Catalyst

The Chinese government is pressuring the country’s state-owned chemical sector to consolidate, in a bid to improve competitiveness, speakers told delegates at CW’s 13th annual China Chemical Industry (ChinaChem) conference, currently taking place in Shanghai. “There are too many small and medium-sized chemical enterprises in China,” Fan Xiaosen, v.p. at China National Chemical Industry Corp. (ChemChina; Beijing) says. “We need to build up a group of large chemical corporations.” The average annual sales of China’s top 100 chemical companies is just Rmb27.7 billion ($3.7 billion) compared with Rmb150 billion for the top 100 chemical firms in the rest of the world, Fan says. Scarcity of natural resources in China, tightening environmental legislation, and the need for more efficient spending on R&D will drive consolidation. “We believe the whole industry will become more consolidated,” says Zhang Pei Zhang, chaiman of Shanghai Hua Yi Group (Shanghai). “It’s still fragmented and we think it’s going to get more consolidated, and that’s good for environmental protection.” China’s rapidly expanding, integrated chemical parks will also assist the consolidation process, Zhang says. The number of state-owned chemical enterprises in China is likely to be cut by half. “There are 154 chemical companies under central government control, and it’s expected that this will be consolidated down to about 80,” Fan says. State-owned ChemChina was created in 2004 as a vehicle for consolidating the chemical sector, and accounts for 47% of the 154 companies’ sales, Fan says. Huayi plans to become a “national company” via mergers and acquisitions, Zhang says.