B2B Platforms Transform China's Chemicals

The past several years saw slow growth in the traditional chemicals industry， characterized by increasingly fierce market competition as a result of excess homogenized products and insufficient innovation in marketing and sales due to a high average age of employee.

Having experienced a painful downturn， some chemical firms are now gearing up for recovery. By developing specialized e-commerce platforms which provide broader， symmetrical information exchange for product transactions， they attempt to embrace the “big data age” while securing a strong position in an ever-changing market.

A Fatal Issue

Since the People's Republic of China was founded in 1949， the chemical industry has contributed significantly to the country’s economic growth. Its development was mainly driven by industry-based cities along coasts and rivers， especially the Yangtze River Delta industrial belt.

However， statistics from the Chemical Industry and Engineering Society of China show that China has entered the heavy chemical industry stage in which while propelling the national economy， chemical manufacturers have caused a considerable waste of resources. Blind investment and production have led to excess production capacity.

Basic fluorine chemical products are a good example. With an annual production capacity of fluorine chemicals exceeding 6 million tons， China’s output of such products accounts for 55 percent of the global total， and its sales volume 33 percent of the global total. However， market demands for hydrogen fluoride and aluminum fluoride are less than half of the country's production capacity. Refrigeration products are also facing difficult prospects due to production capacity concentration in traditional products and a lack of new， high-end varieties， which has resulted in a slump of sales and very low profits.

According to Li Lei， CEO of whmall.com， a B2B （business-to-business） platform for chemical transactions， apart from oversupply， there are two other reasons for the chemical enterprises’ excess production capacity. One is that their products are primarily materials for industrial production， instead of fast moving consumer goods. The other lies in information asymmetry between manufacturers and buyers， resulting in poorly-planned production and operation.

Liu Jian， deputy director of the Agricultural Promotion Center under the China Electronic Commerce Association， said that similar problems have also afflicted producers of agricultural chemicals. Generally， farmers tend to simply refer to the previous year’s prices when deciding the amount of certain types of agricultural products they need for the coming year. But this is subject to information delay and a limited market of reference. Due to the close association between chemical fertilizers and farming， chemical fertilizer producers are affected.

The Solution

What is the solution to these problems？

From Li Lei’s perspective， as e-commerce explodes， taking business online is inevitable. Specialized B2B platforms can provide enterprises with industry information and think tank support， help them find buyers and accelerate the pace of integration with state-of-the-art logistics systems.

“The chemicals industry requires a high degree of expertise，” Li said. “In this industry， most managers and technicians hold a Master’s degree or above， and many have accumulated five years of work experience， which makes them qualified to provide think tank support for enterprises.”

Li also revealed a rising call for the establishment of e-commerce platforms among chemical firms. This not only recognizes his potential value， as well as that of his team， but has also brought them considerable profits. By the end of 2016， there were 25，000 member companies registered on whmall.com， trading nearly 10，000 different types of products a month on average. This year， turning its eyes to overseas markets， the website management has focused on promoting China’s cross-border trade of chemicals with neighboring countries.

Zhang Yulin， founder of Echemi.com， a professional chemical industry B2B platform， expressed similar views. He stressed that the great demands for chemical products in overseas markets show the possibility and feasibility for Chinese chemical firms to compete globally， and that specialized e-commerce platforms provide them the most cost-effective and time-saving channels.

Statistics recently released by the China Council for the Promotion of International Trade show that Thailand， Indonesia， Singapore and some other ASEAN countries have high import demand for chemicals. In the first 10 months of 2016， Thailand imported chemicals valued at US$2.4 billion from China， amounting to 22 percent of the country’s total imports of products in that category.

Zhang thinks that in the future， e-commerce platforms for the chemicals industry should continue efforts in providing transparent information about supply and demand， as well as services such as finding raw materials and selling products.

Zhang Zhouping， a senior analyst at the China E-Business Research Center， has a positive view of such online platforms.

“Conducting business online holds a significant breakthrough for the future of traditional enterprises， and the effect will be visible，” Zhang said. “The online information channels will help enterprises greatly reduce costs， increase trade efficiency， and expand product research and innovation.”

Zhang also suggested that managers of such platforms should set strict benchmarks for selecting high-quality enterprises and create a favorable e-commerce environment for registered members. Exchanges and cooperation between such platforms are also necessary to help firms seek new development opportunities and approaches， he added.