“The integration of the two aspects reshapes the structure of the chemical industry

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Source: Economic Daily. Reporters: Zhou Lei, Huang Xin. A Chinese chemical giant with assets exceeding one trillion yuan and over 220,000 employees – part of both the Fortune Global 500 and another list of top companies – has emerged, and this will have a direct impact on China’s chemical industry as well as on the global chemical industry landscape. The State-owned Assets Supervision and Administration Commission announced recently that Sinochem Group Co., Ltd. (hereinafter referred to as “Sinochem”) and China National Chemical Corporation (hereinafter referred to as “China National Chemical”) are undergoing a joint restructuring. Sinochem Group and China National Chemical Corporation both stated that they will, in compliance with relevant laws, regulations, and the requirements of regulatory authorities, advance this joint restructuring in a proactive and steady manner. The industry generally believes that through this joint restructuring, resources will be better integrated and synergies will be leveraged to create a world-class integrated chemical enterprise, thereby promoting the high-quality development of China’s chemical industry. The chemical industry is a fundamental and pillar industry of the national economy, and an important sector of the modern economic system. The global chemical industry is characterized by high industrial concentration, significant scale effects, and dominance by large enterprises. In recent years, a trend toward higher-end development in the chemical industry has become increasingly evident. To enhance their overall competitiveness, international chemical giants have been pursuing mergers and reorganizations. In 2017, the American coatings giant Axiall completed the acquisition of Westcoast Paints. In 2018, Bayer completed the acquisition of Mendoxa ； Linde and Praxair complete merger ； Mitsui Chemicals and Thailand’s **Petroleum Company jointly manage the global PET and PTA businesses. Currently, all developed economies in the world have large, comprehensive chemical companies that play a key leading role in areas such as basic chemical research and development, the creation of new products, and the generation of value along the industrial chain. As a major chemical country, our country has relatively dispersed market entities, with a weak industry clustering effect. Li Shousheng, president of the China Petroleum and Chemical Industry Federation, pointed out that at present, China’s lack of large-scale enterprises with international competitive advantages is a weakness in its transition from a major petrochemical country to a strong one. The restructuring of Sinochem Group and China National Chemical Corporation to form a new group represents a significant milestone in the strategic reorganization of China’s petroleum and chemical industry. Sinochem Group was formerly known as China National Chemical Import and Export Corporation; it boasts significant trading advantages. As a state-owned enterprise established on the basis of enterprises under the former Ministry of Chemical Industry, it engages in frequent overseas business acquisitions and possesses technical advantages. “The merger of Sinochem Group and China National Chemical Corporation will facilitate complementary strengths and accelerate industrial structure adjustment, thereby creating a chemical industry giant with a wide range of operations, coverage across the upstream and downstream sectors of the industry, and a more complete industrial chain, in order to compete with other giants in this field. ”Dr. Xing Jun from Sinopec Group Research Institute of Economics and Technology said. It is understood that China is the world’s largest producer and consumer of chemicals, as well as a major importer of chemical products. China’s rapid growth in demand for high-end chemicals, especially in the field of new materials, far outpaces the increase in supply. As China becomes more open, international chemical giants are increasing their investments there. In April 2020, the ExxonMobil Huizhou ethylene project in Guangdong, with a total investment of around $10 billion, began construction. On May 30, 2020, the construction of the first units of BASF’s new integrated facility in Guangdong began in Zhanjiang; the total investment in this project is 10 billion dollars. With increasing competition in the chemical industry, the integration of the two sectors is timely. After the restructuring, the new company will adhere to a global and market-oriented business model, striving to become a world-class integrated chemical enterprise that is driven by science and technology for sustainable development, with life sciences and materials science as its core areas, basic chemicals as its support, and environmental science as its safeguard. Ning Gaoning, chairman of Sinochem Group and also chairman of China National Chemical Corporation, publicly stated last year that in the chemical industry, there are around 100,000 products in the field of fine chemicals, and less than half of them are actually produced by Chinese companies on their own. “At present, for Sinochem and Sinochem Chemical combined, sales from original and high-tech products account for less than 30%, and this proportion needs to be increased gradually. ” Wang Xiaoming, deputy director of the Institute of Science and Technology Development Strategy at the Chinese Academy of Sciences, believes that Sinochem Group has adopted the principle of \"science first\" in recent years and is shifting toward an innovation-driven model; in 2018, Sinochem Group and the Chinese Academy of Sciences signed a comprehensive strategic cooperation agreement. Sinochem has inherited the research institute system of the former chemical industry, and its overseas acquisitions in recent years have enabled it to acquire world-class R&D-oriented companies such as Syngenta. “The integration of the two sectors facilitates enterprises to increase their investment in research and development, optimize their innovation systems, consolidate the innovation resources of their affiliated research institutions, and thus play a better role in technological innovation and industry leadership. The industry has also noted that the integration of the two sectors will generate significant synergies in areas such as agrochemicals and rubber. In 2020, Sinochem Group and China National Chemical Corporation merged their agrochemical businesses to form Syngenta Group. The group is a new-type agrochemical giant that operates in four major fields: fertilizers, pesticides, seeds, and digital agriculture. In the first half of 2020, all business units of Syngenta Group achieved growth in sales for their core businesses. Based on the current situation, Syngenta Group has made positive progress in its relevant efforts: it has strengthened the high-quality development of its agrochemical business through restructuring and integration, achieved an international presence via capital operations, established a modern agricultural service platform through the MAP strategy, and advanced its digital transformation by acquiring technology companies. “‘The integration of the two aspects in the field of agrochemicals is merely the beginning of the consolidation within the chemical industry; it is believed that future integrations will help this industry move forward toward higher levels of quality development. ”Xing Jun analyzed. Source: Huanqiu Net