China chemical industry - Growth

The China chemical industry is maturing and will grow at a much more settled pace than during the  previous boom years. This new but stable GDP growth rate of around 7 % , along with urbanisation, rise in domestic consumption, greater demand for auto and electronic products and ambitious sustainability targets will provide ample growth opportunities. KPMG estimates that this will enable the Chinese chemical industry to grow by between 9 and 11 percent in the period 2013 to 2015.

Despite strong and stable growth in chemical manufacturing, China continues to have a net chemical deficit and is heavily dependent on imported material. This dependency makes the sector vulnerable; it has been affected by price trends in the world market caused by renewed international demand for raw materials, petroleum and other chemical inputs since last year.

Boosting the consumption of natural/shale gas can help China develop its low-carbon economy. For the chemical industry, natural gas could be used to produce synthetic ammonia and methanol, bringing economic benefits 20-30 times higher than those generated by coal and petroleum. China has approximately 26 trillion cubic metres of  recoverable shale gas, close to America’s 28.3 trillion cubic metres.

The US produced 87.8 billion cubic metres of shale gas in 2009, and if China’s output could reach one third of that, its natural gas gap of 30 billion cubic metres could be bridged.32 However, technology is a precondition for success in this sector and China has a long way to go — it needs  to promote shale gas exploration, deepen basic research in geology and improve exploration technologies before it can harness the industry’s full potential.

A trend to watch out for is the way domestic companies deal with specialty sector demand, which has grown in a spectacular manner. In 2012, the gross production value of China’s specialty chemicals exceeded RMB 2 trillion, while total domestic output exceeded 100 million tonnes.

China imported about 10 percent of its specialty chemicals and more than half of its electronic chemicals in 2012, indicating  that there is still a lot of scope for internal growth. The priority of industry managers is now on developing: a) high- performance electronic chemicals and fluoro coatings and b) high-end specialty chemicals, such as safe food additives and feed additives, eco-friendly adhesives, plastics additives and water treatment agents.

Among all specialty chemicals, China is least self sufficient in electronic chemicals, which now represent an RMB 30 billion market that has room for further growth