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Global Demand for Plastics Will Soar Over the Long Term, Business and Industry Trends Analysis

The emergence of a large middle class in China in recent years has created a new and lucrative market for a huge variety of goods, including plastics.  Meanwhile, China’s accession to the World Trade Organization in 2001 has had a profound impact on the country’s ability to compete aggressively in the global plastics market.
BASF estimates that the Asia-Pacific region, with China playing the dominant role, has become the world’s largest growth market in chemicals.  Within China, a broad base of industries relies on chemicals of all types.  While the country is playing a growing role as a chemicals and plastics manufacturer itself, it also will have a significant need to import specialty chemicals and high-performance plastics from providers in other nations.
Chinese plastics have become more sophisticated and of higher quality as investments in production plants continue.  At the same time, relatively low labor costs have kept prices down.  (However, wages are rising quickly in China, and its cost advantage is eroding.)
Because of its vast coal deposits, China will continue to fuel much of the growing amount of electricity generation needed at its chemicals plants via coal (although this is creating a serious pollution problem).  Meanwhile, it will continue to import a rapidly growing level of oil and petrochemical feedstocks from major suppliers such as Middle Eastern oil producers.  It is also becoming a major importer of LNG, liquefied natural gas.  However, China has major plans to reduce its need to import processed chemicals, especially ethylene, by constructing a number of new naphtha crackers.  In addition, China has built as many as 20 plants (according to the Gasification Technologies Council) that convert coal into a gas that is utilized in making plastics and pharmaceuticals.  According to U.S. consultant Chemicals Market Associates, Inc., China is focusing on several coal-to-chemicals product areas including methanol, olefins, acetylene-carbide, polyvinyl chloride (PVC), ammonia/urea and aromatics.  Meanwhile, a number of Western companies are cashing in on demand for coal-based chemicals.  Celanese Corp. has a plant that utilizes coal to make paint and food sweetener chemicals.  Dow Chemical was also partnering with ShenHua Group Corp. (a Chinese energy firm) to convert coal into plastics.
Many American and European plastics firms have built or are building production plants in China in order to more directly serve the continuing demand from emerging Asian markets.  Germany’s Bayer AG has invested in a $1.8 billion plant in Shanghai that will produce diphenylmethane diisocyanate (MDI).  UK-based medical plastics processor Flexicare Medical Ltd. built a 40,000 square foot injection molding and extrusion factory in Dongguan.  ExxonMobil Chemical owns and operates the Shanghai Technology Center.  The $90 million facility is a research and development complex.
In July 2022, BASF gave final approval to build what would be China’s first completely foreign-owned chemicals complex.  To be completed by 2030 at a cost of about $10.19 billion, the plant would be located in Guangdong, a major industrial city in southern China.  BASF already has a 50-50 joint venture with Chinese firm Sinopec in a plant that opened in the city of Nanjing.
In April 2021, the Chinese government approved the merger of Sinochem Group Co. and China National Chemical Corp (also known as ChemChina).  The new entity will operate under a holding company overseen by the government body called the State-Owned Assets Supervision and Administration Commission.  The merger eliminates a long-standing competition between the two companies and establishes one of the world’s largest chemicals conglomerates.  ChemChina made news in 2017 when it acquired Syngenta for $43 billion.

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