China's chemical industry surpassed the United States to become the first in the world. When did this happen? year 2010!
The Chinese market is undoubtedly fatally attractive. For global chemical giants such as BASF, Bayer, INVISTA, LANXESS, and Praxair, this market always seems to have boundless imagination.
Accompanied by the high growth of China's petroleum and chemical industry for more than 30 years, multinational chemical companies have developed from simply exporting products, to establishing offices, to building factories, to establishing sole proprietorships and joint ventures, and to systematic localization. Process - Together with many partners in China, they have promoted the sustainable development and prosperity of the entire chemical industry.
However, in 10, 20, or even 30 years, have multinational chemical companies really "understood" China? The realistic answer is clearly between yes and no. The only certainty is always "change". Gone are the days of welcoming chemical giants with flowers, champagne, red carpets.
There is no more accurate description of the mentality of multinational chemical companies in China than "crossing the river by feeling the stones". However, Chinese companies have to cross the river by feeling the stones themselves, and it is difficult for foreign companies to surpass this stage. And - for more than 30 years, many companies have rolled into the river without touching the stone.
The industrial process here may be a thousand miles away, and the changes in policies, partners, competitors, and technology levels here may also be dazzling; the Chinese market is sometimes still confusing for multinational chemical companies. Standard Porter's Five Forces Analysis and Boston's Five Forces Analysis The Matrix is no match for Sun Tzu's Art of War and conventional wisdom. Even if they are proficient in studying the speeches of Chinese state leaders, even if they are familiar with "Chinese characteristics", the pressure and risks faced by some chemical giants are obviously no less than the expectations brought by opportunities.
Management professor Juan Antonio Fernandez has long studied the Chinese business environment. In his book "Relationship", he likened that there is often a certain degree of disconnection between multinational companies and Chinese partners (officials, clients, buyers), just like a pair of dance partners, the male dance partner always wants to dance too fast, while the female dance partner always wants to dance too fast. On the other hand, being careful, how to keep pace with China's business environment is a difficult lesson for multinational companies - and some multinational chemical companies are no exception.
Then, for the chemical giants who have deeply cultivated the domestic market in China and gained a competitive position here, what are the opportunities and risks they see in the face of the new normal, new policies, new environment and new opponents? In this regard, the China Petroleum and Chemical Industry Federation conducted a survey, and they fully communicated with the executives of more than ten multinational companies such as BASF, Dow, and Bayer, and obtained valuable first-hand information.
Although the strategies, markets and investment strategies of different companies are very different, their opinions and judgments also have obvious similarities. Overall, it can be summed up as follows: the importance of the Chinese market is unquestionable, and the investment in the most Chinese market will basically remain at a considerable level in the future. However, concerns about overcapacity in the industry continue unabated; energy demand, water resources, urbanization, demographic changes, and motorization may bring about profound changes in the industry; more focus on cost control, profitability, value growth, and R&D markets Orientation; full of expectations for the market-oriented reform in the chemical industry, and full of desire for a fairer and freer market environment.
Qian Mingcheng, President of LANXESS Greater China:
Generally speaking, innovation that does not adapt to the market has no future, and the two must be closely related. Historical experience has proved that even if a good product is developed, it will be eliminated without the support of market demand.
Based on the core business of LANXESS itself, we believe that the future global development will face four major trends: green motorization, urbanization, clean water demand and sustainable development of agriculture. LANXESS is particularly optimistic about motorization and urbanization.
In the last 30 years of reform and opening up, the industry must be transformed and upgraded in order to adapt to future challenges. Transformation is a painful process. During the process of transformation, the requirements for safety, environmental protection and health are constantly increasing. This is a process of big waves. The transformation and upgrading of the industry requires the cooperation of relevant stakeholders such as the government, industry, and associations, and at the same time, important aspects such as social stability must be considered.
LANXESS suggested that to achieve long-term development, it is crucial to create a long-term stable and clear policy environment. For example, the current trend of China's environmental protection policy is undoubtedly correct, but it is not stable enough. The policies of different provinces and cities are not clear, and different projects may face different treatment methods. In addition, there is a problem of insufficient policy coherence due to the replacement of local governing leaders. We believe these will improve further as reforms deepen.
For chemical companies, there is currently a lot of pressure from raw materials. To some extent, raw materials and markets determine investment. For China, raw material supply is a shortcoming, and market demand is an advantage. In the future, LANXESS will be concerned about the degree of openness of the policy, and mixed ownership will be one of the focuses. It is expected that the supply of raw materials will be more market-oriented in the future than it is now. Looking back, in 2004, when Lanxess's business was spun off from Bayer, Asia Pacific's assets were only 5%, and by 2015 this figure will reach 35%.
Miao Bole, President of Bayer Group Greater China:
It is impossible for Bayer to ignore the existence of various challenges. For example, short-term overcapacity is understandable, and long-term overcapacity will bring bigger problems.
In the Chinese market, in the past 15 years, Bayer has been in the construction period, mainly investing in human, material, financial and R&D. But in 2015 or 2016, it will enter a period of strength, that is to seek higher efficiency and better customer service on the basis of the completion of basic construction, which is in line with China's people-centered urbanization, through environmental protection and pursuit of higher efficiency to achieve a new wave of growth.
In terms of regional strategy, Bayer's overall idea is to maintain close communication with partners and customers. For example, when customers began to shift from coastal areas to central China, Bayer also followed in this area, and began to support the customer base that has shifted to central China by establishing sales offices, system material factories, etc.
Innovation is indispensable, and the most important aspects are efficiency and focus. At Bayer, we strive to achieve the integration of people, planet and profit through self-contained breakthrough production process innovations. Given that Bayer's main product is polymer, the product maturity is relatively high, and there is no need to invest too much resources in the field of basic scientific research. Therefore, at this stage, innovation is mainly focused on customer-oriented product applications.
Developments in the IT, automotive, electrical and electronic, construction and coatings industries will all drive demand for high-performance materials. 50% of the global automobile industry, 60% of the furniture industry, and 80% of the shoe industry are produced in Asia, which means a huge market potential in the future.
Bayer looks at the problem of overcapacity from three perspectives: First, the relevant management departments such as the Ministry of Industry and Information Technology, the National Development and Reform Commission can adjust the production capacity through scientific means, and try to ensure that the production capacity of the industry meets the market demand; second, the overcapacity is investment The embodiment of overheating; Third, the relevant departments still need to continue to strengthen the implementation of policies and regulations.
Philip, Global Vice President, Air Products:
The competition in China's air separation market is very fierce. Full communication with customers and a deep understanding of customers' operation models have become an important source of competitiveness for Air Products.
The scale of China's coal chemical industry ranks first in the world. It is estimated that 70% of the world's air separation units will be sold to China in the future. China's coal chemical industry will become one of the most important air separation markets in the world.
Generally speaking, the competitiveness of coal chemical projects increases with the extension of the industrial chain and the increase in the added value of products; at the same time, the major changes in the international energy market pattern caused by the development of shale gas in North America will significantly affect the competitiveness of coal chemical projects. . As far as coal-to-methanol is concerned, as the price of shale gas in North America is expected to remain low for a long time, companies have announced a total of 14 new natural gas-to-methanol projects in the United States. With a strong cost advantage, the release of production capacity will have a greater impact on the economics of China's methanol market and coal-to-methanol projects.
In this regard, Air Products and other companies are making every effort to adapt to the trend of diversification and lightening of petrochemical raw materials. On the one hand, they are actively seizing the opportunities of coal-to-olefin projects on the basis of moderate investment, and on the other hand, their steam methane reforming to syngas. The technology is at the world's leading level, and it can seize the development opportunities of shale gas chemical industry at any time.
Faced with the challenge of large investment in coal chemical and supporting air separation projects, Air Products tracks the development trends of the industry and customers and its competitiveness in the world and China, scientifically evaluates the sustainability of the project, and implements prudent investment. On the one hand, a large proportion of the average annual investment budget of 2 billion U.S. dollars will be invested in China to maintain active expansion. At the same time, Air Products has continued to reduce the cost of plant construction through equipment localization and other means. In the past three years, Air Products has taken a series of effective measures to reduce the cost of its large-scale air separation plant by 30%.
From the perspective of the macro-industrial environment, the environment, energy and emerging industries are the driving factors for China's economic development, and improving labor productivity is the key to maintaining and enhancing China's international competitiveness. Based on Air Products' industry segment and our understanding of China's chemical industry, we believe that the following four aspects can be optimized and improved to further promote the transformation and development of the chemical industry: 1. Promoting the specialization of chemical park infrastructure services 2. Simplify approval and optimize planning; 3. Improve environmental protection, energy efficiency, carbon emission reduction and other regulations and standards to help promote innovation in the above areas; 4. Improve labor productivity.
Celanese Senior Vice President of Asian Affairs Aubrey:
As a link in the supply chain, Celanese will not be the first batch of companies to go west, but will follow customers such as automobiles and electronics.
The Chinese market is showing three major trends. First of all, with the slowdown of GDP growth rate and the intensification of market competition, it will be more difficult to find opportunities in the Chinese market in the future than before. These opportunities are not universal, but should be found according to business and market.
Secondly, the regional strategy of the Chinese market has shifted. In the past, companies in East China could complete their regional layout by building factories, such as Shanghai and Jiangsu. The strategic model of companies in the southern market is similar. Today, customers show two trends, one is moving to the west, and the other is going out of China. At present, Celanese's western investment is still in the early stage, but in the next 2-3 years, Celanese will definitely determine how to implement the western strategy. Regarding the trend of going out of China, more and more companies are currently implementing the "China + 1" or "China + 2" strategy in the Asia-Pacific region, that is, in addition to the Chinese market, they also go to other Asian countries such as Vietnam, Malaysia, Indonesia, and India.
Finally, the Chinese market has shifted from capital-driven to talent-driven. 5-10 years ago, the Chinese market was driven by capital investment, such as investment in building factories, but now the factors driven by capital have become lower and lower, and it tends to be driven by talent investment, that is, engineers, sales talents, business talents, market talents, etc. The value is higher than the investment in the factory.
For Celanese, at the beginning of entering China, it mainly valued two factors: market space and the supply of raw materials with price advantages. Compared with the United States and the Middle East, the cost advantage of China's raw materials is gradually diminishing. For example, the price of coal is double what it was 8-9 years ago, and the price of natural gas in the United States has dropped by half, but this does not affect Celanese's emphasis on the Chinese market. In terms of investment strategy, Celanese implements different investment strategies for different regions. For example, businesses driven by energy costs choose to invest in the United States, and businesses that need to be close to customers, such as plastics, invest in China, or invest in businesses close to the Chinese market. Invest in other parts of Asia.
Celanese's development in the Asia-Pacific region has three goals: to increase the profitability of the business. Today's environment and challenges require the company's business to increase profitability, and Celanese's current business has not achieved the desired profitability goals; in the Asia-Pacific region, it must be renewed. Layout, especially in business areas that are not currently involved, to achieve profitable growth; establish a more efficient operating organizational structure to achieve profitable growth.
In order to achieve these three goals, Celanese seizes market demand, optimizes internal operating costs, optimizes raw material contracts, maintains cooperation with the government and industry associations, and increases product sequences through acquisitions to expand businesses that are not currently available, but have profit potential in the future and product range, and looking for expansion opportunities in emerging markets such as Vietnam, Indonesia, China and India.
Ke Ruonan, Senior Vice President of INVISTA Global:
We are happy to see market-oriented reforms in the energy industry, including natural gas, coal and other industries, to support the marketization of energy prices and the diversification of producers.
The process of urbanization and the expansion of the consumer class are the main driving forces for China's economic growth, and excess capacity is an important issue for China's economic development. For example: in recent years, China's new caprolactam production capacity has accounted for 20% of the global production capacity.
The main factors that highlight the problem of overcapacity in China include: 1. The lack of an exit mechanism for outdated production capacity; 2. Repeated construction of excess capacity has been repeated. 3. Implementing short-term market protection on the grounds of "technical independence" and "market self-sufficiency", some enterprises are keen to invest in the construction of "first set" devices for products with domestic technology gaps and high import dependence. These first sets of devices often have high cost, low efficiency and insufficient market competitiveness, prompting enterprises to strongly request the government to take anti-dumping measures against relevant imported products and implement short-term market protection. Such anti-dumping measures and market protection will, on the one hand, cause losses to other companies in the industrial chain, and on the other hand, will provide room for more backward production capacity construction in the short term, leading to aggravation of the long-term overcapacity problem.
In this regard, I believe that many multinational counterparts will have similar appeals: First, establish and implement a more free and fair market competition mechanism. Secondly, to formulate a reasonable energy policy is a topic we are very concerned about. Market-oriented mechanisms help drive investment and growth in natural gas, including unconventional natural gas, and other energy sectors. In addition, strengthen intellectual property protection, encourage foreign-funded enterprises to introduce the best technology into China, and at the same time encourage Chinese enterprises to innovate independently, improve the technical level of the industry, and create an innovative and market-driven business environment. Finally, adhere to scientific and reasonable policies for energy conservation, environmental protection and greenhouse gas emission reduction.
Zhu Mingyue, President of Solvay Greater China:
Nowadays, the speed of commercialization and mass production of special products is very fast, the cracking cycle of technical secrets is shortened, and the technical barriers are getting lower and lower. .
Solvay's past development experience shows that a multinational company and even a large industry must adapt to the general trend and adjust its industrial structure in a timely manner. In the process of structural adjustment, transformation and upgrading, scientific research and development is the driving force. Therefore, the impact of firm size and overall strength on the ability to sustain innovation is critical. In the past ten years, companies in the chemical industry of specialty chemicals have basically been acquired, and companies with a volume of 6 billion to 8 billion euros are becoming the general standard size for mergers and acquisitions by large companies. The phenomenon of this new round of consolidation in the chemical industry should be noticed, and Chinese companies can pay attention to the opportunities created by multinational companies in the process of business adjustment.
But for now, China's chemical industry still faces five challenges. First, the combination of excessive industrial dispersion and local protectionism hinders the adjustment of the entire economic structure. Second, the structural overcapacity is still serious, the low-end is heavily duplicated, and the mid-to-high-end gap still needs to rely on imports. Third, the pressure on safety, health and environmental protection is increasing. Fourth, the research and development capacity needs to be improved. For a variety of reasons, some businesses do not have the ability or motivation to invest. Industry innovation cannot rely entirely on corporate consciousness, but also needs to be promoted by government policies. Fifth, the succession of chemical talents is weak.
In the face of various opportunities and challenges in the Chinese market, Solvay will continue to focus on innovation and operational excellence in the future, and is committed to sustainable development. We always pay attention to our six stakeholders, including employees, users, suppliers, communities, the environment and investors, and have formulated relevant commitments to ensure that each stakeholder is fully respected and fully respected in the course of business operations. Assure.
In the future, Solvay will adopt three major growth methods. The first is organic growth, which achieves self-sustaining growth by strengthening internal technological transformation, promoting structural adjustment, and improving cost-effectiveness; the second is external growth, which effectively speeds up the integration process through mergers and acquisitions; and the third is innovative growth. The key is to analyze and locate each business segment, which are the locomotives of growth, which have high resistance to economic cycles and industry cycles, and which need to be adjusted, sold or strengthened.