Restrain on Chinese chemical production

August 8, 2016
blog

The coming of the Chinese New Year (CNY), also named  Spring Festival, impacts the chemical production and logistics every year. Now coupled with new governmental rules to reduce pollution, a serious restrain is caused on Chinese chemical production and supply.

The Chinese government started a straightforward campaign to decrease water pollution to control the waste water from chemical production. This results in a much stricter attitude of the government towards the safety and environmental regulations for chemical producers.

Impact on Chinese chemical market

Many Chinese producers are forced to invest immediately into their production facilities to meet the strict requirements from the government.  Due to the fact that control has been lacking for a long time the changes need to be made are considered intense. Some facilities rather shut down and start chemical production at new facilities conform the new government rules then facing forced shut down by the government.

As most chemical production facilities are linked to or depending on other producers, the whole production chain suffers problems maintaining their business and normal lead times. The large producers seem to survive and smaller-less professional-ones are disappearing. As a consequence prices are driven up and supply is short, affecting business and lead times worldwide.

Chinese Spring Festival

The Chinese Spring Festival  is the biggest and most important festival in China: gifts and “Red Bags” are exchanged and people get to spend quality time at home. A majority of the factories in China are located in the coastal regions while traditionally factory floor workers come from far flung inner regions. For blue-collar factory workers this is the only time of the year when they get to see their families. That is why Chinese Spring Festival holds significant “emotional value” to the people of China. The workers in factories and drivers will be off from January 28th 2017.

Normally factories would stop to examine their machines and do maintenance either in summer or in winter. In the northern part of China, the temperature may be -10 to -15℃ during Spring Festival, so some factories specifically choose this period to examine machinery. The workers in the factories enjoy a much longer holiday, sometimes up to 20 or 30 days. For suppliers and importers the CNY can impact inventory levels and create quality issues and additional costs.

Our advice

In order to avoid problems we would suggest:

  • Avoid the rush: If your company need the goods in the first quarter, we suggest to make your purchase in December or at latest by beginning of January. Thus we could find the most economical way to ship the goods.
  • Take a margin: Do not count on tight schedule. Have a minimum of two weeks as buffer between the closing date and the production date. Because of the expected rush, even ordering in time may still result in issues with delivery times or quality.

If you have any specific question or query, please contact us. We are happy to help.

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