I. Agricultural Chemicals

INDUSTRY OVERVIEW
China is one of the biggest agro-chemical consumers and a large agro-chemical importer. Agro-chemical exports to China ranked as the top destination for U.S. fertilizer exports until 2003. In 2006, China imported $337 million in fertilizers and $40.40 million in pesticides from the U.S., accounting for 13.57% and 19% of total imported fertilizers and pesticides respectively.

China’s accession to the WTO provides benefits to U.S. fertilizer exporters. On accession, tariffs dropped 6% from the 11% import duty rate. WTO commitments stipulate that all quotas must be fully allocated, forbidding the current practice of limiting imports by only allocating a certain portion of the quotas each year. On October 10, 2006, China’s Ministry of Commerce (MOFCOM) released the 2007 fertilizer import tariff rate quotas (TRQs). The total 2007 TRQs will be 3.3 million tons of urea imports, 6.9 million tons of diammonium phosphate (DAP) and 3.45 million tons of NPK compound fertilizers. Of the TRQs, 2.97 million tons of urea, 4.49 million tons of DAP and 2.24 million tons of NPK are for state trading while non-state trading TRQs will be 330,000 tons of urea, 2.41 million tons of DAP and 1.21 million tons of NPK. The import volumes within the quota are levied an import duty of 4%, while imports exceeding the quota are levied a duty of 50%. From the data above, we can summarize that total volume under fertilizer tariff rate quota has been much higher than the one upon China’s WTO accession. However the domestic fertilizer industry develops rapidly in recent years, most fertilizers except potassium and DAP are gradually no longer desperately depend on imports. Therefore increase in TRQ will not much fluctuate China’s fertilizer market. In 2005 China imported 71,000 tons of urea, 1.74 million tons of DAP, 2.28 million tons of NPK compound fertilizers. It is estimated that in 2006 China’s import in urea, DAP and NPK will respectively total 60,000 tons, 1.5 million tons and 1.9 million tons. We may conclude from these statistics that the final import volume actually is much lower than what TRQ allows. Therefore although China still has not fully carry out its TRQ promise upon WTO, it will not be a concern for U.S. fertilizer exporters.

China’s goal is to rely less on fertilizer imports in the future, but domestic output cannot meet the total market demand, forcing China to import high-concentration and compound fertilizers. On the other hand, in the first eleven months of 2007, China’s fertilizer export rushed to three times of the previous year, showing a prosperous market trend. The import of such fertilizer is still controlled by a quota management system.

The U.S. has been the largest exporter of pesticides to China for the past several years. China is taking measures to regulate the pesticide market to prevent toxic runoff and alleviate risks of consumer poisoning. The proportion of herbicides and fungicides within pesticides production has increased. The proportion of output of the pesticides featuring high performance, low toxicity and better safety characteristics has also increased. Imports of high efficiency, low toxicity, and low residual pesticides have strong market prospects, mainly as an alternative to highly toxic Chinese pesticides. However, foreign suppliers currently face discriminatory product testing requirements.

MARKET OPPORTUNITIES:
Market Demand
China’s accession to the WTO provides benefits to U.S. fertilizer exporters. On accession, tariffs dropped 6% from the 11% import duty rate. On September 19, 2007, China’s Ministry of Commerce (MOFCOM) released the 2008 fertilizer import tariff rate quotas (TRQs). The total 2008 TRQs will be 3.3 million tons of urea imports, 6.9 million tons of diammonium phosphate (DAP) and 3.45 million tons of NPK compound fertilizers. Of the TRQs, 2.97 million tons of urea, 3.8 million tons of DAP and 1.76 million tons of NPK are for state trading while non-state trading TRQs will be 330,000 tons of urea, 3.1 million tons of DAP and 1.69 million tons of NPK. The import volumes within the quota are levied an import duty of 1%, while imports exceeding the quota are levied a duty of 50%.

Based on the WTO commitment, China started to allow foreign companies to gain the right to retail and distribute fertilizers starting on December 11, 2006. China’s fertilizer circulation field will face more fierce competition. In the telephone interview with a U.S. fertilizer exporter, its experts held that it is a great positive move and will untie their company in China market. Fertilizer exporters should apply to MOFCOM for license to be authorized to retail and distribute fertilizer in China. It will bring more business opportunities to U.S. exporters in China.

Best Prospects
Fertilizers:
The local producers have yet to meet the growing local market demand, especially for phosphate and potassium fertilizer, which are limited natural resources. China still must rely on importing fertilizers in large quantities.

• Nitrogen fertilizer
• Phosphate fertilizer
• Potash fertilizer

Pesticides:
High efficiency, low toxicity pesticides have strong market prospects. Although domestic output of pesticides satisfies local demand in most areas, domestic production of high efficiency herbicides, high-efficiency and low-toxicity insecticides and fungicides cannot meet the demand both in terms of quantity and quality. Some raw pesticides and intermediates rely on imports, such as aniline with o-dihydroxybenzene, furphenol and tripoly-nitrogen-chlorine dialdyl. It is imperative for China to stop the application and production of highly-toxic pesticides, especially organo-phosphorous biocides, since the high-toxic pesticides take up about 36% of the country's total consumption.

• Herbicides
• Environmentally safe insecticides
• Biopesticides
• New technologically advanced pesticides

Because the Chinese government now emphasizes environmentally sound technologies, pesticides will have to meet new requirements.

II. Industrial Chemicals

INDUSTRY OVERVIEW
China’s chemical industry has displayed rapid growth over the past decade. The chemical industry is now one of the country’s major sectors, the third largest after textiles and machinery. The market within China grew by almost 30 percent between 1998 and 2002. A main driver of this growth has been the Chinese government, which encouraged the industry’s development in the 10th Five-Year Plan. The growth of this sector is considered critical for creating self-sufficiency in areas such as agriculture and petrol refinement and for generating foreign exchange through exports. Foreign Direct Investment (FDI) into the chemical industry takes up about 24% of the total national FDI.

China is the world’s fourth largest chemical manufacturer, according to research published by the Deutsche Bank in October 2005. The chemical industry will continue to grow at a rate of 10% annually. By the year 2015, China is expected to increase its share of the world market from 8% to 13%, which will make it the second largest producer in the world after the United States.

One notable industry trend in China is consolidation. In recent years many smaller Chinese chemical companies have merged with larger companies, which have the technological expertise and financial strength to accelerate product innovation. The government has also encouraged the purchasing of state-owned chemical industry assets by competing private firms.

MARKET OPPORTUNITIES:
Market Demand
Over the past several years, China has experienced steady growth in both the import and export of chemicals. According to the International Council of Chemical Associations, China is the eighth largest chemical importing nation and the twelfth largest chemical exporting nation in the world. The United States is the only leading exporting country that enjoys a slight trade surplus with China in the area of chemicals. It is expected that China will continue rely on imports in the foreseeable future.

Best Prospects
Fine and Specialty Chemicals
The fine and specialty chemical industry is a development priority within China’s chemical sector. Fine chemicals are composed of high purity components, and are used for personal hygiene, medical purposes, or water treatment, whereas specialty chemicals are manufactured for a specific use, such as adhesives or dyes. Both types are produced in lower volume than bulk chemicals.

The Chinese fine and specialty chemical industry still remains highly fragmented. The top ten producers control only five percent of global capacity. Currently, domestically produced fine and specialty chemicals cannot satisfy China’s rapidly growing demand. As a result, China needs to import many types of fine and specialty chemicals, while also investing in domestic production facilities and encouraging cooperation with foreign corporations for certain chemical projects.

The development of the fine and specialty chemical industry has been restricted by the shortage of applied research, technical services, marketing expertise, and funds. Domestic products often cannot provide the range of products needed nor meet quality requirements for chemicals used in the production of export goods.

Organic Chemicals
Organic chemicals constitute another promising export market in China. Major organic chemical products in China include ethylene, propylene, styrene, and polyvinyl chloride. But the main hindrance of Chinese organic chemical production is inefficient factories with obsolete technology. As a result, organic chemical imports have been increasing steadily since 2000.

Synthetic Materials
Synthetic materials, including high quality fibers and rubbers, also present a significant export opportunity. Many Chinese chemical factories currently produce these products, but at a rate only sufficient enough to fulfill about half of domestic demand per year. Local products are also inconsistent in quality and can be highly toxic. Foreign products have a good reputation in the China market for their good quality and after-sales service. For example, China’s main tire manufacturers all use imported accelerants because of their consistent levels of quality.

III. Plastic Materials and Resins

INDUSTRY OVERVIEW
Annual plastics consumption in China has been over 40 million tons. In the last tenth-five year plan (2001-2005), the annual growth rate of general synthetic resins was 6.8% and engineering plastics materials was 10%. However, the local output of plastics materials and resins can only satisfy 50% of market demand. As a result, China must import large quantities of plastics materials each year.

China's accession to the WTO has provided significant benefits to U.S. plastics and resins exporters. Specifically, the average rate has been reduced to a final average rate of 10%. In 2008, import tariffs on all PP will be lowered from 7.6% to 6.5%. Most quotas will be eliminated on virtually all chemical products upon accession. China has also agreed that any entity will be permitted to import most products, including plastics and resins, into China after a three-year phase-in period. U.S. companies operating in China will also be able to freely distribute plastics materials in China.

According to a manager from Chemical Markets Associates Inc., demand for PE in North East Asia (including China) will grow 7% annually from 2005 to 2015. However, the local output of plastics materials and resins in China can only satisfy 50% of market demand.

Government development policies will also stimulate demand for plastics and resins. For example, the State has commanded that by 2015, the amount of plastic used in piping be increased from 50% to 70%, the amount using in doors and windows materials be increased from 25% to 40%, and the amount in roofing materials be increased from 50% to 80%.

China needs to import large amounts of synthetic resins to meet local market demand. In 2007 China imported 19 million ton of synthetic resin, an increase of 5% comparing to 2006. According to China Customs, in 2007, China’s imports of general plastic products totalized USD 11.1 billion, an increase of 15.9% from the previous period.

Due to rapidly expanding production capabilities, PVC supplies have overtaken demand. China’s imports of PVC have also been decreasing by 10% a year since 2004. In 2006, government’s tightening macroeconomic policy has hit the real estate industry, decreasing construction demand for PVC.

China’s market size for plastic machines has doubled in the past decade, from yearly sales of US$2.45 billion in 1996 to US$5.2 billion in 2006. Due to its lack of manufacturing capability of high-end plastic machines, China has to heavily rely on imports of higher-grade plastic machinery. Such imports saw a substantial rise from US$1.93 billion in 1996 to US$4.45 billion in 2006.

This market should continue to generate business opportunities for U.S. exporters. Such opportunities will primarily focus on large-scale, high speed, high precision, resource saving, or environmental friendly types of plastic machines or key components.

MARKET OPPORTUNITIES:
Market Demand
Special engineering plastics and other resins that possess special physical and chemical properties are used widely in various industries. U.S. engineering plastics products have high-technology input and are very competitive in the local market. However, U.S. firms now face stiff competition from Japan, Korea and Taiwan, German. I n recent years, imports of general plastics from the U.S. dropped sharply due to price competition and the close relationship between Asian competitors and China. Meanwhile, China has become the largest importer of engineering plastics in the last three successive years. Up to 2005, the demand for the five major engineering plastics (PC, POM, PA, PBT and PPO) and ABS will increase to 590,000 t/a and 1.6mt/a.

Best Prospects
Synthetic Resins
China needs to import large amounts of synthetic resins to meet local market demand. In 2006 for the January to November period, China’s imports of general plastic products totaled USD 34.1 billion, an increase of 12.4% from the previous period. Imports from the United States represented 8.26% of the total, just behind Taiwan, Korea, and Japan. China’s imports of PVC reached a value of USD 1.4 billion in 2006, a decrease of 9.4% over 2005. Meanwhile, China has become the largest importer of engineering plastics in the last three successive years.

Due to rapidly expanding production capabilities, PVC supplies have overtaken demand. China’s imports of PVC have also been decreasing by 10% a year since 2004. In 2006, government’s tightening macroeconomic policy has hit the real estate industry, decreasing construction demand for PVC. This trend is likely to continue into 2007, where macro policies on environmental and energy issues will also influence the PVC market.

The local market requires imports of general-purpose thermoplastic resins, including polyethylene (LDPE and HDPE), polypropylene (PP), polystyrene (PS), acrylonitrile butadiene styrene (ABS), and polyvinyl chloride (PVC). This market is subject to fluctuation of up-stream supply and down-stream market demand.

In 2007, plastics and plastic products ranked as China’s 5th largest import category (Harmonized Schedule 2-digit level) from the United States, with a total value of 3,600 million USD.

The top 3 Chinese plastic imports are:

• Polyethylene
• Polyacetals
• Polypropylene

IV. Petrochemicals

For more details, visit the US Commercial Service China site under the heading “Oil and Gas,” at the following link:http://www.buyusa.gov/china/en/oilgas.html

Industry Brief

Industry Brief - Industrial Chemicals

Major Shows & Exhibitions

This section provides a listing of upcoming chemicals-related events in China, including industry shows and trade missions. While FCS China is directly involved with some of these events, the majority here have no direct relationship with the FCS and are listed solely as a convenience to our users.

For more information, please contact the organizing group as listed in the event description. Verify the information before making any commitments - we are not responsible for accuracy of information or changes in events' schedules.

China International Agrochemical & Crop Protection Exhibition
March 12-14, 2008
Shanghai
http://www.agrochemshow.com/index_en.asp

Shanghai International Desiccant Exhibition
March 19-21, 2008
Shanghai
http://www.desiccantshow.com

China International Adhesive Tape, Protective Film, and Adhesive Glue Fair
March 19-21, 2008
Shanghai
http://www.zyexpo.com/english.asp

Food Ingredients China
March 26-28, 2008
Shanghai
http://www.chinafoodadditives.com/d_e.htm

China International Chemical Industry Fair (ICIF)
April 23-25, 2008
Shanghai
http://www.icif-china.german-pavilion.com/gp/icif08/home/page2.cfm

Asian Pacific Confederation of Chemical Engineering Congress & Exhibition
August 4-6, 2008
Dalian
http://www.icit-expo.com/html/2008/1/149.htm

Asian-Pacific International Plastics & Rubber Industry Exhibition
November 25 -28, 2009
Shanghai
http://www.applas.com.cn/applas/index.asp

ChinaCoat 2008
November 26-28, 2008
Guangzhou
http://www.chinacoat.net/2007/exh_en.htm

ChemSpec China
December 3-5, 2008
Shanghai
http://www.chemspecchina.com

Informex China
January 27 -30, 2009
Guangzhou
http://www.informexchina.com/

Food Ingredients China 2009 (FIC 2009)
March 25-27, 2009
Shanghai
http://www.ChinaFoodAdditives.com/d_e.htm

China International Dye, Pigments Textile Chemicals Exhibition
April 8 – 10, 2009
Shanghai
http://www.chinainterdye.com

ChinaPlas
May 18–21, 2009
Guangzhou
http://www.chinaplasonline.com

Market Research Reports

The Agricultural Chemicals Market
China needs to boost agricultural productivity to feed its large and growing population using the limited farmland available. China has 7% of the world’s arable land and 22% of the world population, of which 71% are engaged in agriculture. In recent years national and local governments have been seriously concerned with the environmental resource problems associated with the overuse and abuse of agrochemical products in agricultural development, which has created environmental problems such as resource degradation, biodiversity decrease and farmland pollution. Much of China’s agricultural problems can be attributed to inefficient and harmful use of pesticides and fertilizers. Chinese experts agree that the most direct method to improve productivity and to promote successful, sustainable and environmentally friendly harvests is to ensure that farmers are using safer and more effective fertilizers and pesticides. Now China is paying more attention to developing sustainable agriculture. According to China’s Agenda 21 project, agriculture must meet the highest possible output while ensuring the best environmental protection.
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Irrigation in China Market
China is an agriculturally based country that relies heavily on its farming industry for sustenance, jobs and economic trade to support its population of 1.3 billion. In recent years China has had to confront the growing concern for water scarcity and assume measures to counter this potentially devastating threat. China’s freshwater resources currently stand at 2,800 billion cubic meters, which amounts to 6% of the world’s total. The Ministry of Water Resources of the P.R.C. forecasts that by the year 2030 China’s population will soar to 1.6 billion, while water availability per capita will be limited to 1,750 cubic meters. Even with efficient water saving measures in place by this date, the demand for freshwater is estimated to total between 700 to 800 billion cubic meters, requesting an increase of 130 to 230 billion cubic meters in water supply from what has been calculated as being available in 2030.
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China: Agricultural Chemicals:
China needs to boost agricultural productivity to feed its large and growing population using the limited farmland available. China has 7% of the world’s arable land and 22% of the world population, of which 71% are engaged in agriculture. In recent years national and local governments have been seriously concerned with the environmental resource problems associated with the overuse and abuse of agrochemical products in agricultural development, which has created environmental problems such as resource degradation, biodiversity decrease and farmland pollution. Much of China’s agricultural problems can be attributed to inefficient and harmful use of pesticides and fertilizers. Chinese experts agree that the most direct method to improve productivity and to promote successful, sustainable and environmentally friendly harvests is to ensure that farmers are using safer and more effective fertilizers and pesticides. Now China is paying more attention to developing sustainable agriculture. According to China’s Agenda 21 project, agriculture must meet the highest possible output while ensuring the best environmental protection.
                                                                                                                           more...

China: Biaxially Oriented Polypropylene Film Industry
China’s Biaxially Oriented Polypropylene (BOPP) film Industry experienced a tremendous growth over the past 20 years. With its production capacity expanding from 18 thousand tons per annum (tpa) in 1985 to 2.05 million tpa in 2006, China has become the world’s largest producer of BOPP film, representing 35% of the world’s total. Similarly, China’s BOPP film is also the biggest subsector among all plastic films, accounting for 33% of China’s national total. Driven by China’s fast growing economy, continued strong market demand, and expected high investment returns, BOPP film industry is projected to increase at an average annual rate of 10-15% in the next several years. This fast developing market should provide potential business opportunities for U.S. exporters of plastic film production lines, polypropylene resin, film testing and measuring instruments, and plastic film additives.
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China: Pigments and Dyestuff
China is both a top producer and a top consumer of industrial pigments, especially inorganic pigments. China is the world leader in pigment and dyestuff production and also the largest pigment exporting country in terms of volume. China’s total pigment export volume accounts for 25% of the world total in pigment trade. The current annual output of organic pigments in China accounts for about 40 percent of global output. At present, there are over 370 pigment manufacturers in China with a total annual capacity of 2.260 million tones. Inorganic pigments account for 92 percent of the total capacity, or 2.08 million tones. Organic pigment capacity is only 0.18 million tones.
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China: Recycled Metal Materials
Over the past few years, China has emerged as the world’s largest scrap metal importer. In 2005, China’s total scrap metal market was USD 19.7 billion. Imports made up USD 7.6 billion of the total market, of which the U.S. supplied around 31%. In 2005, China imported USD 2.6 billion worth of ferrous scrap, USD 1.4 billion worth of aluminum scrap, and USD 3.2 billion worth of copper scrap. China’s demand for scrap metal has grown consistently over the past years and should continue to expand into the foreseeable future.
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Useful Websites

Links to non-Commercial Service organizations are provided solely as a convenience to our users. The Commercial Service makes no representations about the accuracy or suitability of the information provided on the following web sites. The FCS is not responsible for the content of the individual organization webpages found through these links, and their inclusion here should not be understood as an endorsement of these organizations.

Chemease – Information on Chinese Chemical Commodity Market

Chemical B2B Website

China Agricultural Means of Production Net

China Chemical Information Center

China Chemical Information Net

China Engineering Plastics Industry Association

China Fertilizer Information Net

China National Chemical Industry Information Center

China Plastic Processing Industry Association (CPPIA)

The Fertilizer Institute (TFI)

Global Chemical Portal and Network

International Fertilizer Association (IFA)

Key Industry Contacts

CCPIT Sub-council of Chemical Industry
Bldg. No. 16, Block 7, Heping Li, Beijing 100013, China
Tel: (86-10) 6421-7428
Fax: (86-10) 8429-2987
http://www.ccpitchem.org.cn

Chemical Industry and Engineering Society of China
53 Anwai Xiaoguan Street, Beijing 100029
Tel: (86-10) 6444-1885
Fax: (86-10) 6441-1194
http://www.ciesc.cn/

China Nitrogenous Fertilizer Industry Association
No.1, Liu Pu Kang Zhong Jie, Beijing 100011
Tel: (86-10) 6200-4185
Fax: (86-10) 6236-8259

China Pesticide Industry Association
Bldg.16, Anhuili Siqu, Beijing 100723
Tel: (86-10) 8488-5001
Fax: (86-10) 8488-5256

China Phosphate Fertilizer Industry Association
No.1, Liu Pu Kang Zhong Jie, Beijing 100011
Tel: (86-10) 6238-2616
Fax: (86-10) 6236-8259

Shanghai Chemical Industry Association Network
Room 1503, No. 560 Xu Jia Hui Road,Shanghai 200025
Tel: (86-21) 6445-8627
Fax: (86-21) 6445-08970
http://www.scianet.org

U.S. Commercial Service Contact Information for Chemicals

The U.S. Commercial Service offers a broad array of market entry services to U.S. exporters of chemical products. Please refer to the following relevant contacts for additional information on how we can help you expand your business in China.

Beijing Office:
Tel: (86-10)8529-6655
Fax: (86-10)8529-6558/9
Agricultural Chemicals: Cao Yueand Gwen Lyle
Industrial Chemicals/Plastics and Resins: Jianhong Wang and Bryan Larson

Guangzhou Office:
Tel: (86-20)8667-4011
Fax: (86-20)8666-6409
Li Shuquan and Ireas Cook

Chengdu Office:
Tel: (86-28)8558-3992
Fax: (86-28)8558-3991
Agricultural Chemicals: Roger Tang and Eric Wolff
Industrial Chemicals/Plastics and Resins: Chen Lingand Eric Wolff

Shanghai Office:
Tel: (86-21)6279-7930
Fax: (86-21)6279-7639
Agricultural Chemicals/Industrial Chemicals: Lisa Tang and Francis Peters
Plastics and Resins: Vivian Bao and Kevin Chambers

Shenyang Office:
Tel: (86-24) 2322-1198
Fax: (86-24) 2322 2206
Yasue Pai and Liu Yang