The differentiation of chemical companies destiny and role
In the past 20 years, state-owned enterprises have been leading the development of China's chemical industry, but it is very important to pay close attention to state-owned enterprises in order to understand the future development trend. The most famous are the central state-owned enterprises, while the state-owned enterprise groups owned by provincial governments are sometimes ignored. In fact, many of the participants in the latter group followed the track of being more energetic and entrepreneurial than the central SOE group.
Wanhua, the MDI producer mentioned earlier, is an example. Shandong province holds a majority stake in the company. Wanhua's path to becoming a leader in MDI began with the production of synthetic leather 40 years ago, and now it has impressive profitability and aggressive expansion plans, including a world-class MDI project on the Gulf coast of Mexico in the United States.
Another company, Shanghai Huayi, went from producing chlor alkali and fine chemicals to producing tires and entering fluorine chemicals manufacturing. The company has a series of projects, including a coal chemical project in Qinzhou, to sustain growth in the medium term. Another successful participant is SDIC Xinjiang Lop Nur potash, which is developing a high-quality, low-cost potash resource in Xinjiang province. This new production will help reduce China's large import of potash fertilizer, indicating that opportunities to meet China's huge chemical market demand are emerging.
At the same time, the major central state-owned enterprises are continuing to fulfill the historical mission entrusted to them by the state to provide a stable supply of basic chemicals. They are participating in the current investment wave of doubling China's ethylene production capacity, and Sinopec's four cracking projects make it the largest investor in the whole. Because of the large scale of the central state-owned enterprises, they also have the ability to complete another task of the government: to maintain stable employment.
However, at the same time, these chemical companies are also facing new challenges. While maintaining the scale of operation, they also need to bear the pressure to begin to eliminate the old production assets with weak competitiveness, so as to improve their profitability. They must meet this challenge while facing increasingly fierce competition from aggressive new entrants in refining and petrochemical businesses.
Some of them also face potential problems with their long-term strategy. Although they have successfully achieved their goal of providing basic chemical supply, this focus may put some of them at a disadvantage in serving the special chemical business needed by China's economic development in the next stage. Unlike basic chemicals, such technologies are often not licensed.
Some state-owned chemical companies may hinder their development of strong professional departments under the perplexity of centralization, silo type organizational structure and bureaucracy. These special businesses usually move fast and rely on cross functional collaboration among R & D, manufacturing and sales departments to succeed. However, if state-owned enterprises can overcome these organizational challenges and develop the necessary excellent functions, their scale will be an available force.
