Marketing Situation of Domestic Synthetic Resins
By Fang Zhongyu  China Petrochemical Consulting Co.
Marketing environment of domestic synthetic resins
1.Domestic synthetic resins are faced  with  fierce  market
competition due to the excessive capacity in the world
The total capacity of synthetic resins  in  the  world  has
reached 150 million tons, and the output of the five major
kinds of general-purpose resins  accounts  for  69%.   The
market environment is poor. In the world market  in  1998,
the average operating rate in general-purpose resin  units
was only around 80% and the average price was down by  30%
compared with 1997.  The  excessive  capacity  has  forced
petrochemical multinationals to  shift  their  development
and market priority to the  Asia- Pacific  region  in  the
recent years. The market of China mainland  is  the  focus
for competition.
The currency devaluation in Southeast Asia has also brought
an extremely great market pressure to  domestic  synthetic
resins. Synthetic resin producers in Southeast  Asia  have
adopted the marketing strategy of igh operating rate,  low
selling price and low profit They are trying  to  use  the
export advantages from the currency  devaluation  to  make
massive low-priced export. According to customs statistics
, the average price of imported synthetic resins  in  China
was 819 U.S. dollars per ton  in  1998,   lower  than  the
average price of 887 U.S. dollars per ton in 1997.   Great
quantities of low-priced imports have led to  a  sustained
slackness in the market of domestic synthetic  resins  and
seriously affected the economic  performance  of  domestic
producers. Besides, if China joins WTO,  the  tariff  rate
for the import of synthetic resins will be reduced from 16
- 18%  to  around  10%  in  the  short  transient  period.
Domestic synthetic  resins  will  be  faced  with  a  much
greater impact from imports at that time.
2. The  domestic  demand  increases  sharply,   the  market
potential is big and domestic synthetic resins only occupy
a market share of less than 50%
The apparent  consumption  of  synthetic  resins  in  China
reached 18.32 million tons in 1998,  the  domestic  output
was 8.26 million tons, the import amount was 10.53 million
tons and the export amount was only  470  000  tons.   The
average annual growth rate of the apparent consumption  in
China was 20.42% from 1990 to 1998, much higher  than  the
average annual growth rate of the GDP (around 10%) in  the
period. The per-capita consumption of plastic products  in
China is 13 kg/a, but the average per- capita  consumption
of plastic products has reached 26 kg/a in the  world  and
even more than 90 kg/a in the United States,  Germany  and
Japan. There is therefore a great potential in the  market
volume of synthetic resins in China.
The average annual  growth  rate  of  the  synthetic  resin
output in China was 15.32% from 1990  to  1998,   but  the
growth rate of the import amount reached as high as 24.85%
in the period. The proportion of the apparent  consumption
of domestic synthetic resins dropped from 66.57%  in  1990
to 45.08% in 1998, presenting a reclining trend on a  year
-by-year basis.
3.The market of domestic synthetic  resins  has  become  a
buyer's market due to excessive imports
Although the output of domestic synthetic resins is not yet
a half of the domestic consumption, the market of domestic
synthetic resins  has  become  a  buyer's  market  due  to
excessive imports. Users of synthetic resins  have  gained
more room of selection.
Marketing situation of domestic synthetic resins
1.advantages in the marketing of domestic synthetic resins
According to the data  collected  in  1998  when  CNPC  and
SINOPEC were just  founded,   the  capacity  of  synthetic
resins accounts for 21.42% of the total for  CNPC  and  38
.64% of the total for SINOPEC. That is to say, 60%  of  the
total capacity is concentrated in the two big groups. Such
high concentration facilitates centralized marketing.
2.disadvantages in the  marketing  of  domestic  synthetic
resins
(A) scattered marketing force
Although domestic synthetic resins are mainly  concentrated
in the two big groups, the  market  survey,   new  product
development and product sales are still done by  producers
themselves. The marketing force is scattered and unhealthy
competition among producers has even impaired the  overall
interests of the two big groups.
(B) high production cost and poor price advantage
Domestic  synthetic  resin  producers   only   have   small
production scale. The biggest  capacity  of  a  PE  or  PP
production line is 140 000 t/a. Most production lines have
a capacity of 40 000 - 70 000  t/a  and  production  lines
with a capacity of less than 100 000 t/a account for  over
85% of the total. The capacity of foreign units is usually
more than 200 000 t/a. Due to the high price  of  upstream
raw products ethylene and propylene, the proportion of the
raw material cost in domestic synthetic resins is as  high
as 60%. Besides, most of domestic units have  problems  of
high investment, outdated  process  and  poor  management.
These problems are also important  factors  for  the  high
production cost of domestic synthetic resins. According to
the estimates made by relevant departments, the full  cost
of PE and PP produced in China is higher  by  over  1  000
yuan per ton than foreign products.  The  high  production
cost has restricted the use of price strategy and  reduced
the price competitiveness of domestic synthetic res