Chemical Firms Expect Government Support    

The 29th Summer Olympic Games closed on the night of August 24th in Beijing, after the Games were declared closed by International Olympic Committee President Jacques Rogge. But the chemical firms near Beijing need to wait patiently for another month because the Paralympic Games are scheduled to open in Beijing on September 6th. Hu Jintao, the President of China pledged that China will work hard to guarantee the success of the Paralympic Games. Officials showed that China will continue to control the pollution in the future just as strictly as in August, keeping the sky blue for a long time.
    While the world was enjoying the exciting games, the publicly listed firms reported their unaudited fiscal results for the first half. Some firms boosted their profits by over 50% by price increases, while others suffered a drastic drop in profits of over 50% by cost increases. Anyway, even in the same sector, such as urea manufacturing, some firms gained a substantial profit through developing new business or constructing new production capacity while other firms were beaten out by their competitors.
    Managers in chemical firms may worry more about the trend of the whole economy than the temporary impacts of the Olympic Games. 'Slack purchase' is the key worry. Many chemical segments expect policy support after the Paralympic Games in September, just like the textile sector gained increased export rebates, and the dimethyl ether producers were supported by an adjustment in the value added tax.
   Chemical fertilizer manufacturers hope for governmental support because the prices of agro-products dropped with the price of crude oil, leading to a decline in demand for fertilizers.
   However, the government is glad to see the price drop because it should slow the worrisome inflation. The National Development and Reform Commission announced on August 26th its intent to further constrain the price increases of coal and power. The official department predicts the supply of coal, power, oil and gas will continue to be tight in the remaining months of this year.


Zhong Weike
August 29th, 2008