Anti-Monopoly Law: A Catalyst for the Chemical Industry

On August 1, 2008, China’s “anti-monopoly law” was formally implemented, which means that China has stepped up anti-monopoly work, and at the same time, the “anti-monopoly law” will also have a huge impact on the chemical industry; the industry generally believes that The implementation of the "Anti-Monopoly Law" helps to clarify problems existing in the existing system and promote the healthy development of the petroleum and chemical industry. What impact will this important and fresh law have on the chemical industry? What difficulties will be encountered during implementation? What kind of role does it play in the development of the chemical industry? With these questions, China National Chemical Information Network has exclusively organized this article for reference.


[Influence of "Anti-Monopoly Law on Industry"]

One of the effects:

Traditional chemical industry: The status of the two giants is difficult to shake SMEs profitable to wait and see

Zhou Yongfang is the chairman of Jiangsu Raymond Chemical Co., Ltd. He has done well in many small and medium-sized chemical companies in Jiangsu and Zhejiang. His company is producing environmentally friendly plasticizer products. In plasticizers, this is a product with high technological content and added value. The annual output value is about 200 million yuan, and the profit is tens of millions of yuan. Most of the products are exported. Zhou Yongfang told reporters that the external environment of the enterprise has been deteriorating since the beginning of this year, and many small and medium-sized enterprises around it have closed down. Although his company is not going to close down, the operating rate has fallen to less than 50%, half of the time has been closed, and it has encountered unprecedented results. Stress, let him breathless.

Speaking of the concrete performance of the deterioration of the company's external environment, Zhou Yongfang told reporters that an important reason is the price of raw materials. The raw materials he uses mainly come from two big groups. Since the two big groups have full control of the market, the prices have not been discussed. Raw material prices rose by 20%-80% this year and eroded a large portion of corporate profits. Coupled with the depreciation of the dollar, exports are difficult.

When asked by reporters, the export is not good, can't it be sold in China? Zhou Yongfang could not even say it again. He told reporters some of the reasons. Phthalate plasticizers are currently used in the domestic market, and these plasticizers account for nearly 90% of the total plasticizer consumption in the country. Phthalates plasticizers from raw materials to finished products, the two companies have a high share, control the price of raw materials plasticizers, phthalate plasticizers in the country The formation of a unique situation, other companies want to enter into very difficult. Zhou Yongfang also reflected that even the standard formulation of products was controlled by monopolistic enterprises. The newly revised national standards for additives for food containers and packaging materials will be issued in September this year, and some ophthalmic products that are not suitable for use in food packaging will be issued. There are no restrictions on dimethyl ester plasticizers, and some relatively safe and environmentally friendly plasticizers are not included, especially some new environmentally friendly plasticizers. The reason is obvious. The former is the "big product" of the two major groups, while private enterprises mainly produce the latter in order to open foreign markets. If implemented in accordance with this national standard, a large number of medium and small plasticizer manufacturers will be excluded from the market. Zhou Yongfang smiled at reporters and had already put forward opinions on the issue of standard monopoly. I wonder if it was useless. The monopolist establishes rules for market games and it is difficult for SMEs to have the right to speak. It is hoped that this situation can change after the implementation of the "Anti-Monopoly Law."

From the interview, we learned that many small and medium-sized chemical companies feel monopoly pressure is a number of large resource monopolies. Enterprises rely on the monopoly advantages granted by the state to expand into downstream industries. This is in fact an unlimited enlargement of the monopoly status granted by the state.

However, in the face of these accusations, Li Rongrong, director of the State-owned Assets Supervision and Administration Commission of the State Council, has different views. He said that among the 50 major oil and oil-consuming countries in the world, no more than three companies are allowed to engage in the oil industry. The current composition of China's oil companies is also reasonable. This is reflected in our corporate contributions to society, taxes paid, and the company's own benefits are all improving. Shareholders have also received good returns and consumers have also benefited. State-owned enterprises are national and people's. Therefore, the profits they earn are for the benefit of the people. China's national economy can maintain steady and rapid growth. It should be said that the credit of this part of the company cannot be underestimated. The price of crude oil in the international market soared, but the refined oil in the domestic market did not rise much. This illustrates the problem.

Hu Wenrui, vice president of China National Petroleum Corporation, said that “if an industry only serves one interest group, it is a monopoly; PetroChina paid taxes to the state of 177.1 billion yuan last year, and the oil price exceeds 45. At the time of the US dollar, special oil proceeds are paid. How can a state-owned company that serves the country and creates wealth be treated as a typical example of monopoly?"

However, attorney Zhang Ma Lin of Jiangsu Zhibang Law Firm believes that this is a concept of stealing: “The so-called national interests are only an abstract concept. For monopolies such as telecommunications and petroleum, they have high profits, but only The return of a very small part to the consumer is in fact a banner of national interest to cover up the nature of its own violation of the market's reasonable competition."


To be bigger and stronger

Sulfur, which is 70% dependent on imports, is one of China's scarce products. The price of sulphur sold by foreign sellers to China has risen tenfold in two years. There is also potassium chloride, crude oil, iron ore, soybeans...

Rare earth products, China's unique resources, more than 90% of the world's rare earth produced in China, but since 1990, China's rare earth exports have increased by 9 times, but prices have dropped by more than 55%. There is yellow phosphorus, coke, phosphate...

All kinds of strange images plagued the Chinese economy: as long as there is more than one product that China lacks, the price in the international market will rise. Conversely, China has advantages and exports many products, but the international market price does not rise and fall.

The root cause identified by experts: This is because of the large number of domestic companies and the result of disorderly competition. It is necessary to strengthen the state's macro-control, reduce the number of enterprises, enlarge and strengthen enterprises, and unify the outside world. The "Anti-Monopoly Law" just provides such an opportunity to support the development of economies of scale, increase industrial concentration, and support all types of companies to become bigger and stronger on the basis of fair competition through the protection of competition mechanisms.

However, the problem is that given China’s current economic environment and intricate corporate attachments, it is necessary to eliminate some companies through competition and to enlarge and strengthen the dominant enterprises. The process is definitely longer than the time required for the country to adopt macro-control policies. The cost is also greater. Is it affordable for resource industries such as crude oil, rare earths, phosphorus, and coke?

The second impact:

Bioenergy: Expect to compete with traditional energy sources

“Originally, Shaanxi Province planned to promote the use of methanol gasoline in October last year, but it has not yet achieved results. One of the main reasons for the slow development of new energy is that standards and supporting policies cannot keep pace with the industry giants, and there is no market monopoly. There is no certain relationship," said Wu Jingchao, chairman and general manager of Shaanxi Changzheng New Energy Co., Ltd.

The new energy that is eager to cut a piece of cake with traditional energy through the “Anti-Monopoly Law” has apparently felt insufficient stamina in the applause of the “Anti-Monopoly Law.” This is due to the fact that China’s new energy technologies are not yet mature and the investment risks are high. , high production costs, lack of corresponding supporting policies and other issues. For example, in order to encourage biomass power generation, relevant departments give subsidies for on-grid tariffs, but stipulate that “co-firing power generation projects with more than 20% of the conventional energy consumed in generating electricity will not enjoy the subsidy price”. In other words, only the power plant that burns 80% of biomass fuel every year can be subsidized. While plants are growing according to the four seasons, it is obviously unrealistic for the power plant to use 80% of the fuel from biomass during the year. Therefore, companies stand by and farmers set fire to straw.

Therefore, some people in the industry frankly stated that the role of the “anti-monopoly law” in the new energy industry may be very limited. It is difficult to solve the problems in the new energy industry such as the high market threshold and the lack of relevant national standards, and the raw material resources and technological constraints are currently the largest. Problems, it is difficult to truly break the market monopoly. The first Pistacia bio-diesel project in China under construction by Shaanxi Derong Science and Technology Information Development Co., Ltd. is one of the demonstration projects of non-food plant bio-energy industrialization supported by the state, but it is also facing scarcity of raw materials and lack of funds.

However, there are still people who are optimistic about the "anti-monopoly law," and believe that there is a positive effect on bio-energy.

"The "Anti-Monopoly Law" is definitely a good factor for new energy sources. This is a signal that can be divided from traditional energy sources by 'cakes'. It will adjust the relationship of the domestic energy industry, form a diversified energy development pattern and benign market. Competition, gradually breaking the monopoly of the market and boosting the healthy development of the new energy industry have a positive effect.” Huang Yijun, President of Shaanxi Ludi Investment Holding Group, Wu Jingchao, Chairman and General Manager of Shaanxi Changzheng New Energy Co., Ltd., and Shaanxi Derong Technology Information Development Co., Ltd. Leaders such as Wang Hong and other private entrepreneurs in the field of biomass energy expressed the same views in an interview with reporters.

Some experts believe that the Anti-Monopoly Law targets the five major industries of railways, telecommunications, petroleum, automobiles, and software and is expected to provide a fair competition stage for new energy development.


[Anti-Monopoly Law's response to enterprises: Transnational tensions indifferent state-owned enterprises, private enterprises look forward to]


Multinational Enterprises: Stressful Learning

“As early as a year ago, after the birth of this law, we began to study and discuss it. We feel that the introduction of the “Anti-Monopoly Law” is a good thing for Tetra Pak. If we don’t succeed in China, "Anti-Monopoly Law" probably has no effect on us." Lee Hsun, president of Tetra Pak China, told reporters.

As a world-famous manufacturer of liquid food processing and packaging systems, Tetra Pak came to China in 1979. As of the end of 2007, Tetra Pak sold 28 billion packages in China, accounting for 10% of Tetra Pak's sales, and China became Tetra Pak Group is one of the largest markets, and its cumulative investment in China has exceeded 2.6 billion renminbi.

In recent years, Tetra Pak has been repeatedly questioned as having a dominant market position. It is a “monopolist” in the sterile paper packaging market in China.

However, Lee Hsun believes that this statement is overstated. “Teleole is a leader in the liquid food packaging market in China, but it is not a monopolist. There are many options for liquid food packaging materials, and Tetra Pak is only in the sterile paper packaging market. However, even in this area, Tetra Pak does not have the ability to dominate the market.As early as the "Anti-Monopoly Law" was introduced, our competitive market has gradually opened up, in the field of sterile paper packaging, other multinational companies have As they entered, they were very successful and grew much faster than Tetra Pak. Domestic companies also have investments, their market share has grown rapidly, and our market share has slowly declined."

In response to the "Anti-Monopoly Law," Tetra Pak made appropriate adjustments to its operating policies and strategies in China. In the past few years, as the prices of raw materials and crude oil increased, the cost of Tetra Pak increased, but the prices enjoyed by customers decreased. The reason was that Tetra Pak had been in the business execution mode of price, sales, after-sales service and customer management. We made adjustments and made long-term preparations in terms of cost control, production efficiency, and personnel training. Therefore, "it can be said that the Anti-Monopoly Law is a catalyst for Tetra Pak. It is beneficial to the overall market, and Promote us to do better," said Lee Husson.


State-owned enterprises: Indifferent to not respond to

“In the oil upstream area, it is estimated that the impact of the two major oil groups is not significant; however, the downstream refined oil retail market has a certain degree of open competition and may be subject to review,” said Wu Hong, dean of the East China University of Political Science and Law’s School of Economic Law.

Since the “anti-monopoly law” has no impact on PetroChina and Sinopec, the two groups do not respond to any accusations made by the parties. This again proves that oil, especially the upstream industry, is a key industry controlled by the state and will not be affected by the The Monopoly Law was introduced to change the original pattern.


Private enterprises: warmly looking forward to anxieties

As a private oil company, the introduction of the "Anti-Monopoly Law" makes them happy and sincerely hopes that the "Anti-Monopoly Law" will be implemented smoothly, because breaking the oil market monopoly will not only benefit private enterprises, but will benefit all parties in the society as a whole. After the introduction of the competition system in the oil market, even if the price of domestic oil falls due to convergence with the international market, there is no need for state subsidies and taxes can be increased. Competition will also encourage companies to increase their vitality, conscientiously increase production efficiency, participate in international competition, and reduce costs across all sectors of society. Consumers are the biggest beneficiaries.

After breaking the monopoly of the oil market, a diversified pattern will emerge, and the state can obtain oil resources through various channels. At the same time, it can also reduce corruption, waste and the loss of state-owned assets, maintain social stability, and promote the harmonious development of social economy.

The "Anti-Monopoly Law" is for other state-owned enterprises and private enterprises to gain free competition rights in a fair market environment. It will promote the comprehensive and harmonious development of our country's social economy and cultivate millions of dynamic and efficient enterprises to participate in international competition.

However, in the enthusiastic expectation of the "anti-monopoly law", some chemical companies have concerns about the prospects.

Guangdong Dongguan Zhenzhong Plastic Co., Ltd. is a manufacturer of environmentally friendly PVC heat stabilizers. Chairman Cai Yongsheng believes that “the “Anti-Monopoly Law” should have regulations that prevent upstream policy monopolies from expanding into downstream industries.” Monopoly difficulties he told reporters.

“Because the upstream resources are monopolized by the country’s important strategic materials, we don’t have much to say. But if you rely on upstream resources to monopolize the downstream, people in such a large area cannot get in. This is a problem.” He continued.




After editing:

How to treat the "anti-monopoly law"? All walks of life are actively responding, either advocating with each other, or being indifferent, or shunned; and for China's chemical industry, the "anti-monopoly law" is more like a catalyst that has always driven the industry forward. Because this catalyst has motivated the development of innovative technologies, it has stimulated the development and utilization of bioenergy. Under the current status of the chemical industry, it is not so much that the “anti-monopoly law” addresses economic issues. It is better to solve the problem of science and technology. In the future, how will the "Anti-Monopoly Law" continue? I think we need more fair law enforcement and multiple trade-offs, and play its role and effectiveness in continuous improvement.
Reporter Gao Yuan

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