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Factory Suspend Operations Cause Price Rise in China

Factory Suspend Operations Cause Price Rise in China2018.05.23

Recently, many chemical factories in different cities of China have come to suspend operations. As a result, the prices of many chemicals, such as textile, dyeing & printing, plastics, and chemical fiber, etc., have gone up. And this will not only affect the domestic market in China but also influence its international import and export business.

There are several factors for the massive suspend operations, and the major three are:

  1. Policy of Production SafetyProduction safety is always an important task for the government. In December 2017, the State Administration of Work Safety promulgated an annual plan for the control and management of production safety. And in April 2018, the General Office of the State Council published another new policy which allocated explicitly the responsibility of production safety to every local party and government leading cadre. This policy requires those local governments to utilize all means such as inspection, examination, inspiring and punishing methods, etc. to carry out the policy in production.

    Guided by these policies, many local governments start to solve the problems related to the production safety. Take Jiangsu Province as an example: in the first quarter of 2018, 18,600 companies were inspected by the government and 88 of them were demanded to suspend production and make corrections.

    suspend operation

  2. Policy of Environmental ProtectionIt is believed that the Earth should not be sacrificed for the society development, and Chinese government has invested many funds and human resources to environment protection this year.

    In Beijing, Tianjin, Hebei and the surrounding regions, making the sky blue again is one of the major work for the local government. And the main task is to reduce the discharge of SO2 and NOx. To reach this goal, all those companies, which could not meet the standard of VOCs’ discharge, had been ordered to suspend operation or limit production until September 2017.

    One month later, Chairman Xi put forward a harmonious co-existence between human and nature at the 19th CPC National Congress, which re-emphasized the importance of environmental protection. After that, the local governments have made their own plan and policy of environmental protection.

    Many provinces like Guangdong are accelerating its process to improve and punish those manufacturers which have lagged behind the city planning, cannot meet standard of pollutant discharge or have been illegally constructed. The government will take various measures like suspend operation, relocation, and rectification, etc., to manage these manufacturers.

    Hubei is a great industry province, which is near to the Yangtze River, and in order to protect the water resource, all parts of Hubei are taking corresponding measures. For example, in Yichang, 134 chemical factories are closing, transforming or moving out.

  3. SCO SummitIn June, SCO Summit will be held in Qingdao, and the chemical industry in Shandong province will be affected accordingly.

    Many restrictions have already been issued. In Yantai, it is required eight works related to the hazardous chemicals should be suspended during the summit, including hot work, confined space work, work at height, etc. In Qingdao, it demands that the containers shipping hazardous chemicals will not be allowed to transit from the port, and that will obviously affect the import and export of chemical industry.

    According to the plan of Qingdao’s government, those related companies will resume normal operation after the suspend operation period (26th May to 12th July). However, Shandong expects to complete the industrial upgrading, including the transformation of chemical engineering and the transition of energy sources before the June 2020, therefore, the chemical industry of this province may still be affected for a few years after the SCO Summit.

     

    In addition to the above causes, there are also some other factors that may influence the price of Chinese chemical products, and the rising prices of chemical raw material may influence many industries. Based on the current situation, there is no huge price cut in the short term. Therefore, it is recommended to stock up as early as possible to reduce the loss caused by the rising prices in China.

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