CCM: Four problems haunt China's chemical industry in 2015 05-17-2016

According to the National Bureau of Statistics of China, in 2015, except for the 4.8% year-on-year decline in the output of caustic soda and the output of pesticide technical remained the same as that in 2014, the output of other products all increased. In particular, plastics in primary shape, chemical fertilizers and chemical fibers witnessed a big growth in the output, with the growth rates of 10.7%, 10.0% and 9.9% respectively.


The domestic chemical industry was haunted by four problems. 


Weak investment


The fixed assets investment in the chemical industry was slowing down in 2015, with a growth rate decline of 5.5 percentage points compared to 2014. In chemicals and chemical products and manufacturing, the fixed assets investment increased by 2.8% year on year, with the growth rate decline of 7.8 percentage points.


In medical manufacturing, the fixed assets investment was up 11.7%, with the growth rate decrease of 3.3 percentage points. In rubber and plastic manufacturing, the fixed assets investment went up 10.4%, with the growth rate decrease of 2.5 percentage points. In chemical fiber manufacturing, the fixed assets investment went up 2.9%, with the growth rate decrease of 2.1 percentage points. 


Compulsory limitation on production capacity by the Chinese government 


During the period of the Thirteenth Five-year Plan, the number of the pesticide industrial enterprises shall decrease by 30% and the production capacity of phosphate shall be limited under 24 million t/a. The Plan of Zero Growth in Chemical Fertilizers Consumption and the Plan of Zero Growth in Pesticide Consumption released by the Ministry of Agriculture pointed out that in 2020, the goal of zero growth in both chemical fertilizers and pesticides shall be achieved.


Later on, the Ministry of Industry and Information Technology stated clearly that no new pesticide manufacturers shall be registered. In addition, the overcapacity in the industries of chlor-alkali, chemical fibers, tires and inorganic chemicals are becoming more and more serious. The Chinese government is putting efforts in limiting the production capacity. 




Heavier taxation 


The total taxes on chemical industry were up about 5.1% with less than 2% growth in revenue, while the total taxes on the whole secondary industry in China only increased by 3.1%. The heavy taxation had greatly influenced the re-productivity and competitiveness of the chemical industry and had put a quite some of enterprises into manufacturing difficulties.


According to  the Notice of Recharging Value Added Tax on Chemical Fertilizers, it stated that: since 1 Sept., 2015, the chemical fertilizers sold and imported shall be charged the value added tax with the tax rate of 13%. In the meanwhile, the charge-then-return policy of value added tax on potassic fertilizers shall halt.


Increasing manufacturing costs 


Though the prices of petrol and some chemicals had decreased, the costs of labor, fund-raising, logistic, environmental issues and electricity had been going up. In 2015, the chemical industry should pay RMB87 for the cost in its RMB100 revenue, which was RMB1.32 higher than that in the whole secondary industry in China. The lower profit had led to weak market and weak investments in manufacturing.


This article comes from Phosphorus Industry China Monthly Report 1602, CCM




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.


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