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The outlook is cloudy for China’s chemical industry

The country’s postpandemic recovery has stalled after a short period of growth

by Hepeng Jia, special to C&EN
January 19, 2024 | A version of this story appeared in Volume 102, Issue 2

Cranes atop apartment buildings under construction in China.
Credit: Shutterstock/chinahbzyg
A struggling real estate sector is one reason for malaise in China's chemical industry.

The Chinese chemical industry’s dream of a robust post-COVID-19 recovery wasn’t realized last year. Just like other industries in China, the sector experienced a short rebound when the country lifted pandemic controls; then, the recovery quickly stalled. And although the government took some positive steps at the end of 2023, the outlook for this year remains largely cloudy.


After a short growth spurt, China’s postpandemic economic recovery has stalled.

Growing production capacity in China will depress prices for basic chemicals.

On Nov. 27, China’s National Bureau of Statistics (NBS) released data on industrial performance for the first 10 months of 2023. The chemical raw material and product manufacturing industry was one of the worst performers, posting a 42.8% decline in profits compared with the same period in 2022.

Leading companies also reported lackluster performances. In the first three quarters of 2023, Sinopec, China’s largest petrochemical maker, posted a 0.7% increase in sales from the year-earlier period, but its earnings fell by 6.6%. Similarly, the polyurethane specialist Wanhua Chemical reported a sales rise of 1.6% but an earnings decline of 6.7%.

The struggling real estate market, weaker exports due to soft global demand, and lower foreign investment in China are key reasons behind the chemical sector’s malaise. According to the NBS, the real estate sector, which accounts for one-fourth of China’s economic output, experienced a 9.3% decrease in investment through October compared with the same period in 2022. Meanwhile, China’s exports rose only 0.4%.


Looking to 2024, Zhao Zhen, an independent chemical consultant based in Shanghai, says China’s chemical industry will remain depressed if the country’s overall economy doesn’t see a robust recovery. The credit rating firm Fitch Ratings has a neutral outlook on the global chemical sector for 2024, partly because of China’s growing fleet of large fuel and chemical facilities, which will lower chemical prices and profit margins.

Ye Yingmin, president of the Beijing-based consulting firm Chem1, is more optimistic. After months of economic downturn, “demand for chemicals is recovering, which will support prices,” Ye says. And, he notes, low prices for fuels and basic chemicals may boost profit margins for downstream chemical producers in the coming year.


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