% in the country.

Comment MCC: This is much higher than the average growth of chemical MNCs in China these days, which is well below 10%. A big contributor is the growth of Electrical Vehicles, for which Celanese supplies some important plastics.

---

Jan 09, 2017: According to the 13th 5YP, new coal-to-olefin and coal-to-PX projects can be approved by provincial governments complying with the central government.

Comment MCC: Interesting to see that this decision is now left to provincial governments after a previous trend to centralize these decisions. In some way, this is an encouragement of such projects as provincial governments are more likely to approve them than the central government

---

Jan 09, 2017: Air Products has confirmed its interest in acquiring the Chinese industrial gas company Yingde

Comment MCC: This acquisition would create a very strong player, combining the estimated 14% of Yingde´s market share in China with 11% of Air Products. This is certainly interesting for Air Products as China is still a fast-growing market due to the gas needs of, e.g., coal chemical companies. And it would offer a solution for the power struggle currently ongoing at Yingde.

---

Jan 07, 2017: ThyssenKrupp will build a 10 kt/a PLA plant for COFCO in Changchun, Jilin province (Bioplastics Magazine), with biobased lactic acid used as raw material.

Comment MCC: This is an example of how regulation drives innovation. Jilin province has banned the use of non-biobased plastics for plastics bags, giving local companies a strong incentive to find alternatives. As a consequence, the first plant using ThyssenKrupp´s new technology is not built in Germany but in China.

---

Jan 07, 2017: Sinopec has begun construction of a petrochemical complex in Zhanjiang including a 10 mio t/a refinery and an 800 kt/a ethylene complex.

Comment MCC: While China still strongly depends on imports for polyethylene, this is one of the projects to reduce this dependency, along with the production of ethylene from coal.

---

Jan 07, 2017: Rosneft and ChemChina will establish a JV to build a 50 kt/ plant to produce marine and arctic-vessel coatings in Russia.

Comment MCC: In this JV, the role of ChemChina seems to be the one previously taken by Western chemical companies - most likely as a provider of capital and technological knowledge.

---

Jan 06, 2017: The State Council issued a five-year plan (2016-2020) to save energy by 15 percent in 2020 compared with 2015, and to reduce emissions.

Comment MCC: This is a fairly ambitious plan, for example, in 2020, the use of coal should account for less than 58 percent of total energy consumption from 64% in 2015. It should give a boost to producers of materials lowering energy consumption (e.g., plastics) and further force domestic chemical companies to actually implement the existing environmental protection regulation.

---

Jan 06, 2017: A report by Research and Markets forecasts a CAGR of 21% for the global biodegradable polymers market for the period of 2017 to 2021

Comment MCC: A substantial part of this growth will definitely come from China, for example Jilin province, where the use of non-biodegradable plastics for plastics bags and food service items has been prohibited.

---

Jan 06, 2017: At least 30 percent of new buildings in Beijing will be prefabricated in 2020 to improve efficiency. Prefabrication will be supported by subsidies and other incentives (Xinhua)

Comment MCC: Perhaps an opportunity for specific construction materials particularly suited to prefabricated buildings.

---

Jan 03, 2017: Camlin Fine Sciences, an Indian fine chemicals producer, will buy 51% of Chinese vanillin producer Ningbo Wanglong Flavors and Fragrances.

Comment MCC: There has been quite some interest of Indian companies - particularly in the specialty and fine chemicals areas - to participate more strongly in the Chinese market. This is now an example of an Indian player actually buying a stake in such a company in China.

---

Jan 03, 2017: According to a CCR article, "China's Chemical Industry Shocked by New Environmental Plan".

Comment MCC: China's 13th Five-Year Plan for Environmental Protection was released on December 5 and may have quite an impact on the chemical industry as it mandates more stringent emission reductions and cracks down on illegal transfer of chemical waste. Particularly for companies looking to establish new projects in the Yangtze area, this may add substantial pressure.

---

Jan 03, 2017: Domestic electronic chemicals have a market share below 30% and mostly are in the low-end sections, according to CPCIF (CCR)

Comment MCC: China is now heavily promoting the development of this segment domestically via subsidies and other incentives. Possibly this is also out of fear of restrictions that the USA may put in place on Chinese investment in the US semiconductor sector, as the WSJ reports.

---

Jan 03, 2017: The amount of sodium sulfide sold in China in 1H 2016 was lower than in the same period in 2015 (CCR)

Comment MCC: A key reason that environmental restrictions - which are increasingly implemented and not just announced - reduced downstream demand. This particularly affects areas such as leather processing and pesticide production.

---

Dec 23, 2016: Sichuan government has stopped production of eight TiO2 producers after CCTV coverage of pollution, taking up to 10% of total capacity out of the market (Plastics News China)

Comment MCC: Interesting to note that the stricter implementation of existing waste water regulation only happened after CCTV reports. Presumably this means local government would rather not have stopped production (as they were surely aware of the issue before), but also that CCTV gets support from the central government to raise the issue.

---

Dec 21, 2016: State-owned Luxi Chemical will build two more polycarbonate lines, expanding capacity from 65 to 200 kt (Plastics News China)

Comment MCC: PC is one of the fewer and fewer materials for which China still strongly relies on imports (in 2015, 73% of domestic consumption was imported). As a consequence, a number of domestic companies are now establishing capacity including Wanhua. Luxi claims to have stabilized their existing production of 65 kt started in 2015 - they now aim to increase their product quality further. China will still be an importer for a while, but not forever.

---

Dec 16, 2016: Plastics compounder China XD will build a 300 kt bioplastics plant in Sichuan, with target applications in food packaging and engineering (Plastics News China).

Comment MCC: It seems the company is keen to get away from its current strong focus on automotive plastics as the Chinese automotive market is unlikely to keep growing at its current double-digit rate.

---

Dec 15, 2016: BASF has inaugurated BASF Coatings (Guangdong) after the acquisition of the automotive refinish coatings business of Guangdong Yinfan Chemistry (APCJ)

Comment MCC: The company press release give some indication for the rationale for the acquisition: "We establish a local presence with full capability to serve the growing Value-for-Money market with a product offer according to the local market needs". In other words, localization both with regard to cost structure/pricing and with regard to adaptation to local requirements.

---

Dec 14, 2016: Eastman will assume sole ownership of its JV with Mitsubishi Gas, Te An Ling Tian Fine Chemical, a Nanjing-based producer of amines and derivatives.

Comment MCC: This points to the continuing attractiveness of selected Chinese specialty chemicals markets, including those focusing on home/personal care and water treatment as end markets. It also highlights an advantage of JVs - that depending on changes in strategy, a company can later relatively easily become sole owner or get rid of its share in the JV

---

Dec 13, 2016: China PE production was 14.25 mio t in 2016. For 2017, a capacity increase of another 1.3 mio t is expected, mostly from coal-to-chemicals projects (Plastics News China/Sci99.com)

Comment MCC: These additional 1.3 mio tons are still below the average annual increase in domestic consumption in the past 3 years (1.7 mio t), so this is one of the few chemicals markets for which imports to China may still increase, though at a slower pace than before.

---

Dec 12, 2016: According to Solvay, China will account for 34% of the global chemical market in 2020 (Shanghai Daily)

Comment MCC: Two things to note. First, CEFIC estimates that China´s global chemical market share is already 40% in 2015 - so there is certainly some disagreement about the details, though nobody doubts that China is the biggest global chemical market. Second, Solvay claims to currently achieve about 10% of its sales in China - so whatever China´s current global market share is, Solvay - like more or less all other multinational chemical companies - is substantially underrepresented in China compared to its global average.

---

Dec 09, 2016: Autonews China predicts that next year will be difficult for the Chinese automotive industry due to stagnating car sales and government pressure to boost electric vehicle production

Comment MCC: Both trends - if correctly predicted - should have an impact on the sales of chemical companies. Most companies will be affected negatively as general demand from automotive customers stops increasing. However, some companies focusing on EV batteries and possibly light-weight high-end plastics may benefit.

---

Dec 09, 2016: PVC producer Xinjiang Zhongtai started a 250 kt PVC plant in Toksun on Dec 2, and will also enter high-performance resins such as CPE and CPVC (Plastics News China)

Comment MCC: Zhongtai is already the biggest Chinese producer of PVC, with a current capacity of about 1.5 mio kt - now they aim to become even bigger. On the other hand, they seem to be aware of the limited growth potential for PVC as China has already turned into a net exporter. Hence the diversification into higher-end resins and also into PTA (the company announced in September 2016 that they will build a 1.2 mio t PTA plant).

---

Dec 07, 2016: Solvay will sell its cellulose acetate tow business to private equity firm Blackstone for $1.1 billion (Reuters)

Comment MCC: This is a declining business as even in China, last year saw the first decline in annual cigarette sales, partly due to an increase in taxes.

---

Dec 07, 2016: China will establish a unified system for the standardization, certification and identification of 'green' products by 2020 (China Daily)

Comment MCC: Chemical companies are well advised to watch and ideally also influence this certification process in order not to be caught off-guard.

---

Dec 06, 2016: China´s POM production capacity rose at an annual 19.9% from 2007 to 2015 while output increased by an annual 12.0% (CCR)

Comment MCC: Consequently, capacity utilization now stands at only about 54% - the combination of fairly high output growth but even higher capacity growth is typical for China´s chemical industry in the recent past.

---

Dec 06, 2016: China´s polyacrylamide output rose by 2.4% in 2015 (CCR)

Comment MCC: These are growth rates that almost sound familiar to participants in mature markets in the West.

---

Dec 06, 2016: Shanghai PhiChem Material will acquire Jiangsu Hecheng Advanced Materials, a producer of electronic chemicals, particularly liquid crystal materials (CCR)

Comment MCC: Electronic chemicals are possibly the specialty chemicals segment with the highest growth potential in China right now, and activities in this area are strongly supported by the government, giving a sound rationale to the acquisition.

---

Dec 06, 2016: China´s specialty chemicals revenue increased by 7.1% yoy from Jan to Oct 2016, followed by pesticides (6.3%), plastics (5.7%) and basic chemicals (5.4%) (CCR)

Comment MCC: It is a good guess that chemical growth in China will have a similar relation to GDP growth in the next few years - specialties may grow up to 1% higher than GDP, basic chemicals up to 1% lower.

---

Dec 05, 2016: China will launch a pollution permit system detailing the pollutants factories are allowed to discharge, starting with coal power plants and paper producers in early 2017 (SCMP).

Comment MCC: This system will be expanded to include chemical companies later. While it is not certain to be effective in reducing pollution - there is always the discrepancy between law and implementation, particularly in China - it will certainly something that chemical companies need to prepare for.

---

Dec 02, 2016: ChemChina is setting up a fund that aims to raise US$5 billion to help finance its purchase of Swiss seeds group Syngenta (Reuters)

Comment MCC: This is a reminder that there reportedly still is a 15 billion dollar gap in the financing of the deal. So far, there is ony very limited involvement of state-owned banks in the financing - somewhat surprising, but possibly an indication that the government does not fully stand behind the deal, or at least is unhappy with the high price of the acquisition.

---

Nov 29, 2016: China´s titanium dioxide production declined by 4.6% in 2015. The chlorination process accounts for 6.5% of Chinese capacity while the global average is 49% (Reportbuyer)

Comment MCC: Titanium dioxide thus nicely illustrates some of the characteristics of China´s chemical industry. There is no unlimited growth any longer (this was the first decline in production in the last 5 years), China´s production methods are sometimes different from those used elsewhere (see also PVC or coal chemicals), and finally, the global report portrays 5 global companies and 15 Chinese ones, showing both the importance of China for the industry and the relative fragmentation of the Chinese market.

---

Nov 29, 2016: An explosion at a formaldehyde plant in eastern China disrupted services along the Beijing-Shanghai high-speed railway line on Tuesday morning (SCMP).

Comment MCC: Accidents like this one will likely accelerate the movement of chemical companies into chemical parks, which is heavily promoted in the 13^th Five-Year Plan.

---

Nov 21, 2016: In Q1-Q3 2016, specialty chemicals revenue increased by 6.9% YoY, pesticide 6.5%, coatings/pigments 5.1%, basic chemicals 5.0%, plastics 4.7% (CCR)

Comment MCC: Though the differences are not huge, specialty chemicals - driven more by consumption than by investment - do perform better than the more commoditized chemical segments. This will likely continue.

---

Nov 21, 2016: The operating rate of China´s phenol producers dropped from 93% in 2014 to 69% in 2015 as capacity increased by 40% while output only increased by 9% (CCR)

Comment MCC: While CCR bravely suggests that there may be a capacity shortage of phenol from 2018 on, but given the capacity expansions already announced and the rather optimistic growth rate assumed by CCR (8%, so more than the 7.3% achieved from 2014 to 2015), this seems unlikely.

---

Nov 21, 2016: By the end of 2015, China had reached self-sufficiency for the production of PET. The top 13 producers account for 53% of total domestic capacity.

Comment MCC: While reaching self-sufficiency is impressive, the low market share of the biggest producers still shows that the segment is far from reaching any kind of maturity.

---

Nov 21, 2016: According to IHS, the Asia Pacific region will have the largest share in petrochemicals investments until 2025, adding 100 million tons of basic chemicals

Comment MCC: The prediction is based on Asian demand trends such as urbanization, improved sanitation, and infrastructure programs in Asia, which favor local production in Asia with the corresponding lower transportation costs.

---

Nov 18, 2016: Huntsman opened its Shanghai campus, which combines the technology center, administrative offices and a formulations facility.

Comment MCC: This has been a bit of a trend recently - the consolidation of locations within a specific city or region. It is part of a broader consolidation of chemical MNCs activities, facilitated by somewhat slower growth and an already established presence in China. Hopefully, it will indeed, as the Huntsman press release states, "boost collaboration and synergies and enhancing innovation performance and service to customers."

---

Nov 16, 2016: Coatings producer Axalta will build a large coatings plant in Nanjing, and open its new Asia Pacific Technology Center in Shanghai in 2017

Comment MCC: It becomes more and more inevitable to both produce and do research in China.

---

Nov 14, 2016: According to an ECA study, China´s salaries will grow by 7% in 2017 - a real rise of 4.7% and another 2.3% on account of inflation.

Comment MCC: It will be hard for multinational chemical companies to achieve a similar sales growth, meaning either their share of labor costs will rise, or they have to reduce their staffing levels, or accept that their salary increases will fall behind those of local competitors, potentially reducing their attractiveness as employers.

---

Nov 11, 2016: Wacker started a new pilot reactor for vinyl acetate-ethylene copolymer dispersions at its Nanjing site, allowing the company to expand local R&D

Comment MCC: It is a complaint often heard from Chinese customers that local product development of MNCs is insufficient and also too slow if done at the company headquarters. Many chemical companies will need to make similar investments in expanding their local R&D capabilities as Wacker.

---

Nov 11, 2016: Ashland may explore a sale of its BDO (1,4 butanediol) business (CW)

Comment MCC: China´s self-sufficiency of BDO increased from 25% in 2003 to 93% in 2013, and no later than in 2018 China will be a net BDO exporter. Based on past experience, this will mean lower global margins. This is the likely reason for Ashland´s decision to consider exiting the business.

---

Nov 11, 2016: DuPont Performance Materials warned about a large number of counterfeit polymer DuPont products in the Chinese market (Plastics News China)

Comment MCC: Many companies active in China have similar stories, though some of them are a bit older now. "Imitation is the sincerest form of flattery", as Oscar Wilde said, but this kind of appreciation for strong established brand names is of course rather unpleasant for the companies affected.

---

Nov 10, 2016: 49 people will be jailed in connection with the Tianjin explosions, with charges including paying bribes to avoid regulation, storing substances illegally and abusing their power.

Comment MCC: Presumably the idea in sentencing a large number of people is to demonstrate to the public that severe justice is being served. To me, the large number is rather an indication of how widespread and obvious the issue was.

---

Nov 10, 2016: Revenue of automotive plastics compounder China XD rose by 39% yoy in Q3 2016.

Comment MCC: The increase reflects both the increased car production in China (+15% in the relevant period) and the shift away from low-end plastics compounds (mostly PP) to higher-value materials such as PA, PLA, POM and PPO. As such, it is a fairly positive indicator of the situation of the Chinese economy, with increases both in volume and in quality level.

---

Nov 07, 2016: Added value of the petrochemical and chemical industries is to grow 8% annually from 2016 to 2020 (Development Plan for Petrochemical and Chemical Industries, October 2016)

Comment MCC: It is a bit surprising that this target is a bit higher than the target for overall GDP (6.5-7%) - seemingly an indication that China´s chemical industry still is perceived to have an above-average potential for innovation and growth. Indeed, the details of the plan strongly emphasize innovation. Another interesting aspect is the level of detail of the plan. It gives specifics such as "Bio-based plasticizers are likely to replace a growing number of phthalate plasticizers " or "Industry players are to develop electronic chemicals for integrated circuits, focusing on 248 nm and 193 nm-grade photoresists".

---

Nov 05, 2016: China will reduce carbon dioxide emissions per unit of GDP by 18 percent compared with that in 2015 by the end of 2020 (Xinhua)

Comment MCC: This is what one calls - in a slightly frustrated tone - a "step in the right direction". In fact, carbon dioxide emissions will rise further. To quote ChinaDaily: "The government will restrict other greenhouse gas emission and start a carbon trading market in the next five years to help meet the commitment to peaking carbon dioxide emission around 2030, according to the 13th Five-Year work plan for greenhouse gas emission control by the State Council."

---

Nov 02, 2016: AkzoNobel will spend €90 million to relocate their Tianjin organic peroxides production into a chemical park.

Comment MCC: As moving chemical production into chemical parks is a major government objective for the chemical industry - as outlined in the 13th Five-Year Plan - many other chemical companies, particularly foreign ones, will face similar moves and similar investments.

---

Nov 02, 2016: The Shell-CNOOC 50:50 JV has received government approval to take over new petchems complex in China

Comment MCC: According to OGJ, construction work is now 70% completed. The project's new units-including what will be China's largest styrene monomer and propylene oxide (SMPO) plant-are due for startup sometime during fourth-quarter 2017.

---

Nov 01, 2016: In 2015, China's new wind and hydropower capacity accounted for more than half of the global total, for photovoltaic capacity it reached one third (IREA)

Comment MCC: This also makes China the most important market for chemical materials used in these applications, whether composites, specific coatings or selected electronic chemicals. In the long run, as China still has huge growth potential, it probably means R&D in these areas should be located here as well.

---

Oct 28, 2016: On Oct 26, Invista had an opening ceremony for a 150 kt polyamide 6,6 plant in Shanghai which includes a 215 kt HMD production.

Comment MCC: This adds about 5% to total Chinese polyamide capacity - given that utilization was about 74% in 2015, not bad by Chinese standards, this plant may come on stream at the right time.

---

Oct 26, 2016: China Resources plans to shut down ist 1 million t/a PET resin production due to poor margins (CW).

Comment MCC: China Resources is the second biggest PET resin producer in China with a strong customer base including Coca Cola, so it is a strong indication of the low segment profitability if they consider shutting down their plant.

---

Oct 25, 2016: 14 people died and 106 were injured after an explosion at a residential complex in Shaanxi. The likely cause is stored explosives used by nearby mining companies.

Comment MCC: A typical example of implementation of laws being the key issue in China - surely it is not allowed to store large amounts of explosives within a residential area.

---

Oct 24, 2016: Syngenta and ChemChina did not submit some antitrust related documents to the EU by a deadline last Friday, possibly delaying the deal. Syngenta shares dropped (WSJ).

Comment MCC: The issue seems to be whether other Chinese state-owned agrochemical companies need to be included in the analysis of the new company´s market position. Given the way ChemChina seems to merge with such companies more or less at will, there is a strong rationale to do so.

---

Oct 24, 2016: China will start an antidumping investigation into POM copolymer imports from Korea, Thailand and Malaysia.

Comment MCC: The problem may be more one of domestic overcapacity than of low-price imports. To quote Duan Qingsheng, Deputy Secretary General of China Synthetic Resin Supply and Marketing Association: "Overcapacity has become chronic in almost all Chinese manufacturing sectors. But in the engineering plastic sector, capacity is overbuilt only for materials like POM and PBT, and that excess capacity has resulted in vicious price competition and low industrial resource efficiency."

---

Oct 24, 2016: According to a report by the Chinese Academy of Social Sciences, China's 2016 GDP will maintain a steady growth of 6.7% (China Daily).

Comment MCC: That may well be true, on the other hand, this organization is not likely to report anything strongly differing from government objectives. More interesting, the report states that consumption contributed 71% of the growth in Q1-Q3, which would indeed indicate a remarkable shift to a consumption-driven growth model, with obvious positive and negative consequences for individual chemical sectors.

---

Oct 20, 2016: China´s 1H 2016 exports of API declined by value (-2.2%) but increased by volume (+10.6%) (CCR).

Comment MCC: This shows that despite increased environmental regulation, China´s API producer still are globally competitive and expanding their global market share. Interestingly, India, a potential competitor, is currently the biggest export destination for China´s APIs.

---

Oct 20, 2016: Sales of China´s dyestuff industry declined by 2.3% in 1H 2016 compared to 1H 2015 (CCR).

Comment MCC: This segment is among the more mature of the specialty chemicals industry and may be one in which China gradually leaves the field to countries at a lower development stage, which may have better conditions for labor-intensive textile production.

---

Oct 20, 2016: Average 2015 capacity utilization of China´s more than 50 toluene producers was 63%. From 2005 to 2015, capacity increased 17.6% p.a., output 19.4% (CCR).

Comment MCC: While China is still an importer of toluene, the import amount is shrinking. Hopefully current producers do not base their capacity plans on past growth figures.

---

Oct 20, 2016: Though China has several dozens of salicylic acid producers, the five biggest account for about 80% of the total capacity of 120 kt (CCR).

Comment MCC: Increased environmental regulation has forced the bigger players to invest several hundred million RMB in improving the technology, while many of the smaller players just stopped production. Overall, this should be good for the industry and may in the long run increase the low capacity utilization (below 45%).

---

Oct 20, 2016: China Bisphenol A consumption has grown by an annual 4% between 2011-2015 (CCR).

Comment MCC: Still, China´s self-sufficiency is only about 60% - a possible opportunity for additional domestic production of Bisphenol A.

---

Oct 19, 2016: Sabic has stated its strategic intention to diversify their feedstock as a consequence of lower availability of low-price ethane in Saudi Arabia (CW).

Comment MCC: This may explain the recent activities of Sabic in coal chemicals in China, e.g., the possible JV with Shenhua Ningxia.

---

Oct 19, 2016: China is the largest global market for photovoltaic, and the government is strongly encouraging development of technological competitive advantage.

Comment MCC: This should be an interesting area for chemical companies - primarily domestic ones - to invest in.

---

Oct 19, 2016: The WSJ (Oct 19, 2016) has an article on the lower import dependency of Chinese chemical companies and the effects on global trade.

Comment MCC: Local sourcing of chemicals does not necessarily mean global companies are no longer involved - but they need to consider localization in order to match local competitors in terms of price and service as they no longer can rely only on the superiority of their products.

---

Oct 16, 2016: According to the HFC treaty just agreed on in Rwanda, China will start reducing the use of HFCs in 2024, achieving a 10% reduction by 2029 (compared to 2020-2022) and 80% by 2045 (CW).

Comment MCC: China is the biggest producer of these chemicals. However, the overall importance of fluorochemicals for China´s chemical industry is small (below 1% of sales), and the extended timeframe of the agreement should give affected companies enough time to adapt. On the other hand, it is positive that China at least in principle now seems to accept a partial responsibility to enact measures against global warming.

---

Oct 14, 2016: ChemChina denied that there are discussions about a merger with Sinochem (CW). The merger supposedly is to be led by Sinochem.

Comment MCC: In terms of stated government policy, such a merger would certainly make sense as the government wants to create strong global players and reduce the number of SOEs. The merged entity would be a global leader in downstream chemicals with revenues of about 100 billion USD -more than that of BASF (though not all the combined entities revenues would come from chemicals). And an added benefit for the government might be to get better control of the one-man show that is ChemChina in the shape of the dominant Ren Jiaxing.

---

Oct 13, 2016: Mitsubishi Chemical and Ube Industries will form a 50-50 JV for Li-ion battery electrolytes in China. Both companies already produce these electrolytes in China, though at different locations.

Comment MCC: This is a market with huge growth potential, e.g., for use in electric vehicles. While the JV may not do much for the cost position of the two companies´ current plants, it should help them to gain economies of scale once they expand their capacity.

---

Oct 12, 2016: Under new State Council rules, SOE managers will be held accountable if they "fail to, or incorrectly, perform their duties" with respect to deals that result in a loss of state assets (4-traders.com).

Comment MCC: Some experts claim that the vagueness of this rule has already led to SOEs becoming more reluctant in making acquisitions. This new rule may therefore also be a major reason that Sinochem International pulled out of the bidding for Atotech after supervisory agency SASAC questioned the valuation of Atotech.

---

Oct 12, 2016: Covestro is doubling polycarbonate capacities from 200 kt to 400 kt at its Shanghai site.

Comment MCC: China is the biggest user of PC (about 35% of global demand) and up to now still imported more than 70% of its demand. So despite some new local entrants into the market, adding production capacity here seems like a good idea.

---

Oct 11, 2016: Black masterbatch and compound producer Cabot will establish a new application innovation laboratory in Shanghai (Plastics News China).

Comment MCC: While this is not a surprise as such for a company with 17% of its sales in China, some of the points stated in the company press release are interesting enough. Cabot states that "The customers in China are much more open than in the Western world. They let us in the labs and let us see how the materials are being used. " In addition, the New Normal is given as part of the explanation for the establishment of the lab in Shanghai: "China's New Normal was a factor in the decision to locate the Asia Technology Center in Shanghai ... The slowdown becomes a separator between the winners and the losers. The customers who are leaders in their area need more innovation." This is likely to be true in other chemical segments as well.

---

Oct 10, 2016: $15 billion funding are still missing in the financial structure that ChemChina plans to use in its acquisition of Syngenta (CER)

Comment MCC: It would be very embarrassing for all participants - including the Chinese government - if the deal fell through because of this issue.

---

Oct 08, 2016: China´s service sector grew 7.5% in 1H2016 and accounts for 54.1% of the overall economy, from 52.3% a year earlier. Overall 1H2016 growth was 6.7%.

Comment MCC: This shows that is somewhat misleading to assume that the chemical industry will grow at the GDP rate. According to the official statistics data quoted above, the non-service sector - which includes chemical production - grew by only 5.8% in 1H2016, as can be calculated quickly. And that still assumes that the official figure of 6.7% growth is reliable.

---

Oct 08, 2016: At the end of September, BASF opened a PVP production plant in Shanghai. Polyvinylpyrrolidone is used in pharma excipient, detergent, cosmetics and technical applications.

Comment MCC: Though BASF recently lowered their sales targets for China in 2020, they stuck with their aim of having 75% local production by then. Also, they emphasized their focus on specialties, particularly in consumer applications. The PVP plant opening illustrates both objectives.

---

Oct 08, 2016: CEFIC expects China´s global chemical market share to increase from 39.9% in 2015 to 44% in 2030 while Europe´s will drop to 12%.

Comment MCC: Despite the talk of "New Normal", China´s growth is still much higher than the global average, leading to further gains in global market share. Chemical companies that want to be global players obviously cannot stay away from this market.

---

Oct 08, 2016: From 2005 to 2015, chemical capital investment in the EU rose by €3 bn to €20.7 bn while investment in the US more than tripled from €9.8 bn to €32.5 bn and in China it rose from €14.4 bn to €95.6 bn (CEFIC)

Comment MCC: Obviously the importance of China for the global chemical industry is also reflected in the massive capital investment increases.

---

Oct 08, 2016: Shandong Tranlin has awarded a design contract for a $2 billion paper mill in Virginia. The plant will first produce bathroom tissue using imported paper rolls but will completely switch to local production by 2020.

Comment MCC: More and more Chinese companies are shifting to producing some of their goods directly in their previous export markets - similar to the production localization of chemical MNCs in China.

---

Oct 07, 2016: Atotech, the metal and surface business of Total, was sold to PE firm Carlyle for 3.2 billion USD, beating Sinochem, another second round bidder.

Comment MCC: This is a bit surprising to me given the emphasis China currently places on electronic chemicals. Maybe the EBITDA multiple of 11.9 was too high for Sinochem, or the sellers fear the higher complexity of selling to a Chinese SOE.

---

Oct 07, 2016: Due to reduced steel production, coke demand shrank by 6.7% in 2015, which lead to a similar change in output of coal tar (PRNewswire)

Comment MCC: It is worth noting that chemicals such as deep-processed coal-tar products (phenol, anthracene, industrial naphthalene, coal tar pitch, etc.) and carbon black, which accounted for 76% and 22% of Chinese coal tar consumption in 2015, are linked to steel production.

---

Oct 07, 2016: CoatingsWorld has a paper titled "The Chinese Economy - Impact on the Chinese Coatings Market". It can be found here

Comment MCC: Unfortunately the paper mostly focuses on general forecasts for the Chinese economy and less on the coatings market, apart from some obvious links between the two such as housing and automotive demand.

---

Oct 02, 2016: According to a survey, by Cornell University and others, China is now ranked at no. 25 of the world's most innovative economies, from no. 29 in 2015 (Shanghai Daily)

Comment MCC: Given that China´s economy is the second largest globally, this shows that China still has a long way to go to be a true innovation leader, though the country gradually moves in the right direction.

---

Sep 30, 2016: ICIS forecasts China´s PE demand to grow by 6.5% per year in the period of 2016-2018, but admits that this forecast might be considered aggressive.

Comment MCC: Aggressive it is indeed, given that China´s GDP will struggle to achieve this growth figure even though this includes the service sector with a growth rate that is higher than that of the manufacturing sector. In fact, growth of industrial production was 6.1% in 1H 2016.

---

Sep 29, 2016: China is home to over half of the world's longest span suspension bridges, cable-stayed bridges, steel arch bridges, and cross-sea bridges (People´s Daily Online).

Comment MCC: It would be surprising if this does not in the long run lead to a shift of certain specialty chemicals segments - and the R&D that is part of it - to China, for example construction chemicals and specialty coatings.

---

Sep 29, 2016: The China market for thermoplastic vulcanizates market demand was 54.5 kt in 2015 and is expected to grow at a CAGR of 7.2% from 2016 to 2024 (Grand View Report)

Comment MCC: Forecasts like this one still seem to me to be a bit too precise, and probably a bit to optimistic, too. Thermoplastic vulcanizates are mostly used in automotive - this market grew by 7.3% in China in 2015 - a growth rate already a lot lower than in previous years. So a growth rate on the same level for the next 8 years seems somewhat implausible.

---

Sep 24, 2016: BASF has confirmed that the previous sales targets of €25 billion for Asia for 2020 (including €12 billion for China) will not be met.

Comment MCC: Still, BASF expects Asia to grow faster than the other regions – 5.6% annually vs 3.7% globally. And the target to produce about 75% of the products BASF sells in Asia/Pacific, in that region, by 2020 remains unchanged. So BASF will still invest in Asia, with a focus on specialties rather than adding to the oversupplied commodities market which is increasingly dominated by local players.

---

Sep 24, 2016: The planned 400 kt/yr phenol project of Ineos YPC Phenol (a JV between Ineos and Sinopec) has been cancelled (CW).

Comment MCC: A sensible decision given the current low utilization rates of the existing plants, and the declining imports of phenol to China (to less than 200 kt in 2015).

---

Sep 24, 2016: According to Clariant CEO Kottmann, China accounts for 40% of the world's US$3.8 trillion chemical market and will contribute about 60% of global chemical growth until 2020. 

Comment MCC: It is good that companies such as Clariant realize that the slowdown in China does not mean China is getting irrelevant for global chemical growth, as the statement of the CEO attests.

---

Sep 24, 2016: China's domestic PVC spot price reached RMB 6,700/mt on Sep 14, the highest level since November 5, 2014 (Platts)

Comment MCC: The reasons indicated by Platts include tighter supply and lower plant operations as a consequence of government orders to reduce PVC operations during the period of the G20 meeting.

---

Sep 24, 2016: China´s share of global PX consumption has risen from 8% in 2000 to 53% in 2016. For 2026, ICIS forecasts a China share of 54%.

 

Comment MCC: Serving the Chinese PX market will likely remain one of the bigger opportunities in the next decade. ICIS forecasts China demand to grow by 56% in this period. Imports are forecast to reach 17 million tons in 2026 (from 18 million tons in 2016), so this will be an opportunity both for PX producers in China and for producers abroad.

---

Sep 23, 2016: ChemChina officially launched its e-commerce platform on Sept 21 at the 15th China International Chemical Industry Fair. Trial operations had started in June.

Comment MCC: According to China Daily, this marks the establishment of the first chemical industrial e-commerce portal in the country. The company´s COO stated that ChemChina should build its own e-commerce platform rather than depend on a third-party e-commerce portal.
Both statements seem somewhat spurious. There are already e-commerce portals in China, both independent (e.g., Molbase) and company-owned (e.g., Sinopec´s epec). And it is questionable whether a portal focusing on the portfolio of only one company can be truly successful. The examples outside of the chemical industry seem to suggest otherwise.

---

Sep 23, 2016: Chinese authorities will conduct a pilot program to evaluate officials based on their performance in environmental protection.

Comment MCC: This is an idea that has been mentioned several times before, so far with somewhat limited results. Hopefully this time the concept will fare better.

---

Sep 22, 2016: According to Greenpeace, there were a monthly average of 29 chemical accidents in China this year so far. 43% of accidents occur due to leaks, while fire and explosions account for 27% and 16% of accidents. The data also shows that 52% of accidents occur during transportation of chemicals, while 27% occur during production.

Comment MCC: Greenpeace also attempts some mapping of the chemical industry in China but points out that the data available is from 2001-2011, highlighting the lack of up-to-date information. In any case, it seems the measures taken after the Tianjin explosions have not led to a major overall improvement yet.

---

Sep 22, 2016: Huntsman shares rose by 5% after a fatal explosion at a Wanhua MDI plant led to expectations that MDI prices will rise.

Comment MCC: Sometimes it is quite difficult not to be cynical about market economies.

---

Sep 22, 2016: Covestro achieved about 16% of its global sales in China.

Comment MCC: Though this is high by the standards of multinational chemical companies in China, it is still less than half of what the share of China is in the global chemical market. On the other hand, Covestro China sales increased by 14% in 1H 2016, so they may be on the way to closing this gap.

---

Sep 22, 2016: The competitive landscape in the Chinese market for synthetic latex polymers is fragmented, with the top 10 suppliers accounting for around 38% of the total market share (Kline)

Comment MCC: One reason for the fragmentation is the existence of three distinct types of players - global, national and provincial ones. Each competes in a different sub segment with different price and quality requirements, similar to many other chemical markets in China.

---

Sep 21, 2016: The current average operating rate of caustic soda is 82%; for PVC, it is 70%. The operating rate in China´s western region is higher than in the central and eastern regions (CCR)

Comment MCC: In China, the carbide route accounts for about 81% of all PVC produced. These plants are more likely to be located in the West as they use coal as raw material. They are currently more economically viable.

---

Sep 20, 2016: The caprolactam price of caprolactam rose to $1,420 per ton in August -- up for the third straight month and 10% higher than the lows seen in May (Nikkei)

Comment MCC: This is partly due to reduced production of Chinese players. After they gradually started adding capacity from 2011, margins shrank by two-thirds (2016 vs 2011). Maybe they now gradually realize that this is not a sustainable situation. On the other hand, Western players such as DSM (in the US) and BASF (in Germany) are also reducing capacity.

---

Sep 20, 2016: The Chinese carbon fiber market is forecast to grow at a CAGR of 6.1% by value from 2016 to 2021 (Lucintel)

Comment MCC: While sporting goods are the largest segment, the main growth area now is industrial applications, e.g., for wind energy and the automotive sector. These are the segments requiring higher-end carbon fibers, which so far Chinese players have had difficulties producing. I am actually somewhat surprised that the Chinese government does not seem to push the establishment of a national champion in this area.

---

Sep 20, 2016: China represented just 12% of worldwide methanol demand in 2000 but 54% in 2015 (ICIS)

Comment MCC: While MTO is an important driver of this shift (ICIS predicts this application will become the second biggest for methanol in the future - it accounts for 8% now), the most important reason for this is the overall growth of China´s chemical industry. Formaldehyde accounts for 29% of all methanol produced - the biggest application by far - and this formaldehyde then is a precursor for many plastics, for which China has developed large capacities.

---

Sep 20, 2016: China accounted for about 30% of worldwide basic chemicals demand in 2015 and a growth rate of about 10%, despite GDP growth of only 6.9% (IHS)

Comment MCC: This is information taken from an IHS presentation at the CPCIF conference in Shanghai this month. To me the growth rate of 10% sounds somewhat optimistic - hard to believe that in an economy with growth of below 7%, which is also undergoing a shift towards services, growth of basic chemicals would still be above 10%. Then again, maybe the newly opened CTO/MTO plants may contribute to the growth.

---

Sep 20, 2016: Automotive plastics supplier China XD aims to shift its strategy towards areas other than automotive, and will also invest more in R&D.

Comment MCC: According to the company, automotive plastics volumes are still growing but net profit is decreasing. Commoditization is a quick process in China.

---

Sep 20, 2016: CHINA'S crude oil output fell 9.9 % yoy while crude imports rose 13.5% in the first 8 months of the year (Xinhua)

Comment MCC: The production drop is mainly due to the big SOEs Sinopec and Petrochina reducing production as a consequence of low oil prices, which shows that they do to some extent react to market forces despite their main role as "strategic" oil providers for China. The increase in imports is due to private refineries, which are now allowed to import crude oil.

---

Sep 12, 2016: BASF will reduce its European caprolactam production capacity by 100 kt within the next 18 months (CW).

Comment MCC: From 2010 to 2016, China´s CPL capacity grew by an annual 49% while consumption grew only by 13% per year, turning China from an massive importer into a location with a capacity utilization of below 45%. During this period, Chinese capacity grew by about 4700 kt. Of course, such a massive increase also affects other regional markets such as the European one.

---

Sep 12, 2016: RPM has acquired Specialty Polymer Coatings, a Canadian manufacturer of high-performance coatings for oil and gas pipelines with annual sales of $26 million.

Comment MCC: RPM seems to continue a strategy of buying small, highly specialized coatings players, presumably as a way of protecting margins as these niche segments are not likely to be commoditized by Chinese players soon. Perhaps other companies should consider such moves as well.

---

Sep 12, 2016: Lanxess CEO Zachert called Lanxess China development a "true success story" as revenue more than doubled from 432 million euros in 2005 to 923 million euros in 2015

Comment MCC: Well. As a CEO, it is his job to make such statements, and of course Lanxess has not done any worse in China than most other multinational chemical companies. But let us take a closer look. 2015 Lanxess sales were 216% of the sales in 2005. Meanwhile, China´s 2015 GDP is 366% of the 2005 figure. For the chemical market, China´s 2015 figure is about 630% of the corresponding 2005 figure. Or to put it differently, Lanxess´ share of the China market decreased from about 0.23% in 2005 to about 0.08% in 2015. 
Lanxess states that China now accounts for about 12% of its global revenue - if they had kept their 2005 China market share of 0.23%, China would now contribute about 35% of Lanxess´ global revenue, a figure roughly in line with China´s global share of the chemical market.
To be fair, most multinational chemical companies seem to have similar delusions of success in China.

---

Sep 12, 2016: Zhejiang Transfar will acquire 100% of the shares of Tanatex, a Dutch producer of specialty textile chemicals, as announced in August 2016.

Comment MCC: This is the kind of deal we will probably see more of - a strong Chinese player so far focused on the lower end of the market adding higher-end products via acquisition of a Western specialty player. This should become particularly relevant for those chemical segments for which the Western markets have shrunk a lot, putting pressure on the Western producers.

---

Sep 12, 2016: Cabot will establish a JV with Inner Mongolia Hengyecheng Silicone Co to build a fumed silica plant in Wuhai.

Comment MCC: While in some chemical areas, JVs have fallen out of fashion, they are still a good choice in others - particularly those in which stability of raw materials supply is a big issue. Cabot is already a market leader in China via its JV with Bluestar, and apparently the experiences with that JV are positive enough to stick with the model.

---

Sep 12, 2016: Korean OCI will start a carbon black production JV with an annual capacity of 80 kt at Zaozhuang, Shandong.

Comment MCC: OCI is the biggest carbon black producer in South Korea, producing 270 kt at two sites. Like many Korean chemical companies so far focusing on importing fairly commodity-type chemicals to China, OCI also had to consider shifting part of the production directly to China to stay competitive. Others will have to follow.

---

Sep 11, 2016: According to a senior government official, China has made environmental protection and restoration a top priority for the Yangtze River area (Xinhua)

Comment MCC: This sounds good. On the other hand, even in in prosperous and highly developed areas such as Shanghai, important wetlands are being used for construction and nature reserves are turned into commercial fishponds, for example in Nanhui. Hopefully there will be less discrepancy between official wording and reality in the future - this will also make planning more reliable for the chemical industry.

---

Sep 09, 2016: K+S Kali and the Fujian Agriculture and Forestry University will establish the International Magnesium Institute in Fuzhou to develop know-how of magnesium application in agriculture

Comment MCC: While the Institute will primarily focus on Asia, Africa will also be a focus of the planned research activities. This points to an interesting aspect for the chemical industry - the potential to serve African markets from China rather than from Europe or the US. Market requirements and cost structures should be a better fit, with a need for "good enough" solutions at affordable prices rather than the very best.

---

Sep 09, 2016: Arkema will increase its compounding capacity for biosourced specialty polyamides at the Zhangjiagang site, adding polyamide 11.

Comment MCC: The market for biobased plastics is still small, accounting for only about 1% of the total market. And polyamide accounts for about 5.5% of the total bioplastics share (2014). Still, growth is high - 20 to 100% per year depending on plastics type, application and source of the forecast.

---

Sep 07, 2016: According to a PWC report, 39% of technology companies in China face difficulties in utilizing government R&D incentives to promote innovation

Comment MCC: The number is probably even higher among foreign-owned companies (including chemical ones) as the details of the incentives are somewhat complicated and sometimes only available in Chinese. In addition, some of the conditions for getting R&D grants are difficult to accept for foreign companies. Still, it may be worthwhile to explore them further, as foreign companies would do in their traditional home markets.

---

Sep 06, 2016: Solvay has started production at a 60 kt hydrogen peroxide plant at Zhenjiang Green Chemical & New Material Industry Park.

Comment MCC: Zhenjiang is one of the lesser-known and lesser-developed cities along the Nanjing-Shanghai axis, but getting increasingly popular as a chemical production location, with Clariant, Solvay, Mitsubishi Chemicals and others already producing there. One reason is that operating costs there are lower than in places such as Shanghai – another is that places like Shanghai, Wuxi or Suzhou seem to be less and less willing to permit chemical production. Zhenjiang is not that choosy yet.

---

Sep 06, 2016: ICIS just published the list of top 100 chemical companies based on 2015 chemical sales. BASF is on the no. 1 position followed by Sinopec.

Comment MCC: Due to the lower oil price, most companies reported lower sales than in 2014. In fact, one could almost use the decline in sales revenue as an indicator of the degree of commodity character a company´s business has. So BASF declined by 5% and Sinopec by 24% while more specialty-oriented companies such as Evonik (+5%) and Merck (+13%) managed to increase their revenue.

---

Sep 06, 2016: 1H 2016 performance of listed Chinese chemical companies was mixed, with 180 companies reporting profit increases and 110 reporting decreases (CCR).

Comment MCC: The more interesting information is in the details - segments such as electronic chemicals are still improving while overcapacity led to losses in segments such as commodity plastics, fertilizers and pesticides.

---

Sep 06, 2016: China carbon dioxide consumption grew by 0.13% from 2014 to 2015. There are about 270 producers of carbon dioxide in China.

Comment MCC: A growth rate of 0.1% does not sound very Chinese but is something that will become more common in some chemical segments. Typical for China, the market is highly fragmented - the biggest 20 producers only account for 34% of the total market.

---

Sep 06, 2016: China produces about 36% of the global sulfuric acid production (CCR).

Comment MCC: Sulfuric acid used to be utilized as an indicator of a country´s industrial strength, and the 36% of sulfuric acid share is probably not far off China´s share of global chemical production.

---

Sep 04, 2016: Russia's Rosneft and ChemChina agreed to create the Far Eastern Petrochemical Company, a 60:40 JV to develop a petrochemical complex near Vladivostok.

Comment MCC: Interestingly, earlier (2013) this was a venture between Rosneft and Mitsui, but apparently Mitsui is no longer in the game, probably due to the changes in the oil price. But the project fits into ChemChina´s regional ambitions, so they were probably happy to take over.

---

Sep 04, 2016: China´s refineries are running at below 70% of capacity, primarily due to refinery overcapacity (Xinhua)

Comment MCC: This is a significant economic disadvantage to the situation in the US, where refineries are currently running at above 90%.

---

Sep 01, 2016: ChemChina and Aramco will explore investment opportunities in Saudia Arabia in the areas of silicones, tires, photovoltaic and specialty chemicals.

Comment MCC: The agreement emphasizes the use of local raw materials and thus indicates the gradual move of China from a mere market to a provider of production and technology expertise for Saudi Arabia, thus of course getting into competition with Western chemicals companies.

---

Sep 01, 2016: SABIC, Shenhua Ningxia Coal Industry Group and the government of the Ningxia Hui Autonomous Region have agreed on principles for a potential JV.

Comment MCC: Somewhat surprisingly given the SABIC involvement, the JV is to potentially build a greenfield coal-to-chemicals complex focusing on highly-differentiated applications and segments through polymers derivatives. Seems SABIC wants to cover all bases.

---

Sep 01, 2016: The Chemicals Working Group of the EU Chamber of Commerce released their part of the annual White Paper. The focus is on more standardized and less stringent regulation.

Comment MCC: While for multinationals operating at several locations in China it obviously is important to have consistent regulation throughout the country, the foreign players may miss an opportunity in asking for relaxed regulation in some areas, e.g., the transportation of hazardous goods. Not only does this go against the current trend, but it also may mean giving away a potential competitive advantage over local players.

---

Aug 31, 2016: Reuters published a list of the top 75 most innovative universities in Asia. China has two in the top 20 and a total of 22 within the list of 75.

Comment MCC: Compared to the population, China is ranked quite low, and no Chinese university is in the top 10 (these ranks being dominated by South Korea and Japan, which both contribute 20 each to the list, a large number if taking the difference in population size into account). So the government goal to make China a country leading in innovation will not be easy to achieve.

---

Aug 31, 2016: Honda Motor and Daido Electronics have developed a method for making high-performance magnets not requiring rare-earth metals imported from China (Nikkei)

Comment MCC: Similar to past high oil prices incentivizing the search for alternative energy sources, China´s use of cutting rare earth metal exports to Japan as a political tool may now backfire in the long run.

---

Aug 31, 2016: ICIS forecasts China still to be a strong net importer of PP in 2026 (4 million t imports per year).

Comment MCC: This seems like a fairly optimistic scenario as it would mean imports essentially remain at current levels (2.3 million t in the first 7 months of 2016), despite a decline by 16% compared to the same period of 2015. The actual outcome will of course depend highly on the use of CTO to produce PP - ICIS forecasts a 14% share of PP production compared to 21% by the end of 2016. So while the forecast is optimistic for foreign producers of PP, it is pessimistic regarding the future of coal-to-chemicals.

---

Aug 30, 2016: CTO capacity of China is expected to increase by 65% in 2016, to a total of 12.85 Mt/a. In 2016 alone, 8 new plants have come or are expected to come under operation (Asiachem)

Comment MCC: CTO projects are long projects, thus the plants currently coming on stream were likely still planned and started at an oil price above 100 USD/barrel. At current oil prices, most of these plants will lose money.

---

Aug 29, 2016: China's first draft environmental protection tax law, which focuses on emission reductions, has been submitted to the country's top legislative body (China Daily)

Comment MCC: Interestingly, an expert is quoted saying that government fees targeting emissions had been effective "in preventing and controlling environmental pollution", but were easily meddled with by local-level governments, making it necessary to implement a law on pollutant discharge. So the conflict between central and local government related to the question of growth versus environmental aspects is still ongoing.

---

Aug 29, 2016: China may impose stricter technology standards on the 200-plus EV companies and limiting their number to only 10. So far two companies have obtained approval to build cars (Bloomberg)

Comment MCC: While China is already the biggest market for EVs and has ambitious targets of reaching 3 million EV in 2025, the current number of companies is indeed very large, attracted by subsidies of up to 60%. As a consequence, there are currently 4000 EV models being developed - certainly too many, though the question remains whether a mix of subsidies and government limits is the best way to deal with the situation.

---

Aug 28, 2016: Ningbo Shanshan, a Chinese manufacturer of lithium battery materials, may buy a stake in Chile's Sociedad Quimica Y Minera, one of the world's biggest lithium producers (Reuters)

Comment MCC: As China is now the biggest market for electric vehicles, local producers of lithium batteries have good prospects. And typical for Chinese players, they love the idea of backward integration. This may also be state-supported if it includes securing raw materials perceived as strategic overseas.

---

Aug 26, 2016: DSM and Chinese Zhejiang NHU Special Materials have inaugurated their JV for PPS compounds, with NHU producing the material and DSM doing marketing and compounding (PNC)

Comment MCC: Interestingly, despite NHU providing the material, DSM has a 60% share of the JV, showing that even in specialty areas, services (compounding) and marketing may matter more than just materials.

---

Aug 25, 2016: China has increased its total fines to companies for environmental pollution by 11.2% (1H2016 vs 1H2015) while the number of companies fined increased by 5.1% (to 307) (China Daily)

Comment MCC: This sounds like - and indeed is -some progress. However, the average fine is still quite low at less than 1 million RMB (about 130 k USD). In comparison, in the US the total amount of environmental fines was 10.2 bn USD compared to a total of 40 million USD in China, and the biggest cases reached amounts above 1 bn USD. So at the current fine level, it may still often be more economic to pay fines than to improve the environmental friendliness of processes.

---

Aug 25, 2016: Petrochina´s 1H2016 profit dropped by 98% compared to the previous year. The chemicals business, however, switched from a loss to profit.

Comment MCC: Interestingly, the Petrochina press release is titled "PetroChina Records Profit in First Half of 2016", before indicating in the finer print that profit actually decreased by 98%. The company admits that "the Company [is] faced [with] the most difficult period for its production and operation since its listing"

---

Aug 24, 2016: In 1H 2016, China has turned into a net exporter of PTA for the first time. A few years before, China was still the biggest importer (ICIS)

Comment MCC: As with other chemicals before, China will likely remain a net exporter in the future as domestic demand accounts for only about 61% of existing Chinese capacity. Foreign players such as Mitsubishi are already exiting the market. The question is which markets will be left in the long run - probably only those with smaller volumes and added complexity (e.g., service requirements)

---

Aug 24, 2016: In 1H 2016, production volume of Shanghai Petrochemical decreased by 8.5% yoy. Main contributors to the loss were ethylene, PX and synthetic fiber monomers.

Comment MCC: The volume data shows that Chinese petrochemical companies are indeed under pressure unrelated to sales losses from lower oil prices. Surprisingly, the volume losses seem to be bigger in the areas further downstream - for example, while gasoline output increased by 4.8%, the output of synthetic fiber monomers decreased by 21.5%. This is not a good sign for companies trying to increase their value creation by moving downstream in the value chain.

---

Aug 24, 2016: The State Council on Aug 23 issued a guideline on setting up an accountability system for illegal operations or investments at State-owned enterprises (China Daily).

Comment MCC: This is indeed exactly the way the news was reported in the China Daily - a bit surprising as it makes you wonder what kind of accountability system was in place before. None?

---

Aug 23, 2016: Albemarle will acquire the lithium assets of Jiangxi Jiangli New Materials in Jiangxi and Sichuan.

Comment MCC: The lithium carbonate and lithium hydroxide produced by Jiangli are used in the production of lithium batteries, a growth market due to the rise of electric vehicles. Jiangli is already a toller for Albemarle materials from Australia, demonstrating how a tolling relationship may start develop trust and lead to a closer connection such as an acquisition later.

---

Aug 23, 2016: India´s Minda Corp and China´s Shandong Beiqi Hai Hua Automobile Parts have formed a JV to make plastic auto parts (PNC)

Comment MCC: So far cooperations between Indian and Chinese companies in the chemical area are still somewhat rare, but there are more to come. The likely benefits of the JV for both sides are giving China market access to Minda and providing the Chinese subsidiary of BAIC with knowledge in the production of plastics parts.

---

Aug 22, 2016: Interim profit of Sinopec Engineering fell by 37% (SCMP)

Comment MCC: Among the factors leading to the decline is the reduced number of coal-to-chemical projects in China as these need oil prices of US$50 a barrel or above to be profitable.

---

Aug 22, 2016: The Committee on Foreign Investment in the U.S. has cleared the planned acquisition of Syngenta by ChemChina (WSJ)

Comment MCC: This was indeed one of the major hurdles, though the deal still has to go through some antitrust reviews. On the news, the stock price rose by around 11% to about 422 SFR, though the difference to ChemChina´s offer of about 464 SFR shows there are still doubts as to whether the deal will go through.

---

Aug 21, 2016: Synthetic rubber capacity in China increased by 16.4% per year during 2010-2015 while consumption only grew by an annual 3.9%. Consequently 2015 operating rates are only about 52% (CCR)

Comment MCC: This is another chemical segment in which capacity has grown at a much higher rate than consumption, with negative consequences for industry profitability. Even in 2016, total capacity grew by another 4.5% - a step in the right direction but probably still higher than market growth, thus leading to an even lower capacity utilization.

---

Aug 21, 2016: China issued an Action Plan of Reducing VOCs in Key Industries in July, with an implementation period from 2016 to 2018. For example, low VOCs products are to account for at least 70% of pesticide formulations, 60% of coatings, 70% of inks, 85% of adhesives and 40% of tire products, leading to a reduction of industrial solvent emissions by at least 20% (CCR)

Comment MCC: While these targets are not extremely ambitious, they are a step in the right direction. Crucially, they should give producers incentives to switch to low VOC products and processes.

---

Aug 21, 2016: Production capacity of TDI in China is expected to be stable during the period of 2014-2016. China is a net exporter of TDI with capacity utilization at around 73% in 2015 (CCR).

Comment MCC: This looks like a chemical already shaped by the "New Normal" - no new capacity for three years in a row is certainly a rarity for chemicals in China. And the utilization rate - while not great - is not atrocious either. However, prices have dropped substantially. And at the lower expected market growth rates, it will take about two years to achieve a healthier utilization of above 80% - if none of the existing players starts another round of capacity expansion.

---

Aug 17, 2016: According to the US Energy Information Administration, China will be the second largest shale gas producer by 2040, with shale accounting for 40% of its gas production.

Comment MCC: Even then, it is unlikely China´s shale gas will have the same impact on the raw materials prices in the chemical industry value chains as in the US.

---

Aug 11, 2016: SGL aims to divest its performance products business, which produces graphite electrodes, cathodes, furnace linings and carbon electrodes

Comment MCC: ChemChina is among the interested bidders - continuing a recent trend of a Chinese SOE being among the bidders of most specialty chemicals assets, as with Atotech/Sinochem.

---

Aug 09, 2016: China will spend 430 billion yuan on around 4,800 separate projects aimed at improving the quality of its water supplies.

Comment MCC: The existing incentive structure for government bureaucrats did not favor the building of water treatment plans as they do not add to nominal GDP. So now the government is taking a more direct approach to sponsor water treatment. This should be a good business for companies involved in water treatment and water treatment chemicals.

---

Aug 09, 2016: BP aims to exit its JV Secco (with Sinopec) in Caojing via a sale of its 50% share.

Comment MCC: BP is still narrowing its focus - the sale of a JV in which it does not have a controlling stake therefore seems like a sensible move, despite missing out on part of China´s growth.

---

Aug 09, 2016: China´s self-sufficiency for PPS increased from 84% in 2010 to 94% in 2015 (CCR)

Comment MCC: Interestingly, domestic capacity utilization is only about 64%, so the remaining net imports are not due to lack of domestic capacity. So despite a net import dependency, this may not be a good area for domestic investment unless it either has a very good cost structure, or matches gaps in regional supply or specific grades.

---

Aug 09, 2016: According to the Jilin Design Institute of PetroChina, CTO is the most attractive route to olefins at an oil price of 100 USD/barrel but less competitive than naphtha and PDH at 50 USD (CCR)

Comment MCC: CTO/MTO currently account for about 13% of China´s olefin production, and the figure is still increasing. Given that currently an oil price of 50 USD is at the higher end of the forecast range, many of the existing CTO/MTO plants will likely be unprofitable in the future.

---

Aug 08, 2016: Sinochem and a number of private equity parties have reached the second round of bidding for Atotech, a Total subsidiary focusing on electronic chemicals and process equipment.

Comment MCC: While several large private equity companies are also bidding, the current government focus on making China less dependent on imports of electronic chemicals should give Sinochem an edge in the bidding process.

---

Aug 05, 2016: Automotive plastic compounder China XD increased sales by 4.4% yoy in Q2 2016. The tax rate declined from 14.7% to 13.6% (China XD press release)

Comment MCC: This seems to indicate some recovery in China´s automotive market, particularly after China XD´s disappointing 2015 results. Also, it is interesting to see China XD profiting from a lower tax rate due to R&D expense super deductions - a consequence of the government focus on innovation stated in the 13th Five-Year Plan.

---

Aug 04, 2016: China´s plastics imports were down by 6.3% (by weight) in 1H 2016 compared to 1H 2015 while domestic production increased by 7.7% (Plastics News China)

Comment MCC: A high-level indicator of China´s decreasing import dependency for plastics - chemical companies should prepare for China not as an export market but as a competitor for sales in third countries.

---

Aug 04, 2016: According to guidelines issued by the State Council, the petrochemical industrial development is hindered by overcapacity and environmental restraints (Xinhua). Among the measures to be enacted are to allow foreign companies to participate in M&A, and to build seven coastal petrochemical production bases to consolidate the sector. Targets were set for a reduction of energy consumption by 8% from 2015 to 2020.

Comment MCC: Probably a step in the right direction, though the establishment of additional petrochemical production bases may further increase overcapacity rather than consolidate the sector.

---

Aug 04, 2016: During the first half of 2016, China exported approximately 5.1 million metric tons of urea vs. 6.75 mmt during the same time in 2015 (Green Markets)

Comment MCC: China uses anthracite coal as raw material, rather than natural gas - as world market prices for urea dropped, they are now below the production costs of some Chinese producers.

---

Aug 03, 2016: China was the top-performing team at the 48th International Chemistry Olympiad, an annual high school chemistry competition consisting of a theoretical and a practical laboratory exam.

Comment MCC: Hard to say whether such an exam reflects future innovation capability, but if so, the West may not always stay in the lead. Another interesting aspect: all four members of the US team seem to have Chinese origins (judging from their looks and names), highlighting the attraction of natural sciences for people with a Chinese cultural background.

---

Aug 03, 2016: Sinopec will sell 50% of a natural gas pipeline worth about 30-40 billion RMB. The proceeds will be used to build more natural gas pipelines, expand capacity and build storage facilities.

Comment MCC: This seems to be an example of light rather than serious SOE reform - Sinopec gets some new funds from external investors but keeps control of the pipeline, with no independent pipeline company being created. Muddling through rather than real reform.

---

Jul 29, 2016: Offshore oil and gas producer CNOOC has projected around 8 billion losses for 1H 2016, the first losses since the company started being publicly traded in 2001 (SCMP).

Comment MCC: Most of the losses are due to writedowns on Canadian oil sands assets, which are only profitable at an oil high price higher than the present one.

---

Jul 29, 2016: Beijing is offering cash incentives for chemical plants leaving the city, with a target of moving 60 plants this year and 20 more between 2017 and 2018 (CD)

Comment MCC: This is always a balance between keeping existing jobs and supply chains and improving environmental conditions in the capital. As a consequence, the measures are likely to primarily hit smaller plants with few workers and particularly risky chemicals. However, it is also part of a nationwide initiative to shift the chemical industry exclusively to chemical parks.

---

Jul 28, 2016: Clariant (+2%) and Wacker (+1%) both reported small increases in their 1H 2016 results for the Asian region.

Comment MCC: While not bad, this means that Asia/China currently is no particular growth driver for these specialty chemical companies. Overall, any growth seems to come more from volume than from price increases.

---

Jul 27, 2016: The Beijing Institute of Aeronautical Materials and the National Graphene Institute (Manchester University, UK) will cooperate in a five-year research program.

Comment MCC: Graphene is a strategically important material for China, according to the 13th Five-Year Plan. In addition, China seems to be keen on collaboration with the UK, particularly after the Brexit decision.

---

Jul 27, 2016: Exports from Chinese teapot refineries so far are much smaller than expected. These exports were expected to surge after the teapots got approval to ship material overseas (Bloomberg)

Comment MCC: Apparently, one teapot refinery needed two months to fill a single ship of 35 kt as they had not suitable mode of transportation and thus required about 1200 individual truckloads of 30 tons each. Due to this lack of infrastructure, the teapots will very likely not be able to utilize their full export quota.

---

Jul 27, 2016: Mitsubishi Chemical Holdings will sell off its Chinese PTA assets. Due to oversupply from Chinese manufacturers, the business had operating losses in the last 4 years (Nikkei)

Comment MCC: Another typical story of retrenching foreign companies as markets for chemicals get unattractive once targeted by a sufficient number of Chinese players. Mitsubishi intends to focus on areas such as carbon fiber, medical care materials and advanced resins - but so will many other multinationals as well. Life is not getting easier.

---

Jul 21, 2016: China´s 2014 carbon fiber consumption was 13.4 kt, of which only 3.2 kt were produced domestically, despite a domestic capacity of almost 20 kt (CCR)

Comment MCC: As in other chemical areas, a nominal overcapacity (capacity utilization in 2014 was below 20%) masks the insufficient domestic supply of higher-end grades.

---

Jul 20, 2016: Walmart has asked consumer product firms to phase out toluene, dibutyl phthalate, diethyl phthalate, nonylphenol exthoxylates, formaldehyde, butylparaben, propylparaben, and triclosan (CW). Any priority chemical found in a product must be disclosed on the product's packaging beginning in 2018.

Comment MCC: Given Walmart´s presence in China - both directly as a retailer and indirectly as a big source of products - this will have an impact on chemical companies in China, too, even if the chemicals listed by Walmart are not covered by specific Chinese regulation.

---

Jul 20, 2016: China's largest aerogel materials manufacturing base will be established in Changzhou National Hi-Tech District, with the aim of bringing more than 10 companies and reaching 10 billion RMB revenue.

Comment MCC: After all these years in China, it is still impressive for me to see how the government just sets such a target and then - through regulation and subsidies - is likely to achieve it later.

---

Jul 19, 2016: Air Products will build a new plant in the Pukou Economic Development Zone in Jiangsu province, about 30 km away from its existing site at the Nanjing Chemical Industry Park

Comment MCC: While the NCIP site mainly serves chemical customers, the new plant will primarily serve China´s growing integrated circuit manufacturing segment. China has ambitious goals for this segment, in which it currently still is strongly import dependent - the target is to have a 40% share of local production in 2020 and 70% in 2025. Suppliers to the industry such as Air Products therefore have good prospects.

---

Jul 19, 2016: DuPont Performance Materials has opened its largest engineering plastics compounding plant in Shenzhen (philly.com)

Comment MCC: Compared to previous plants, the new plant will be much more highly automated. This is not only to increase production speed and quality, but also to counter rising labor costs in China.

---

Jul 19, 2016: Hyundai Engineering Plastics will build its third production plant serving automotive customers in China, located in Chongqing (PNC).

Comment MCC: This comes after already operating plants in Beijing (serving Northern China) and Jiangsu (serving Eastern China), highlighting the growing focus on Western China.

---

Jul 18, 2016: ChemChina wil buy the remaining 40% of Adama from Koors (Israel), and combine the company with local agrochemical producer Sanonda.

Comment MCC: ChemChina is an SOE, thus focusing primarily on national interests. Once the company has complete control of a former foreign entity, they can feel free to have local companies such as Sanonda benefit from its expertise and thus help China create the desired national champions. Maybe this will be a model for Syngenta as well.

---

Jul 18, 2016: Sinopec is among the presumed bidders for McDonald´s mainland China operations. ChemChina is no longer mentioned (Nikkei Asian Review)

Comment MCC: It is still very difficult to see any strategic logic in a bid of a petrochemical company for fast food outlets.

---

Jul 15, 2016: China´s electricity use rose 2.7% yoy in 1H 2016. In the industrial sector, the increase was 0.5%.

Comment MCC: That seems to indicate there still is some growth in overall production, though at the same time the relative share of industrial production declines compared to the service sector.

---

Jul 14, 2016: Anhui-based profiles manufacturer Conch Profiles will build a production base with an extrusion capacity of 40 kt in Changchun, Northeast China (PNC).

Comment MCC: Gradually the strongest companies on a provincial level turn into national players - a promising pathway to industry consolidation.

---

Jul 14, 2016: German fertilizer producer K+S will acquire Huludao Magpower Fertilizers, a producer of magnesium sulfate fertilizers, including a production site in Liaoning province.

Comment MCC: So far K+S only produces magnesium sulfate in Germany, so the acquisition seems to be a sensible step in increasing the company´s global presence.

---

Jul 14, 2016: ChemChina is planning to sell $10 billion of preference shares in one of its units to fund its Syngenta acquisition (China Daily)

Comment MCC: This sounds interesting at first as it could make ChemChina more market- and profit-oriented. However, it seems the shares will be sold to government-linked entities, so overall ChemChina will stay as controlled by the government as before.

---

Jul 14, 2016: China will start levying anti-dumping duties on imported acrylic fibers from Japan, the Republic of Korea and Turkey (China Daily)

Comment MCC: Though China´s acrylic fiber capacity has been stable over the last few years, demand has declined somewhat, leading to a decrease in capacity utilization. Root causes are the higher price and the replacement of polyester fibers. So now it is time for some protectionism.

---

Jul 12, 2016: China will end its anti-dumping duties on trichloroethylene imports from Russia and Japan as no applications for expiry reviews have been received from domestic TCE producers (China Daily)

Comment MCC: Good to see any antidumping measures expiring, including this one. However, it is a bit surprising that local producers did not ask for an extension - after all, domestic capacity utilization is only about 50% and after a few years with essentially no imports, some imported TCE has started to reach China again in 2015. Presumably the current low price of TCE - which has already led to some production stops - makes it unattractive to protect the current price level via antidumping duties.

---

Jul 12, 2016: Covestro is expanding HDI production in Shanghai. According to the company, use of latest technology has decreased the carbon footprint of HDI production by up to 70% (PNC).

Comment MCC: This is one of many examples where the most modern production facilities are now located in China - not only because of stricter environmental requirements but mainly as China is the location of the latest and thus most advanced investment.

---

Jul 11, 2016: Japan will impose a tariff of 73.7% on imports of potassium hydroxide from China.

Commment MCC: China exports about 10% of its KOH production, indicating that local production is likely to be fairly competitive. In addition, at least in 2014 Japan was only a minor export destination. So most likely this decision is just based on lobbying by some affected Japanese competitors.

---

Jul 09, 2016: While M&A activity fell in 1H 2016, chemicals was the sector with the highest activity, with a combined deal value of 244 bn USD (IBT)

Comment MCC: Of course, China accounted for a large share of the activity in chemicals, including the biggest deal of the year so far, the Syngenta purchase by ChemChina.

---

Jul 08, 2016: DuPont Ethylene copolymer resins will be sold online in China through an e-commerce platform launched by Kingfa.

Comment MCC: E-commerce in chemicals seems to be an area in which China is to some extent leading.

---

Jun 30, 2016: Nuclear power, aerospace, shipping, defense and high speed rail will be the main targets of SOE restructuring in H2 2016 (China Securities Journal)

Comment MCC: As expected from previous developments, the chemical SOEs are currently not the main focus of SOE restructuring.

---

Jun 30, 2016: DSM is open to acquisition opportunities in the nutrition and renewable energy sectors in China. DSM China sales rose 12% to $1 billion in 2015 (China Daily)

Comment MCC: Food and feed indeed seem like good growth opportunities for multinational companies in China, both because the demand is increasing as China´s consumers get more health conscious, and because Chinese consumers still have limited trust in local brands.

---

Jun 23, 2016: Electric carmaker BYD will take part in lithium mining in Qinghai, partnering with Qinghai Salk Lake Industry in building a plant with annual output of 30 kt of lithium carbonate.

Comment MCC: Anybody familiar with Chinese companies knows that they generally like the idea of insourcing and extending their upstream value chain. BYD is no exception. This has the potential to bypass the chemical industry for key elements of electric vehicles.

---

Jun 23, 2016: Kingfa, China´s largest plastics compounder, and Jushi, the world´s largest fiberglass producer, have announced a technical cooperation including their global manufacturing sites (PNC)

Comment MCC: There are many cooperations announced, and not all of them end in meaningful results. However, if the two companies are serious about this alliance, it could be a model for other Chinese chemical companies to expand their overseas resources and move towards complete solutions.

---

Jun 22, 2016: Pingdingshan Coal Mining will cooperate with LERRI Solar in a JV for production of monocrystalline silicon cell chips (CCR).

Comment MCC: Somewhat strange bedfellows, these two - a coal mining company and a leader in photovoltaics. Still, if both sides contribute the right resources - most likely cash and technological knowledge, respectively - it could work out well.

---

Jun 22, 2016: Invista has won an intellectual property arbitration case against a Chinese company using Invista´s proprietary PTA technology (CW)

Comment MCC: As also remarked by Invista, it is encouraging that such cases can be won in China, though the exact implications are hard to assess as Invista did not give details of the case.

---

Jun 22, 2016: Haldor Topsoe opened an automotive-catalysts plant in Tianjin, producing catalysts for emission cleaning from heavy-duty diesel engines (C&EN)

Comment MCC: Given the tightening standards for automotive emissions in China, this seems like an interesting market with huge growth potential.

---

Jun 21, 2016: According to a Freedonia market study, annual growth of the Asian coatings market will slow from 8% (2010-2015) to 4.8% (2015-2020).

Comment MCC: Asia accounts for more than half of the global market, and China accounts for about 2/3rds of the Asian market. So this slowdown primarily reflects lower expected growth in China. Still, Asia remains the fastest growing region for coatings.

---

Jun 21, 2016: In May, the China Crop Protection Industry Association issued the 13th Five-Year Plan for China's Pesticide Industry. The plan sets some ambitious goals for industry consolidation (CCR)

Comment MCC: Some of these goals will be hard to achieve given the current fragmented status of the industry. For example, to have the top 20 companies account for 70% of total industry sales will be tough, as will be having at least 5 players with sales of at least 5 billion RMB - in 2015, none of the players achieved this, with the biggest player only having sales of 3.5 billion RMB. It remains to be seen what measures will be taken to move towards these goals.

---

Jun 20, 2016: Korea's current account surplus from trade with China dropped by 19% last year. In particular, exports of display panels and chemical products dropped (Chosun).

Comment MCC: Korea´s chemical industry is likely to suffer first and most from China´s decreasing import dependency for chemicals. In contrast to imports from Europe and the US, many chemical imports are not specialties but commodities and semicommodities such as plastics and intermediates. These are exactly the products for which China keeps adding domestic capacity.

---

Jun 17, 2016: BASF will buy the Chemetall surface treatment business from Albemarle for about $3.2 billion (CW)

Comment MCC: While this may be the right step from a product portfolio perspective, it also increases BASF´s focus on North America and Europe, where 80% of Chemetall´s sales are. Though on the positive side this means the new owners may leverage Chemetall´s products and increase their sales to Asian automotive customers. According to an analyst, 27% of Chemetall´s sales are to automotive customers.

---

Jun 15, 2016: BASF Coatings broke ground on a new, world-scale automotive coatings plant in Caojing, Shanghai, an investment of around 140 million Euro.

Comment MCC: Despite all the worries about a slow-down, China is still by far the biggest contributor to volume growth of the global automotive market. BASF´s investment reflects this.

---

Jun 15, 2016: ChemChina is among companies considering bids for McDonald's China operations (Bloomberg)

Comment MCC: ChemChina is already running Malan Noodle, which supposedly is used as an outlet to give surplus workers of ChemChina´s chemical businesses employment. Given the status of ChemChina´s domestic operations, they could certainly provide many more workers for McDonald´s in China. Insert your own joke about the similarities between fast food and chemicals here.

---

Jun 15, 2016: Kingfa launched production of its first compounding line in Europe (in Bonn) on June 8. With a capacity of 15 kt/year, products include PP, HIPS, nylon, and PBT compounds (PNC)

Comment MCC: So while multinational companies are expanding their footprint via presence in multiple regions in China (see yesterday´s entry), the leading Chinese players are working on establishing a presence in the major global economic regions. Kingfa already has production in the US and now added Europe (Germany).

---

Jun 14, 2016: LyondellBasell has started building its third China factory adding Dalian to Suzhou and Guangzhou. The plant will focus on PP compounding for automotive applications (Plastics News China)

Comment MCC: One could probably almost use the number and locations of a chemical company or a chemical segment as a maturity indicator. First either the Shanghai area or the Guangzhou area, then the other one of these two; then a location in the North (the stage LyondellBasell is at now), then additional areas such as Chengdu (see AkzoNobel). In the long run, localization in China may mean not having one plant but one in each major economic subregion (e.g., Chengdu/Chongqing with a population of about 110 million people). Of course, for some specialty chemicals segments a single location may be sufficient - if for example a single location in Europe is sufficient as well.

---

Jun 09, 2016: OXIS Energy (UK) and Lithium Balance (Denmark) will build the first-ever prototype Lithium Sulfur E-scooter battery system primarily for the Chinese market

Comment MCC: This is a nice example for innovation coming from China-specific needs. The E-scooter market in China is 30 million (now mostly using Pb acid batteries), so there is a much larger market than elsewhere. Also, typical living conditions (in high rise apartments) lead to the battery weight being much more of an issue than elsewhere. In short, specific Chinese requirements requiring technological innovation.

---

Jun 07, 2016: China will tighten regulation of chemical parks, and has recently already forced many chemical companies to relocate (CCR)

Comment MCC: The CCR article gives a number of examples of recent plant closure numbers - there are in the several hundreds in a number of different provinces. And it is suggested that even the existing, recognized chemical parks are under pressure to improve and possibly to consolidate. Chemical companies active outside of chemical parks - or located in marginal chemical parks - are well advised to watch the situation and make contingency plans.

---

Jun 07, 2016: China exported 7.3 million tons of APIs in 2015, a volume increase of 4.4% though prices decreased by 5.1%, leading to an overall decline in value of 0.9% (CCR)

Comment MCC: This is a market in which China is already so strong that further increases are not very likely. In fact, overcapacity in China may lead to further price declines.

---

Jun 07, 2016: China had 61 PP producers (end 2015) with ˃ 90 production units. Capacity was 17.8 mio tons, output 16.9 mio tons and 2016 consumption is estimated at 18.5-19 mio tons (CCR)

Comment MCC: This is still one of the brighter spots in China´s chemical landscape, with high capacity utilization, though the producer landscape is rather fragmented.

---

Jun 07, 2016: Wuhuan Engineering, a subsidiary of SOE China National Chemical Engineering, will build a 200 kt PVC plant in Bangladesh (Plastics News China)

Comment MCC: As the local Chinese market is suffering from overcapacity and China is already a net exporter of PVC, building production capacity overseas seems to be the next logical step, particularly as so far all PVC in Bangladesh is imported.

---

Jun 07, 2016: Chengdu Guibao, a maker of silicone sealant products for construction use, will buy privately owned Wuhan Huasen Plastic (Plastics News China)

Comment MCC: This will let Guibao enter the automotive market as the plastics products of Huasen are mainly used in this segment. It reflects the broader shift from investment (i.e., construction) to consumption (i.e., automotive) currently taking place in the Chinese economy.

---

Jun 06, 2016: American CuMo Mining has signed an MOU with Chinese Ping Shan Resources and MCC8 Group Company to develop CuMoCo's molybdenum-copper-silver deposit in Idaho (CW)

Comment MCC: The Chinese partners will invest a minimum of USD 700 million, showing that China still continues its strategy to secure vital industrial raw materials overseas.

---

Jun 04, 2016: Petrochemical plants in Shanghai and Ningbo will have to curb production ahead of the G20 Summit in Hangzhou in order to improve air quality (Platts)

Comment MCC: A bit hard to imagine this to happen in the West, and an indication that the government does not fully trust chemical companies not to pollute the air during normal operations.

---

Jun 03, 2016: US semiconductor producer Globalfoundries has entered into a JV with Chongqing government. Chip production utilizing Globalfoundries' Singapore 300 mm technology will start in 2017

Comment MCC: As also indicated in the 13th 5YP, China is keen to participate to a larger extent in the electronics value chain, particularly in the most innovative upstream activities rather than just in component assembly. This should give a further boost to the market for electronic chemicals.

---

Jun 03, 2016: Chinese extruder Conch Profiles and Science is planning to acquire a majority stake in Chery Automotive's electric vehicle subsidiary (Plastics News China)

Comment MCC: While at first this sounds exciting - synergies between lightweight electric cars with high plastics content and a producer of plastics? - in reality, the reason is probably simply an overlap in ownership (by the Anhui provincial government) as well as increasing competition in the plastics extrusion business

---

Jun 03, 2016: A former secretary-general of International Food Packaging Association (Beijing) will serve 14 years in prison for multiple extortion of packaging companies (Plastics News China)

Comment MCC: Best to just quote Nina Sun´s comment from her blog directly: "If the companies could abide by laws in the first place (I know it's a naive thought), or if the government would actually enforce its laws and regulations, [the secretary's] tricks wouldn't have worked"

---

Jun 03, 2016: Vertellus Specialties has filed for Chapter 11 bankruptcy protection, stating it "faced a slowing of growth rates for its pyridine and picoline products, coupled with significant increases in global capacity and production, primarily from Chinese manufacturers." (C&EN)

Comment MCC: This is a warning signal for many Western companies thinking that the production of presumed specialties gives some protection from Chinese competition. Indeed the Chinese are very good at producing specialty chemicals to specification. The differentiation potential for Western companies comes from service, product variety, innovation and customization, not simply from a non-trivial production process.

---

Jun 03, 2016: Cabot will open a research center in Shanghai to develop clean technologies and specialty chemicals. China contributes about 20% to Cabot´s global sales (Shanghai Daily)

Comment MCC: Cabot are not exactly the first chemical company to realize that developing products suited to local needs is best done locally, but better late than never.

---

Jun 01, 2016: Chinese fiber glass producer Jushi will open a plant in the US investing $300 million USD (Plastics News China)

Comment MCC: Jushi already has a plant in Egypt outside of China, but the substantial US investment is an indication of an even more serious attempt to become a global player. According to Plastics News, Jushi is also conducting feasibility studies about plants in Asia and Eastern Europe.

---

Jun 01, 2016: The State Council announced an action plan to combat soil pollution, urging relevant government agencies to launch a survey on soil conditions every 10 years (Xinhua)

Comment MCC: This is another step in the implementation of the 13th Five-Year Plan, which targets zero growth for the amount of chemical fertilizers and pesticides used on crops by 2020.

---

Jun 01, 2016: Two people died at a lithium battery storehouse of Haisida Power Supply in Jiangsu province Tuesday

Comment MCC: Lithium batteries do occasionally explode - one would expect a larger battery producer such as Haisida to know how to minimize danger to their staff. Still, accidents happen.

---

Jun 01, 2016: A second-year graduate student at ECUS Shanghai died on March 23 in an explosion at Shanghai Joule Wax Industry, running pilot tests (China Daily). His academic supervisor is a part-owner of the company. He was not present at the pilot tests.

Comment MCC: Although academic staff of the university are prohibited from taking substantive part-time jobs in enterprises or setting up their own companies, it seems these rules are often ignored. To some extent this may even be intentional as at the same time the State Council encourages professionals working in universities and scientific research institutes to start their own businesses while they are still in an academic post. In any case, such conflicts of interest may have serious consequences, as illustrated by the accident.

---

Jun 01, 2016: According to Europol, China has become "the chemical and pharmaceutical wholesaler and retailer of new psychoactive substances to the world" (SCMP)

Comment MCC: Factors fueling this business are rising online trade, the rapid growth of China´s chemical and pharmaceutical industry, and the entrepreneurial spirit of smaller companies particularly in the Guangdong area.

---

May 31, 2016: Shanghai increased its minimum wage by 8.4% in April 2016, reaching 2190 RMB. This is the highest minimum wage in China - Qinghai province has the lowest with 1270 RMB.

Comment MCC: This shows both the huge salary differences within China and the slowdown in salary increases. In the last five years, the average increase was 13.1% per year.

---

May 31, 2016: Sabic and Shenhua Ningxia Coal Industry Group will conduct a three-year greenfield chemical project in Ningxia with local coal as raw material.

Comment MCC: I am not sure this really requires a three-year feasibility study - after all, these projects already exist elsewhere. More likely, Sabic wants to cover all bases without immediately having to commit resources.

---

May 27, 2016: SGL Carbon shares rose 12% after Manager Magazin reported that ChemChina is interested in acquiring the graphite electrode unit or possibly the whole company.

Comment MCC: It seems ChemChina keeps focusing on overseas acquisitions - this one may actually make some sense as steel production has shifted to China to such a large extent - rather than improving their existing businesses. Well.

---

May 24, 2016: Honeywell will build local production capacity in China for its MTO catalysts

Comment MCC: This reflects the overwhelming importance China has - and even more, will have - with regard to MTO.

---

May 23, 2016: Agropages published a list of the top 100 Chinese pesticide producers. Operating income of the 800 enterprise above designated size increased by 5.1%, profit by 1.7%

Comment MCC: Interestingly, 4 of the top 5 in the list had lower revenues than in 2014 - so while the industry is highly fragmented, there is no obvious indication of consolidation. Overall, the 13th Five Year Plan with its target of not increasing overall pesticide use may be a challenge for the industry.

---

May 21, 2016: Revenue of domestic Chinese coatings producers rose by 7.3% in 2015 while profits rose by 10%. 2016 sales growth forecast is +5% (CCR).

Comment MCC: Interesting to see that growth was still a bit above GDP, and that profit grew faster than sales. Reasons include the low raw materials prices and the pressure on small players to stop production due to increasing environmental regulation.

---

May 21, 2016: China's output of dyed/printed cloth in larger enterprises was 50.9 billion meters in 2015, a drop of 5.1% 2014. The output declined steadily from 59.3 billion meters in 2010 (CCR).

Comment MCC: Among the reasons for this decline are the higher cost of environmental protection compliance and the shift of parts of the textile industry to lower-cost countries. Accordingly, Vietnam and Bangladesh were the two top export destinations for these products.

---

May 21, 2016: By 2020, China's annual PTA output will be ~ 40 million tons, requiring 26.5 million tons of PX compared to local output of 15.5 million t/a, requiring imports of about 11 million tons.

Comment MCC: This will already be a reduction of the current import dependency ratio due to new construction of PX plants. However, PX plants face strong resistance in China, so some projects have been cancelled despite PX being on the radar of many domestic chemical companies wanting to expand.

---

May 20, 2016: „Major problems with the bloated centrally-administered SOEs include weakness in core business, too many sideline businesses, low efficiency and excessive layers of administration and management." (China Daily)

Comment MCC: Though this is not specifically targeting chemical SOEs, it probably applies to them too. Li Keqiang has pledged to "tackle them step by step, which isessentially deepening the SOE reform." But many such announcements have been made before, even though this time some of the reform targets are quite specific and thus more difficult to fudge. Let´s see.

---

May 20, 2016: Household chemical enterprises in the Pearl River Delta are required to begin relocation
into Green Daily Chemical Industrial Area of Yunfu industrial park (CCR)

Comment MCC: This is one of the many relocation projects we will see in the next 5 years, as relocation of chemical companies to chemical parks is a key goal of the 13th Five-Year Plan.

---

May 20, 2016: Sinorgchem, a subsidiary of Sinochem, will purchase American rubber chemical producer PANIT for US$114.6 million (CCR)

Comment MCC: Sinorgchem already has a very strong position in rubber chemicals - like many other Chinese companies, they now seem intent on establishing a global presence with this acquisition.

---

May 20, 2016: China´s chemical sector grew by 3.8% yoy in Q1 2016, while profits reached a post-financial crisis record of 101 billion RMB (+21%).

Comment MCC: While growth is subdued, the industry has profited from the lower oil prices, which they have generally only partly passed on to their customers so far.

---

May 20, 2016: An quote from the CEO of Borouge: "Traditionally products were developed in Europe ... [and] shipped into Asia ... Now we see the opposite start to happen where we actually are introducing new products here, which are then going back into Europe." (Plastics News China).

Comment MCC: Indeed this reflects a broader trend. As quality requirements and production levels have neared Western levels and Asia still has a much higher growth rate than elsewhere (plus huge existing markets), it is turning into the natural center of innovation in chemical materials.

---

May 18, 2016: RPM via its Carboline Company subsidiary acquired the remaining 51% interest in its Chinese JV, Carboline Dalian Paint Production, a producer of corrosion control coatings

Comment MCC: The JV was set up with a local partner in 2009 - the current ownership change is a reminder that most JVs eventually end up being owned by only one of the two or more initial partners. Which does not mean they are necessarily unsuccessful for all parties involved.

---

May 17, 2016: Dow and Xinjiang Production and Construction Corps (XPCC) will cooperate in the areas of green building, transportation, and infrastructure in Xinjiang (CCR)

Comment MCC: Xinjiang is certainly an underutilized opportunity for Western chemical companies. The concept to target this area with a local partner is a good one as the area is vast, somewhat underdeveloped and quite different from the rest of China - it would take huge resources to go there on one´s own.

---

May 13, 2016: One of the four members of the Clariant executive committee, Christian Kohlpaintner, has relocated to Shanghai as "the future of our company will be decided here in this region"

Comment MCC: Like most Western chemical companies, Clariant has some serious catching up to do in China - the country accounts for 11% of global Clariant sales, similar to competitors, but far below the global chemical market share of China of about 35%.

---

May 13, 2016: Honeywell will spin off its resin and chemical business, which is dominated by Nylon. The main reason appears to be growing competition from China.

Comment MCC: According to Honeywell, Chinese manufacturers now account for 43% of global nylon 6 resin capacity from 26% in 2010. "As a result of the increased capacity and competitive intensity, the margins for nylon 6 resin and caprolactam have declined in recent years to historic lows" (Honeywell). Another market now unattractive for Western players after the entry of multiple Chinese companies, it seems.

---

May 11, 2016: The government of Longkou city in Shandong cancelled preliminary plans for a petrochemical plant after residential protests.

Comment MCC: While in the past jobs were more or less the only thing that mattered in China, nowadays residents are also very concerned about local environmental risks. The "New Normal" for the chemical industry in China.

---

May 11, 2016: The government has asked IFF to move a fragrance ingredients plant in Zhejiang. Other chemical plants in the same industrial zone received the request.

Comment MCC: Given the strong emphasis the 13th Five-Year Plan puts on relocating chemical plants into chemical parks, it is likely many chemical companies - and particularly foreign ones, which are perceived to be financially stronger - will have similar experiences soon.

---

May 09, 2016: Long-serving company executive Dai Houliang will become general manager of Sinopec, replacing the previous GM, who is under investigation for bribery (Shanghai Daily).

Comment MCC: Nominating a board member and former CFO of the group signals continuity, which is a bit surprising given that the previous GM is under prosecution for corruption.

---

May 06, 2016: CPCIF issued the Guidelines for the Development of the domestic Petroleum and Chemical Industries in the 13th Five-Year Plan Period, including about 7% annual growth (CCR).

Comment MCC: It seems if GDP is to grow at least 6.5%, then the chemical industry has to contribute at least the same share - even though this may not make too much sense if the economy is to change from production- to service-driven.

---

May 06, 2016: China CPL demand in 2016 will be 2250 kt, according to Luo Hongjing of a Sinopec-affiliated economic research institute (CCR).

Comment MCC: This contrasts quite negatively with the capacity to be added in 2016 (1300 kt, or more than 50% of demand) and the expected final CPL capacity for the end of 2016 (5200 kt). No wonder Western companies such as Honeywell are trying to get out of the business.

---

May 06, 2016: China consumed about 45 mio t of methanol in 2015 while local production was about 40 mio t and production capacity was 76 mio t (CCR).

Comment MCC: This shows that a large share of China´s methanol capacity is not fully cost competitive with imports, something that is unlikely to change soon.

---

May 06, 2016: Dyestuff volume produced in China stagnated between 2014 and 2015 after annual growth of about 5% between 2011 and 2014 (CCR).

Comment MCC: Dyestuff thus may be one of the first chemical segments suffering from the rising salaries in their customer industries, and the resulting shift of production to places outside of China. Correspondingly, Vietnam and Bangladesh grew the fastest, though the industry still relies on local demand for the bulk of their sales.

---

May 06, 2016: According to ICIS, spot PP prices in Asia may come under pressure in May as new production in China is started.

Comment MCC: In fact, two coal-to-oil plants in China, China Coal Mengda and Xinjiang Shenhua, will add 300 and 360 kt of PP capacity around this time. Construction of the Mengda plant was started in 2011, suggesting that it will still take some time before lower oil prices will have an impact on the startup of new CTO capacity in China.

---

May 04, 2016: U.S. mold equipment supplier Progressive Components got a Chinese competitor to stop displaying counterfeit products at the recent Chinaplas (PlasticsNews).

Comment MCC: While there is still substantial IP violation particularly in China including those areas related to the chemical industry, at least the official position is getting more supportive, as witnessed by the Chinaplas organizers asking the competitor to stop displaying the questionable products. So it may be worth even for small players to make some efforts to identify and pursue IP violations.

---

May 01, 2016: Tianjin started charging petrochemical, packaging and printing companies for VOC , with a standard charge of 10 yuan ($1.5) per kg (China Daily)

Comment MCC: After the explosions, Tianjin is likely to be particularly keen on improving its environmental image. This increases the chances that the new charges are actually being implemented - in the past, this was the key bottleneck in improving China´s environmental situation.

---

Apr 29, 2016: Private company Zhejiang Petrochemical is planning to build a US$15 billion petrochemical complex near Shanghai, the country's largest by a non-state investor 

Comment MCC: The government has recently been more positive towards private investment in petrochemicals, e.g., by giving crude oil import licenses to private companies. Allowing this project is another step in the same direction - presumably the government hopes to apply some pressure on the petrochemical SOEs to become more competitive in this way.

---

Apr 29, 2016: Baerlocher is expanding capacity of calcium stabilizers for PVC at its plant in Changzhou, Jiangsu from 30 to 40 kt

Comment MCC: The China Plastics Piping Association has committed to eliminate lead from stabilizers in plastics by the end of next year. If successfully implemented, this will be a big boost for lead-free alternatives such as the calcium stabilizers provided by Baerlocher.

---

Apr 29, 2016: Ms. Shulman of ExxonMobile emphasized the importance of China for chemical industry growth and for innovation (PlasticsNews)

Comment MCC: Her comments nicely illustrate that China is taking the lead for some chemical products now, as indicated by Exxon launching innovative products with China as specific target. Some of her more interesting statements:
"The China market today is a leading market in the world. 90 percent of our growth in performance polyethylene is in emerging markets and 50 percent of that growth comes from China."
"If you look at the state of the equipment, it is leading edge. So years ago there may have been less sophisticated equipment, but over the last three decades many state-of-the-art equipment manufacturers and equipment has been installed and it´s an innovation leader"

---

Apr 29, 2016: DSM Engineering Plastics has launched a pilot production line at its Jiangyin research center (PlasticsNews)

Comment MCC: The rationale highlights the increasing importance of China - DSM wants to be able to provide sufficient material for customers to do larger trial runs, and to do so within days rather than within weeks or months.

---

Apr 29, 2016: According to plastics producer A. Schulman, some of the biggest plastics converting machines are now installed in China.

Comment MCC: As Schulman points out, this means that solutions tested elsewhere can no longer just be transferred to China - the local requirements are too challenging, and innovation is required. China thus will inevitably become a leading location for innovation.

---

Apr 29, 2016: Dow Q1 sales volume increased by 5% in Greater China in Q1 2016 compared to Q1 2015.

Comment MCC: Dow sees the shift towards a consumer-driven economy as the main reason for the growth of their business, which was double-digit in the areas of packaging, elastomers, automotive, and coatings.

---

Apr 29, 2016: Anglo American will sell its niobium and phosphates businesses to China Molybdenum for $1.5 billion. Niobium is used in steel alloys but also in a number of high-tech applications including superconductors.

Comment MCC: This makes CMOC the second biggest Niobium producer in the world, and should help the company in the market for specialized alloys, in which it is already a strong player.

---

Apr 29, 2016: While the Q1 2016 results of Petrochina and CNOOC showed a decline, those of Sinopec improved compared to Q1 2015.

Comment MCC: This reflects the relative weakness of oil exploration and the relative strength of chemicals due to lower raw materials costs. Sinopec is the strongest in chemicals and thus the winner of the current situation; Petrochina turned an overall profit into a loss even though for their chemicals unit, the previous loss turned into profit.

---

Apr 28, 2016: In Q1 2016, Covestro achieved yoy volume growth of 13.3% in China.

Comment MCC: As Patrick Thomas points out, this is about double the current GDP growth - not bad compared to most other MNCs.

---

Apr 28, 2016: Clariant yoy Asia sales in Q1 2016 declined by 1% in local currencies, mainly driven by weak performance in China.

Comment MCC: At the same time, Clariant announced that in 2017 about 40% of its global investment are to be located in China - Clariant still seems bullish about China despite the current weakness.

---

Apr 27, 2016: Profits earned by Chinese industrial companies rose 11.1% in March from a year earlier, with chemical companies gaining the most, 20.8% (Reuters).

Comment MCC: Nice to hear some good news, and somewhat surprising to hear that the chemical industry is leading in profit growth.

---

Apr 27, 2016: Total value of PE and VC deals in China's cleantech industry in 2015 fell 8% year on year to US$1.1 billion, despite a 49% rise in the number of transactions (PwC/Shanghai Daily).

Comment MCC: The authors of the report (from PwC) interpret this data as pointing to "a growing awareness of environmental protection issues among the Chinese public". However, another interpretation would be that many companies in the segment will eventually fail.

---

Apr 26, 2016: India´s specialty chemicals companies are expected to gain market share due to stricter implementation of environmental norms on Chinese specialty chemicals firms (Business Standard)

Comment MCC: Indeed, export of specialty chemicals from China to India has already declined due to plant shutdowns in China. According to the Business Standard, the cost of production of India's specialty chemicals is now 10-15% lower than in China after investment in environmental protection.

---

Apr 26, 2016: DuPont Performance Materials will launch its largest compounding plant globally in Shenzhen at the end of June (Plastics News China)

Comment MCC: DuPont seems to be optimistic about the prospects of their plastics in China as some applications such as automotive and packaging still have growth rates substantially above GDP.

---

Apr 21, 2016: "SOEs in the competitive market should be given time and financial support ... instead of being told to contribute more to the country's fiscal revenue" (China Daily)

Comment MCC: The quote above summarizes the opinion of the Group for State-owned Enterprises Reform under the State Council according to China Daily. In other words, don´t hold your breath for any meaningful reform.

---

Apr 21, 2016: All 28 chemical plants at Hai An Industrial Park, Jiangsu were shut down after several pupils of a nearby school reported nosebleeds and skin rashes (Straits Times).

Comment MCC: It seems the government is now paying more attention to violations of China´s environmental regulation, at least if somebody complains loud enough. The measure to shut down all plants rather than just the actual offender may be an overreaction.

---

Apr 21, 2016: At the end of 2015, China hat 255 calcium carbide producers operating at 60% capacity (CCR).

Comment MCC: Another good example for overcapacity and fragmentation in China´s basic chemicals segment.

---

Apr 21, 2016: At the end of 2015, China hat 26 anilin producers operating at 48% capacity (CCR).

Comment MCC: Another good example for overcapacity and fragmentation in China´s basic chemicals segment.

---

Apr 21, 2016: China has 6 MDI producers, all foreign owned or JVs except the biggest, Wanhua, which has about 60% of the total capacity (CCR)

Comment MCC: Wanhua is indeed a Chinese chemical success story, not only with regard to their output, but also the achieved quality improvements.

---

Apr 21, 2016: According to KPMG, 62 percent of Chinese manufacturing executives interviewed plan to put over 6% of revenue into innovation, from 36% in the previous year.

Comment MCC: It is probably correct to interpret this - as KPMG does - as an aggressive move of Chinese companies into innovation. On the other hand, part of this may just be Chinese bosses parroting the innovation focus emphasized in the current Five-Year Plan.

---

Apr 20, 2016: BASF will buy assets from Chinese automotive refinish producer Yinfan chemistry, giving BASF access to state-of-the-art production facilities and Yinfan brands.

Comment MCC: A year ago, BASF already announced to use Yinfan for production of some of their lower-end coatings. Acqusition of these assets now seems to be the next step.

---

Apr 20, 2016: Northwest Innovation Works has cancelled its plans for a 3.4 billlion USD methanol plant in Tacoma, Washington.

Comment MCC: Although local papers celebrate this as a victory for the environment and a success of local protests, most likely NWIW did not need too much of a push to cancel this plant given that the current oil prices substantially reduce the attractiveness of the methanol-to-olefin conversion which was the basic rationale behind establishing methanol capacity.

---

Apr 18, 2016: Invista started up a 215 kt HMDA plant in Shanghai, part of a project first announced in 2007 but delayed due to the economic downturn (CW).

Comment MCC: In fact this is almost exactly 2 years after the groundbreaking ceremony. The plant is among the most energy-efficient nylon intermediates sites - this will be the situation for many chemicals in the future as China is the location of the latest investment.

---

Apr 16, 2016: Australian FYI Resources and Chinese Yuntianhua aim to formalize their cooperation at a potash project in Laos by entering JV negotiations.

Comment MCC: FYI Resources is a listed company focused on the exploration and development of potash projects in Southeast Asia. Yuntianhua majority owns the "Sino-Lao" potash project located approximately 40 km north of Vientiane, and thus is a natural partner for the Australian company which has the self-declared objective of "establishing a material potash presence in Southeast Asia".

---

Apr 15, 2016: CABB started a 25 kt monochloroacetic acid plant in Jining, a JV with Jining Gold Power.

Comment MCC: This is one in a recent comeback of joint ventures. Despite the many problems experienced with JVs in China in the past, these may actually well if the responsibilities are clearly split, such as in this case. Jining provides raw materials and energy while CABB provides technology. Of course, it also helps that 67% of the JV are owned by CABB. The added capacity, which had already been announced in 2013, seems to indicate the success of the JV so far.

---

Apr 14, 2016: Industrial power use in China increased by 0.2% in Q1 2016 compared to Q1 2015.

Comment MCC: This is an indication that at least industrial production (and with it, chemical production) is growing, and at a rate above these 0.2% as production is becoming more energy efficient. However, it is still low growth compared to energy consumption increase in the other segments such as households (+10.8%) and services (+10.9%)

---

Apr 09, 2016: „For example, the capacity for making PTA, a polyester feedstock, has risen by 200% over the past five years" (The Economist)

Comment MCC: Though mentioned only as a sideshow to the overcapacities in other segments of China´s industry, finally the Chinese chemical industry gets some attention in the Economist too. Unfortunately - but justifiably - for the issue of overcapacity. Other quotes from the article referring to the chemical industry: "[Chinese Chemical] factories have been running well below capacity. Even so, Chinese firms are still increasing their potential output."

---

Apr 07, 2016: China Prosperity Jiangyin started production at a new 2.2 million t PTA line.

Comment MCC: Another exemplary case about the creation of overcapacity in China. In 2011, the company was one of the smaller players with a 600 kt line (out of more than 50 million kt PTA capacity on China). Then, they decided to massively expand production in order to lower overall costs and become one of the leaders. Unfortunately, many other companies had the same thought ...

---

Apr 07, 2016: Chinese fluorochemicals producer Juhua will produce refrigerant Honeywell Solstice® yf for Honeywell in China. In the US and Europe, the refrigerant will be marketed by Honeywell.

Comment MCC: This seems like a clever approach of Honeywell to lower its capital expenses and secure local support for their refrigerant. Maybe a model for other companies to consider?

---

Apr 06, 2016: China´s chemical market increased by 10.3% in 2014, much higher than global growth of 2.6%, reaching 1111 billion Euro (CEFIC)

Comment MCC: This means China´s global chemical market share is now 34.4%, slightly above the combined share of Western Europe (17.0%) and NAFTA (16.3%), an increase of about 1% from 2013. China thus stays on track to account for about 40% of the global chemical market in 2020. So despite China´s economic slowdown, China´s importance for the global chemical industry is still growing, and no global player can afford to ignore the country.

---

Apr 06, 2016: Acrylic acid capacity utilization in China dropped below 50% in some months in 2015 (CCR).

Comment MCC: For those familiar with the Chinese chemical industry, it is clear what this means for the future: capacity expansion. A capacity increase of about 30-45% is expected by 2020 based on current expansion plans.

---

Apr 04, 2016: A Hubei court has decided to proceed with a lawsuit against fertilizer producer Hubei Yihua that contaminated forest land by dumping untreated wastewater (Caixin)

Comment MCC: It is good to see that environmental laws are gradually being implemented more strictly, even outside of Eastern China.

---

Apr 04, 2016: Chinese automotive plastics molder Jiangnan will open a plant in North America, an investment of 45 million USD, which follows an investment in Mexico announced 2015.

Comment MCC: Kingfa also announced plans to establish production in the US in March 2016, indicating a broader trend of Chinese plastics compounders to become global players.

---

April 02, 2016: China will impose provisional anti-dumping duties on acrylic fiber from Japan, Korea and Turkey

Comment MCC: Consumption of acrylic fiber in textiles has shrunk due to partial replacement by polyesters. So the local industry is under pressure, and there is always an excuse to impose antidumping regulation. Of course, other countries are doing exactly the same.

---

Apr 01, 2016: According to Rose Ryntz of IACG, Chinese vehicles of a defined size are heavier than those produced elsewhere, indicating potential for increased plastics use (Plastics News)

Comment MCC: At the same time, growth of some of the key providers of automotive plastics such as China XD has recently slowed down or even stopped.

---

Mar 31, 2016: Industrial gas company Linde yesterday will open a new 70 million RMB plant in Ningbo

Comment MCC: While industrial gas companies will probably have to face a smaller-than-expected market for oil-to-chemicals, the push of China´s chemical industry into a limited number of chemical parks should support their growth.

---

Mar 31, 2016: Insurance payouts from the Tianjin explosions last year could be up to US$3.5 billion (Swiss Re/ Reuters)

Comment MCC: Another source, an insurance broker, comes to a similar estimate of US$3.3 billion for the explosions which killed about 170 people and destroyed thousands of vehicles and containers.

---

Mar 30, 2016: Sinopec aims to double its 2015 output of natural gas by 2020, to 40 billion cubic meters

Comment MCC: This will include only a limited amount of coal gas methane (0.5 billion cubic meters), but shale gas will already make a substantial contribution of 25% (10 billion cubic meters), showing the rise of shale in China.

---

Mar 30, 2016: Chemical marketplace Molbase (Shanghai) claims to have 25,000 chemical suppliers, with 8.8 million chemicals offered and more than 1 billion RMB monthly sales

Comment MCC: The marketplace just finished another funding round, so there seems to be some optimism about its prospects even though annual sales in China are still only in the range of a single mid-size chemical company.

---

Mar 30, 2016: The last ten years have seen significant developments in the legal framework related to intellectual property in China (EU Chamber of Commerce in China)

Comment MCC: Indeed there have been substantial improvements, and it becomes increasingly unconvincing to use the IP situation as a rationale for not doing chemical R&D in China.

---

Mar 30, 2016: In 2015, Sinopec's chemicals segment had an operating profit of 20 billion RMB compared to a loss of 2 billion in 2014. Sales decreased by 24%

Comment MCC: This is mainly the result of lower raw materials prices, which are not immediately passed on to the chemicals customers. Of course, as Sinopec also produces the raw materials, it has limited effect on the overall profitability of the company.

---

Mar 30, 2016: Kingfa started plastics compounding at its newest production base in Wuhan, China, adding the location to its existing 7 locations (Plastics News China)

Comment MCC: Wuhan was indeed a gap in Kingfa´s site portfolio (as Wuhan is an important location for automotive production) which is now being closed.

---

Mar 28, 2016: Sinochem International and Halcyon Agri (Singapore) will combine their natural rubber assets, which have total revenues of $2.3 billion.

Comment MCC: Though the combined businesses will be named Halcyon Agri, they will in fact be controlled by Sinochem International, thus expanding the company´s engagement in natural rubber which they have already pursued over the last few years.

---

Mar 24, 2016: Top US senators asked for a national security assessment of ChemChina´s planned takeover of Syngenta. They quote the rising risk when "an acquired US agricultural asset becomes in some part governed by a foreign government with clear strategic interests" (Bangkok Post)

Comment MCC: It is hard to deny a strategic interest of the Chinese government of acquiring Syngenta and getting access to the company´s technology. The question will be whether this justifies a US veto regarding the takeover.

---

Mar 24, 2016: Sabic´s chairman emphasized the importance of China as its fastest growing market despite the slowdown, and announced future investments, particularly in R&D.

Comment MCC: Although growth in China is slower now than before, it is also from a much higher base. As a result, in absolute terms China is still by far the most important growth driver for chemicals, even if countries like India may achieve higher relative growth.

---

Mar 23, 2016: The chemicals business of PetroChina made a small operating profit of 193 mio RMB compared to an operative loss of about 16,000 mio RMB in 2014.

Comment MCC: While the company attributes the better results to an optimization of the product structure and better cost control, it is most likely the effect of lower oil prices which are not immediately passed on to the chemicals produced from crude.

---

Mar 23, 2016: Lanxess sales in China decreased by 4.2% in 2015 compared to 2014, mainly due to lower selling prices for Lanxess´ performance polymers

Comment MCC: While decreasing China sales sound like a disaster after the continuous past growth, Lanxess´ sales development was actually very much In line with that of the average foreign-owned company in China, which had a sales decline of about 6%.

---

Mar 22, 2016: Sabic, the Dalian Institute of Chemical Physics, and Petrochina reached an understanding to jointly research catalysts and process development in conversion of methane into olefins, aromatics and hydrogen

Comment MCC: Such "South-South" cooperation - if successful - may eventually lead to research-intensive parts of the chemical industry completely bypassing Western chemical companies.

---

Mar 22, 2016: CNOOC and Shell have made a final decision to expand their 50-50 petrochemical JV at Huizhou, China. Plans include an ethylene cracker and ethylene derivatives units.

Comment MCC: Good to see this one move forward - likely the right decision by Shell as there is still a lot of room for long-term growth in petrochemicals in China, particularly at the current oil price level.

---

Mar 22, 2016: The profit margins of Chinese chemical companies declined from 7.7% in 2010 to 5.3% in 2015, and an article in the Financial Times predicts that industry profit margins will remain under pressure.

Comment MCC: Fortunately chemicals is a broad area, so there are still bright spots. But those segments driven by construction, and those with a heavy presence of SOEs are clearly not very profitable.

---

Mar 21, 2016: Dow launched a store on Alibaba, starting with making the products of Dow Industrial Solutions available online. Orders will be performed by selected distributors (CCR)

Comment MCC: After BASF, now Dow is following with its Alibaba store. It will be interesting to see how successful these sites are in increasing overall market penetration.

---

Mar 21, 2016: Dow will build a new advanced materials manufacturing plant near Chengdu, Sichuan, focusing on architectural, industrial and paper coatings (CCR)

Comment MCC: China is now Dow´s second biggest market, and it makes sense to expand production from the current sites in Shanghai and Guangdong.

---

Mar 17, 2016: China's largest lead-acid battery maker Tianneng plans to start production in Southeast Asia as a reaction to rising production costs in China and increasing demand in Southeast Asia (China Daily)

Comment MCC: In the longer term, the move of production out of China into cheaper locations will surely affect the chemical companies supplying the raw materials, be it for batteries, textiles or other products.

---

Mar 16, 2016: The Chinese crop protection market is valued at $5.2 bn at provincial distributor level, with local products taking 65% market share versus 35% of imported products (Research&Markets). In general, the sales force of the local players is much larger than that of the MNCs.

Comment MCC: It will be interesting to see if and how Syngenta adopts its approach in China if the acquisition by ChemChina goes through. Will they become more like a local company?

---

Mar 16, 2016: China's electricity consumption rose 4% year on year in February. Power consumption for the first two months was up 2% from one year earlier (China Daily)

Comment MCC: Makes me wonder whether the longer February (29 days) was taken into account. It alone should increase February power consumption by 3.6%, or 1.7% for the first two months.

---

Mar 16, 2016: According to Xiao Yaqing, head of SASAC,SOE reform will mainly be pushed forward through M&A, not bankruptcies (China Daily)

Comment MCC: While understandable from the perspective of social stability, it seems unlikely that the big issue of overcapacity - including in the chemical segment - can be solved by mergers alone, without bankruptcies and without workers losing their jobs. So my reading is there will not be much of a meaningful SOE reform.

---

Mar 15, 2016: China XD, a provider of polymer composites primarily for automotive applications, saw revenue decline by 10% in 2015 compared to 2014.

Comment MCC: This is the first ever annual sales decline for the company, indicating perhaps the "New normal". The decline is despite vehicle sales in China still increasing by 4.7% in the comparable period, and is partly due to lower prices achieved.

---

Mar 11, 2016: Wanhua has started up a new isophorone di-isocyanate (IPDI) plant at their chemical park in Yantai.

Comment MCC: This is an indicator of Yantai - exemplary for some other leading Chinese chemical companies - moving into the lower-volume, higher-value segments of areas such as isocyanates. IPDI is an aliphatic isocyanate produced in relatively low volumes, but with properties superior to MDI and TDI in applications such as non-yellowing high performance coatings.

---

Mar 10, 2016: Sales of DSM in China grew by 12% in 2015, to 937 million Euro (China Daily)

Comment MCC: This growth rate is quite a bit higher than for most foreign chemical companies in China, showing that a focus on consumer-driven markets such as nutrition and health care may pay off.

---

Mar 09, 2016: China´s February exports fell by 25% compared to the previous year, the worst decline in more than 5 years. Imports declined by 14% (The Guardian / CER)

Comment MCC: Most exports from China will have required some chemical input, so these figures strongly suggest that chemical companies need to focus on domestic consumption and demand rather than on demand ultimately derived from exports.

---

Mar 06, 2016: China´s chemical sector increased its revenue by 1.9% in 2015 while profits rose by 6.3% and investment rose by 1.1%. Exports decreased by 6.2% (CCR/CPCIF)

Comment MCC: These 1.9% growth are certainly a more realistic benchmark for industry players than the general GDP growth.

---

Mar 06, 2016: Average Chinese pesticide prices declined by 17.5% in 2015 (CCR/CCPIA).

Comment MCC: The drivers are the same as in other chemical segments - overcapacity, lower raw materials prices and weak demand.

---

Mar 06, 2016: According to Sinopec expert Liu Xue, domestic polyolefin capacity will grow by 14.3% in 2016 while apparent consumption will grow by only 7.8%

Comment MCC: This will put further pressure on global markets as China´s capacity to absorb imports will decline further.

---

Mar 02, 2016: Dalian HuiYu Xin Technology, a Chinese specialty chemicals company, will buy the US-based Clearon business of water treatment chemicals for pools from Israel Chemicals.

Comment MCC: Interesting to see the emergence of a strategic Chinese buyer - probably a clever move in order to shift the water treatment business towards formulations/services rather than mere chemicals. Though the business was operating at a loss, it was expected to sell for up to 40 million USD, with PE firms among the potential buyers.

---

Mar 02, 2016: DSM will extend its offerings for the solar photovoltaic market by marketing the portfolio of PV backsheet products of Suzhou Sunshine New Materials

Comment MCC: This shows that in the PV sector, the Chinese industry has indeed come a long way, now offering the technology for Western companies to distribute globally.

---

Feb 27, 2016: Air Liquide opened its fifth global R&D center in Shanghai, following one in the US, one in Japan and two in Europe.

Comment MCC: A logical step taken by the company as China is now their fifth-biggest market, and they expect the Chinese market for industrial gases to grow by a further annual 6-8%.

---

Feb 26, 2016: BASF is reassessing its methanol-to-propylene (MTP) investment in Texas due to the current low oil prices. According to the chairman, oil at $40/bbl makes the project unattractive.

Comment MCC: Assuming that Chinese MTP plants have similar technology and economics, this should mean that at the current oil prices many of the projects are not economically favorable.

---

Feb 25, 2016: „Though having witnessing oversupply for many years, the national capacity of glycine in China will keep increasing in the coming five years" (CCM market study announcement)

Comment MCC: It is characteristic for the current status of the chemical industry in China that in the sentence above, one could easily replace "glycine" with a large number of other chemicals, indicating the severity of China´s overcapacity issues.

---

Feb 24, 2016: SP Olefins, the Chinese subsidiary of Singaporean SP Chemicals, will build a 650 kt ethylene gas cracker in Taixing, using ethylene and propane imported from the US as raw material.

Comment MCC: This is the first ethylene gas cracker in China - this could be a more generally used alternative for wholly foreign-owned companies to integrate their local value creation upstream without the need for a local JV partner.

---

Feb 22, 2016: PetroChina stated that technological innovation has supported its development in the past five years. The company "will continue to invest in research and technological expertise" (China Daily)

Comment MCC: After Xi Jinping has recently strongly emphasized the importance of innovation, unsurprisingly now the SOEs echo him.

---

Feb 22, 2016: Chinese-owned Northwest Innovation Works is stopping work on its Tacoma methanol complex in the US. The project is the largest of three planned plants.

Comment MCC: The official rationale is public concerns, as stated in a press release: "We have been surprised by the tone and substance of the vocal opposition that has emerged in Tacoma. To force a facility on a community that does not welcome it would not be consistent with our goals. Therefore, we have decided to pause the [...] environmental review process in Tacoma. ... We remain committed to Tacoma, and will restart the process after assessing the results of our engagement with the community. " Still, the cynic in me wonders whether the company would have the same concern for public opinion if the oil price was higher, and the project thus economically much more feasible.

---

Feb 20, 2016: Sinopec has broken ground on an R&D center in Saudi Arabia, with a future focus on application technology research and training (CW)

Comment MCC: Internationalizing R&D is an important step in becoming a global player. And the fact that this center is built in the Middle East shows the growing importance of this region for leading Chinese petrochemicals and indicates that Sinopec intends to not only import from the region but also produce there.

---

Feb 20, 2016: Sinopec ethylene production increased by 3.9% in 2015 while plastics production increased by 2.9% to 15.1 million tons(CW).

Comment MCC: The plastics production growth is likely to be below the plastics market growth in China over the same period, and it is below the increase in ethylene production. This seems to indicate that Sinopec is not particularly successful in shifting its business downstream.

---

Feb 20, 2016: A forum of respected Chinese economists asked the government to more quickly cut excessive capacity. They remarked that that officially arranged mergers of SOEs cannot solve problems such as low efficiency and excessive capacity. They also state that "Some local governments report that they are closing down unprofitable businesses, which areknown as zombie companies. But in fact they have just revoked some production licensesthat they had not used for a long time, so they are not really helping these enterprises go through the liquidation process".

Comment MCC: This is obviously relevant for chemicals as petrochemicals is one of the industries for which overcapacities are stated to exist, along with steel, coal, aluminium and shipbuilding.

---

Feb 18, 2016: China is likely to account for 25% of global energy consumption in 2035. The share of natural gas - particularly from shale - is forecast to rise at the expense of coal (BP, ICIS). BP expects shale gas production in China to reach 13 bcf/d by 2035.

Comment MCC: An increase in shale gas production could mean a shift away from the current trend towards production of chemicals from coal, driven both by economics and by environmental aspects.

---

Feb 18, 2016: China encourages the country's scientists to turn their research into commercial products (China Daily). Among the policies to be established are greater autonomy to turn academic research into commercial products without filing of applications, greater rewards for commercially used research results and more freedom for publicly employed scientists to take part time or temporary jobs in the private sector.

Comment MCC: This is definitely a step in the right direction and a more specific action than just a permanent emphasis on the importance of innovation for China.

---

Feb 17, 2016: Sinopec will respond to the Doha announcement of freezing oil production at January levels by temporarily closure of four old domestic oil fields.

Comment MCC: Average oil production costs in China are $40-$60 per barrel, leading to losses of the petrochemical SOEs at current price levels. Accordingly, Sinopec states on the company website „At current oil prices, the shutdown could save 130 million yuan of costs and reduce losses by 200 million yuan"

---

Feb 15, 2016: The US subsidiary of Chinese agrochemicals producer Rotam and US firm SipcamAdvan will form a US JV (AgroNews)

Comment MCC: The JV combines the sales forces of both companies (while both companies maintain their identity and assets), allowing to sell products of both companies to the same customer group. Of course, this is not without risks, but sounds like a clever model to increase the customer reach of both companies.

---

Feb 14, 2016: A compilation of remarks by Xi Jinping on scientific and technological innovation has been published by the Central Party Literature Press (Xinhua).
According to the publishing house, "The remarks could help officials and Party members to better understand the significance of innovation in adapting to a development mode led and supported by sci-tech innovation."

Comment MCC: This is in line with the strong emphasis on innovation in the 13th Five-Year Plan. The interesting thing to see now is how successful the promotion of innovation will turn out to be.

---

Feb 11, 2016: Chinese PU coated fabric producer Kunshan Xiefu will collaborate with Covestro to promote sustainable PU fabrics. This is part of Covestro´s Insqin Partner Manufacturer program, which connects manufacturers and brand owners across the PU-coated fabric supply chain, committing them to use Covestro's waterborne PU coating technology to meet the emerging sustainability needs of brand owners. (International Fiber Journal)

Comment MCC: Sounds like a clever initiative to forge a close customer relationship, though I am surprised that sustainability is already an important issue for a Chinese manufacturer - possibly due to pressure from its end customers.

---

Feb 10, 2016: Sunshine Kaidi New Energy Group (Wuhan) may construct a biodiesel Plant in northern Finland, an investment of about €1 billion, a capacity of 200 kt/yr, and a scheduled startup date in 2019/2020 (CW)

Comment MCC: While it is hard to judge the economics of this project without detailed information, it certainly fits in with China´s 13th Five-Year-Plan for the chemical segment, which lists energy from biomass as one of the target areas.

---

Feb 05, 2016: An investigative team by the State Council said flames spreading among stocks of nitrocellulose, later spreading to ammonium nitrate caused the Tianjin explosions (NYT)

Comment MCC: Overall, the investigation pointed out to numerous failures of implementing existing safety regulation - not really news but important to keep in mind when considering harsher regulation as a solution to existing problems.

---

Feb 05, 2016: China's 2014 R&D spending reached 102% of the EU total and 80% of the 2013 US level, according to OECD statistics.

Comment MCC: In relative terms, China´s spending is also higher now at 2.05% of GDP compared to the EU´s 1.94%. The EU already has a 2020 goal of 3.0% and is well advised to put more efforts into reaching this goal.

---

Feb 05, 2016: ChemChina will buy Syngenta for $43 billion.

Comment MCC: It seems Syngenta management sees a better chance of keeping its current status by having a Chinese owner, rather than by being acquired by a more direct competitor. It will be interesting to see whether this assumption is correct.

---

Feb 03, 2016: According to the Financial Times, ChemChina is expected to announce a $43bn deal today to buy Swiss agribusiness company Syngenta.

Comment MCC: While such a deal is less likely to be blocked by competition regulators than the merger of Syngenta and Monsanto envisioned earlier, it may still face obstacles from other sides, such as the Committee on Foreign Investment in the US. This US government committee can block transaction that are deemed dangerous to national security, and has done so, most recently with the sale of Philips' Lumileds business to a Chinese PE firm.

---

Feb 02, 2016: ChemChina´s Bluestar will sell 50% in two loss-making units by listing them, isocyanate producer Bluestar (Tianjin) chemical and Fuzhou Bluestar chemic (Plastics News China)

Comment MCC: This may well be another case of ChemChina showing activism rather than solving business issues - unless the proceeds are really used to improve the situation at the newly listed businesses.

---

Jan 29, 2016: Arkema will not exercise its option to increase its stake in Taixing Sunke, a JV with acrylic acid and butyl acrylate production in China

Comment MCC: This was to be expected as the option had already been extended once in 2015. Acrylic acid is no longer a particularly attractive market due to lower expected growth and sufficient domestic capacities.

---

Jan 29, 2016: LG Chem cancelled plans to build a polysilicon plant in South Korea

Comment MCC: Not surprising - a sensible decision based on market conditions and existing antidumping regulation for polysilicon imports to China.

---

Jan 29, 2016: BASF and Markor started a 100 kt BDO plant in Xinjiang, operated by a 49% - 51% JV between BASF and Markor.

Comment MCC: BDO is another market with surplus capacity, though Markor may benefit from a good cost position and the on-site use of BDO for production of THF and GBL.

---

Jan 28, 2016: While overall Chinese industrial profits fell by 2.3% in 2015, those of the segment "Manufacture of Chemical Raw Material and Chemical Products" grew by 7.7% (NBSC)

Comment MCC: Even though profits from principal activities grew by only 2.3%, this is still better than the result of most chemical MNCs in China, showing that MNCs lose ground to private companies.

---

Jan 27, 2016: China is the world's biggest electric car market with about 330,000 vehicles sold in 2015, driven by about 30 billion yuan of government subsidies (Shanghai Daily).

Comment MCC: On the one hand, this is still way below the government target of having 5 million electric cars in 2020. On the other hand, government subsidies are now reduced, with plans for further reduction, as at least some of the past subsidies led to large-scale fraud. Chemical companies supplying to this market are well advised to follow the further developments closely.

---

Jan 26, 2016: Pret, a major plastics compounder focusing on automotive applications, will almost double its domestic capacity from 180 kt now to 330 kt in 2021 (Plastics News China).

Comment MCC: Despite the slowdown in China´s automotive market, companies still see big prospects for growth of plastics - partly not driven so much via increased car volume but by higher quality and energy standards of the cars produced.

---

Jan 22, 2016: China´s highest court rejected an appeal in an environmental case in which several Taizhou-based chemical companies had been fined 26 mio USD for discharging waste acid (China Daily)

Comment MCC: Apart from this confirming a general trend towards stricter environmental regulation and implementation, there is another interesting aspect to this case. The appealing company Jinhui argued that they did not discharge the acid themselves but rather sold the acid to a third party which then discharged it. However, the court still held Jinhui responsible as the third party did not have the authority to discharge the acid into the river. Along this line of argument, chemical companies could also later held responsible for the actions of other business partners (e.g., distributors, logistics providers, recyclers) if these business partners do not have the qualifications to take over the given tasks.

---

Jan 21, 2016: China added 15 gigawatts of photovoltaic power capacity in 2015 (+40%) and with total capacity of 43 Gw is the country with the biggest global capacity (CPIA, Chinadaily)

Comment MCC: For more and more segments such as this one, global chemical suppliers have to focus on China - whether GDP grows at 7% or not at all.

---

Jan 21, 2016: Xi Jinping and Saudi King Salman opened a refinery in Riyadh on Jan 20 - a JV between Saudi Aramco and Sinopec (Channel News Asia)

Comment MCC: A logical combination for both parties as China seeks to secure long-term access to crude and Saudi Arabia aims to diversify its economy by moving downstream into refining and chemicals.

---

Jan 21, 2016: CNOOC, China's largest offshore oil producer, has reduced its targeted 2016 production to 470-485 million barrels of oil equivalent, down from 495 million barrels in 2015 (Shanghai Daily)

Comment MCC: This is the first production drop for CNOOC since 1999, and it highlights the difficult position of oil companies in the current low-price environment.

---

Jan 21, 2016: While 2013 R&D spending of China was similar to the EU and below the US, the growth rate is much higher , with 19.5% annual growth in the past decade compared to 4.5% in the US (C&EN)

Comment MCC: In addition, China has a larger share of students taking up science and engineering. As chemical MNCs get most of their competitive advantage from superior products, this should be a serious concern for them.

---

Jan 21, 2016: The MIIT has set up a dedicated government fund for relocation of hazardous chemical companies, and has allocated a budget of 275 billion RMB for 238 selected projects (CCR).

Comment MCC: Given the rising awareness of environmental and safety issues in China, the need for relocation of some chemical plants will increase. The fund will support this while helping reduce the job losses from factory closures, therefore allowing local governments to achieve another of their key goals, that of job stability.

---

Jan 21, 2016: The Chinese chemical sector grew by 2.3% in the first 11 months of 2015. By sub segment, coatings grew by 6.2%, pesticides 5.7%, fertilizer 5.2%, specialty chemicals 4.2%, basic chemicals 0.1%, plastics - 1.9% (CPCIF)

Comment MCC: The data shows that only those segments tending towards specialties still show growth - and even this growth is substantially below that of GDP. On a positive note, profitability of the chemicals sector increased by 6.8%, a marked difference from petrochemicals where profitability declined - probably a consequence of lower raw materials prices not immediately being passed on to downstream customers.

---

Jan 21, 2016: In 2014, China had an adipic capacity of 1650 kt while production was 749 kt, a 45% utilization (CCR)

Comment MCC: In typical fashion, Chinese players reacted by adding another 590 kt of capacity in 2015. China has already been a net exporter of adipic acid since 2012. In that year, production was slightly higher than in 2014 (762 kt) but capacity was lower (about 1300 kt), indicating a somewhat healthier utilization rate of slightly below 60%. The combination of stagnant production and rapidly rising capacity does not make for a promising outlook for adipic acid producers.

---

Jan 21, 2016: In 2014, China's methyl methacrylate capacity was 830 kt while output reached 358 kt, indicating a utilization of 43% (CCR).

Comment MCC: In a reaction typical for China´s chemical companies, they reacted by adding another 350 kt capacity in 2015. Probably they thought that MMA presents an opportunity as China has only about 70% self sufficiency - however, imports from countries such as Thailand seem to be more competitive, though they have been restricted by anti dumping measures.

---

Jan 20, 2016: The IMF forecasts China´s GDP to grow by 6.3% in 2016 and 6% in 2017 after growth reached 6.9% in 2015 (WSJ)

Comment MCC: This sounds a bit more reasonable and emphasizes that keeping China´s growth at around 7% - the government objectice - will be quite a hard task. Given that this figure will mostly be driven by services, the growth of the chemical industry will likely still be lower.

---

Jan 20, 2016: China´s economy grew by 6.9% in 2015 according to official figures, though electricity consumption fell by 0.2% (WSJ)

Comment MCC: Taking a cue from Li Keqiang´s statements, it is a bit hard not to see the contradiction between the two figures as a bit too big. Hearsay from Western chemical companies in China also does not indicate that there was much growth in 2015. On the other hand, the shift towards a more service-oriented economy should lead to lower energy consumption growth in the longer run.

---

Jan 19, 2016: The China retail price of gasoline will not be cut in line with crude as long as it trades below 40 USD/barrel (Malaymail online)

Comment MCC: While this obviously means consumers will have to pay more, it may also help to reduce consumption and pollution. It is expected that refiners will not benefit much from the policy as the extra earnings will mostly go to the government, though they may be allowed to keep part of it to upgrade their production facilities.

---

Jan 19, 2016: China became a net fuel exporter for the first time, driven by diesel exports and growing refining of China´s privately owned teapot refineries (Bloomberg)

Comment MCC: This is part of a broader trend of China becoming an exporter for more and more chemicals as local production capacity increases, even though of course a substantial share of the basic raw materials needs to be imported. 
Teapot refiners now have the highest capacity utilization for the last 5 years - around 50%, though of course this is still low. The increases are partly due to the low oil price and the granting of import licenses. As a consequence of this increased competition, Sinopec actually plans to cut its oil-processing target for 2016.

---

Jan 19, 2016: Sinopec has invested C$10 billion in Canada, including a stake in the oil-sands venture Syncrude, and sees its Canadian assets as "core" to its long-term strategy (Bloomberg)

Comment MCC: This fits in with the SOE role of Sinopec as a provider of strategic raw materials to the Chinese economy.

---

Jan 18, 2016: 85 enterprises working with hazardous chemicals in Binhai, Tianjin municipality will be closed or relocated after the completion of safety checks (China Daily)

Comment MCC: This is out of a total of 583 companies checked after the explosions, so for 15% of the companies checked, smaller corrections were not deemed sufficient. This confirms that compliance with existing regulation is still a major issue for chemical companies in China.

---

Jan 16, 2016: Shandong Hengyuan Petrochemical, a private refiner, has got approval from local authorities to acquire the Shell Refining Company (Malaysia) for $130 million (China Daily)

Comment MCC: This will be the first outbound acquisition by one of the so-called teapot refiners in Shandong. It is likely that more private refiners will go overseas once they get crude import licenses from the central government. The Ministry of Commerce gave 32 private companies fuel-oil import licenses in July 2015 followed by another 15 in January 2016. It seems the Ministry aims to break the monopoly of SOEs such as Sinopec to import crude oil.

---

Jan 16, 2016: Haier will buy General Electric's appliances business for $5.4 billion in cash in the country's biggest acquisition of an overseas electronics company (ChinaDaily)

Comment MCC: According to some reports, GE is the fourth biggest injection molder in the US., so if the acquisition leads to a shift in their sourcing, it could well impact the market.

---

Jan 16, 2016: Hengli will build a 300 kt propane and 600 kt isobutene dehydrogenation unit using Catofin technology and Clariant Catofin catalyst (CW)

Comment MCC: Already reported earlier but this time with a new comment ... It is somewhat surprising that all these projects are going ahead despite the low oil price. If more crackers are built as a consequence of permanent low oil prices, the demand for dedicated projects such as the Hengli one will likely decline.

---

Jan 15, 2016: Israel Chemicals has made a 15% investment in Yunnan Yuntianhua, the parent company of ICL's China JV partner, Yunnan Phosphate Chemicals, which is is China's leading phosphate producer (PR Newswire)

Comment MCC: Interesting to see that an Israeli company now is collaborating with a Chinese one in a way similar to the cooperation between Chinese and Russian/Central Asian companies - as a way to secure access to raw materials.

---

Jan 14, 2016: Sinochem is in talks to buy Halcyon Agri, a Singapore-listed global rubber trader (WSJ), for about 300 million USD

Comment MCC: This follows the acquisition of Singapore-based natural rubber producer GMG in 2008 and seems to indicate that Sinochem´s future role among the different Chinese SOEs is in the area of natural resources and agrochemicals - which makes sense given that Sinochem is among the weaker and smaller petrochemical SOEs.

---

Jan 14, 2016: The government will widen support for small and medium-sized high-tech enterprises to encourage startups and innovation via a number of measures (China Daily)

Comment MCC: China indeed still has an innovation gap - the question is whether this can be solved by support for companies alone, or whether this would require wider changes in the education system.

---

Jan 12, 2016: According to Nikkei Asian Review, Beijing is considering mergers among its state-owned chemical companies. Apparently, Sinochem Group is in merger talks with CNOOC, while Sinopec is considering combining with Petrochina.

Comment MCC: While one can doubt the wisdom of making these big and unwieldy companies even bigger, it would indeed be in line with stated government intentions to merge some of them. The current proposal for the chemical industry part for the 13th Five-Year Plan specifically promotes creation of " a series of [chemical] enterprises and enterprise groups in possession of international competitive advantages".

---

Jan 11, 2016: Hyosung will build a US$170 million nitrogen trifluoride production plant in Quzhou, China, with a scheduled production start in the second half of 2017 (CW).

Comment MCC: Nitrogen trifluoride is primarily used as an etchant in microelectronics. The investment thus shows both the continued growth in electronic chemicals and the continued importance of foreign companies in this segment.

---

Jan 11, 2016: ChemChina will buy German plastics and rubber processing machinery maker KraussMaffei from a PE firm for about $1 billion

Comment MCC: With ChemChina, it always seems to be the same story - another acquisition is preferred to bringing the house in order. And while the bid for Syngenta at least had the prospect of some synergies with existing ChemChina business, this does not seem to be the case here. Probably it is best to think of ChemChina not as a chemical company but rather as a vehicle of the Chinese government to invest money abroad.

---

Jan 08, 2016: Solvay plans to sell its Nylon business, which generated sales of €1.1 bn in the first nine months of 2015 (-4.6% yoy) and includes intermediates such as adipic acid and polymers such as nylon-6,6.

Comment MCC: This looks like another example of a chemical market getting unattractive for multinationals once a sufficient number of Chinese players moves in, creating overcapacity and lowering margins.

---

Jan 07, 2016: China spot prices of acetone are at the lowest level of the last 14 years at about 390 USD per ton CFR (ICIS)

Comment MCC: What they like to call a perfect storm - a combination of low yuan, low oil prices, low demand and not-too-promising outlook.

---

Jan 06, 2016: Ning Gaoning, the former head of China's food processor and grain trader COFCO, will be the new chairman of Sinochem

Comment MCC: According to local analysts, this is an indication that Sinochem will pursue more acquisitions in the seed and fertilizer area in the future, as Ning Gaoning has experience in these areas.

---

Jan 05, 2016: The China Dyeing and Printing Association reports a 2.5% decline in output of the domestic (fabric and cloth) dyeing and printing industry (CCR).

Comment MCC: Surprisingly, exports still increased by 8% year on year. However, the overall decline in output has obvious consequences for the chemical companies supplying materials for printing and dyeing.

---

Jan 04, 2016: 4 new elements (113, 115, 117, 118) will be added to the periodic table based on sufficient evidence. Of these, 113 was discovered by a Japanese team.

Comment MCC: Element 113 will therefore be the first element to be named in Asia as the discovering team gets to name the new element - a reminder that so far the history of chemical research is still mostly a Western one.