China looks set to remain the fastest-growing major chemical market, but important changes are under way. To succeed in this next stage of development, players will need to embrace a new set of strategies.
China’s fast-growing chemical industry has been the largest in the world by revenue since 2011, and its growth rate continues to outpace by far other major chemical-producing regions. But this colossal size should not be seen as a sign of stability. On the contrary, China’s chemical industry is in the midst of a profound, rapid transition.
China’s growth in chemicals over the past two decades has been characterized by rapid investment and intense competition and fragmentation across large numbers of segments. This has particularly been the case where production technology has been widely available and where access to raw materials and financing has been easy to obtain. This combination has led to rampant overcapacity in many sectors.
But the market and the industry are now moving into a new phase of development. There’s a shift toward specialty-chemical growth, reflecting consumer-demand trends and the rising sophistication of China’s industrial output, while consolidation has started to take a grip in certain sectors. These trends are all helping the value-pool growth prospects for parts of the industry. In the meantime, money for investment is harder to come by, and the government is imposing new, stricter environmental regulations on the industry. To succeed in this next stage of China’s chemical-market development, players will need to embrace a new set of strategies.
China’s new chemical-market dynamics
China’s chemical market has contributed half of the growth of the world chemical market over the past two decades. Increasing economic turbulence since mid-2018, related to China’s economic slowdown and US–China trade relations, adds new uncertainties to the short-term outlook. While the chemical market’s growth rate is expected to slow as the country’s overall economy matures, we expect that, in the medium term, the growth rate will remain significantly positive.
The enormous base that China’s chemical industry now constitutes—around $1.5 trillion of sales in 2017, amounting to nearly 40 percent of global chemical-industry revenue—means that, even at lower overall growth rates, the growth of absolute volume is still very large. To get a sense of that potential, consider that, at 5 percent growth per year, China will be adding the equivalent of the annual sales of Brazil’s or Spain’s chemical industries. Projections suggest that China will provide over half of the global chemical industry’s growth over the coming decade, underlining its importance.
Five trends are spurring the changes in China’s chemical-market dynamics. Three are fueling the industry’s expansion and diversification, and two are imposing new constraints.
> Read the full article on the McKinsey website
By Sheng Hong, Yifan Jie, Xiaosong Li, and Nathan Liu
France has launched an offshore green hydrogen production platform at the country’s Port of Saint-Nazaire this week, along with its first offshore wind farm. The hydrogen plant, which its operators say is the world’s first facility of its type, coincides with the launch of another “first of its kind” facility in Sweden dedicated to storing hydrogen in an underground lined rock cavern (LRC).
The project sets up the Hydrogen Valley in Rome, the first industrial-scale technological hub for the development of the national supply chain for the production, transport, storage and use of hydrogen for the decarbonization of industrial processes and for sustainable mobility.
At first glance, hydrogen seems to be the perfect solution to our energy needs. It doesn’t produce any carbon dioxide when used. It can store energy for long periods of time. It doesn’t leave behind hazardous waste materials, like nuclear does. And it doesn’t require large swathes of land to be flooded, like hydroelectricity. Seems too good to be true. So…what’s the catch?