Relocating chemical plants in China

Usually designed to withstand storms, earthquakes, and floods, chemical plants are not easily dismantled and moved from one place to another. In China, however, the government routinely orders the relocation of chemical plants away from urban areas. Over the past 10 years, dozens, if not hundreds, of such plants have had to move in China because of safety or environmental concerns. A new government order may force many more to follow suit.

Last month, China’s cabinet, the State Council, issued national guidelines for the relocation of chemical plants, owned by both local and foreign firms, that produce or handle compounds on a list of hazardous substances. Many of these plants were built years ago in outlying areas but have since been enveloped by urban sprawl.

Innocuously called “guidance,” the new rules will be felt throughout the Chinese chemical industry.

“Guidance from the State Council is something very serious,” warns Travis Gan, general manager of Jingzhou Jian­ghan Fine Chemical, a producer of silane coupling agents located in the central Chinese province of Hubei.

“Many cities and provinces have issued orders for the relocation of chemical plants in recent years, but it’s an order from the top this time,” Gan says. Jian­ghan voluntarily relocated to an industrial zone about 12 years ago as part of an expansion and modernization of its operations.

Several foreign chemical companies have had to move in China in recent years. For example, AkzoNobel is currently rebuildingand expanding its organic peroxides plant in a different part of the city of Tianjin. In 2011, Rhodia, now part of Solvay, moved its synthetic sandalwood plant to Zhenjiang after authorities at the original location in Wuxi—about 150 km away—took back land they had allocated to the firm.

Tens of thousands of chemical plants currently operate outside industrial zones in China, says David S. Jiang, president of Sinodata, a Beijing-based chemical market research firm. “In the past, every city in China tried to develop a chemical industry,” he says. He expects that only very large state-owned firms will be able to delay relocation orders.

The State Council’s new guidelines call for accelerating chemical plant relocation in China to reduce the safety and environmental risks urban residents face. Companies producing or handling the most dangerous substances, as defined by the country’s Catalog of Hazardous Chemicals, should relocate into government-approved industry parks no later than 2020. Chemical plants handling substances deemed less risky but still dangerous should complete their moves by the end of 2025. Companies that refuse to comply will be ordered to shut down.

The State Council leaves it to provincial and municipal governments to implement the guidelines, but it calls on local authorities to provide financial assistance to companies that have to move plants. And the cabinet asks local authorities to provide resettlement assistance to plant workers, or vocational training if they’re unable to work at a plant’s new site.

The European Union Chamber of Commerce in China, which counts several foreign chemical firms among its members, says the State Council guidelines, known as Circular 77, are an improvement over the current situation, in which chemical companies are often ordered to move without adequate warning or compensation.

But the chamber tells C&EN that the State Council’s instructions as currently written are vague. The group hopes that “authorities will issue further regulations with more specific provisions.” In particular, it wants local authorities to “provide clear information on relocation criteria” and to apply the rules evenly to Chinese and foreign firms.

Gan, the manager at the Hubei silane producer, says the State Council is well-intentioned in wanting to improve the environment in Chinese cities. But he’s concerned that the new guidelines will impact the entire chemical industry, including companies that don’t have to move. Owing to prior relocation orders and stricter environmental controls, the price of basic chemicals that Jianghan and other firms use as raw materials is already escalating, he says.

“There are shortages already, and this will make the situation much worse,” Gan says. “This is something we should have done before.”