The focus of the fine chemical industry is shifting to China and India

The trend of industrial transfer is obvious

A report from the Stanford Research Institute in the United States shows that in 2005, the world's total annual output of chemical products was US\$2.2 trillion, of which fine chemicals and specialty chemicals accounted for US\$1 trillion, with a fine chemical rate of 45%.

In 2010, with the recovery of the global economy, the world's total annual output of chemical products reached US\$3.4 trillion, an increase of 8.8% compared with 2009. The market size of fine chemicals was close to US\$1.5 trillion, and the fine chemical rate dropped to 44.1%. The main reason is that in recent years, global markets, especially in the Middle East, have made large and concentrated investments in large oil refining, large petrochemicals, and large chemical industries, while investment and development in the fine chemical industry have been relatively stable, without significant fluctuations, leading to a decrease in the proportion of fine chemical output.

China's production scale of fine chemicals is constantly moving up in the world rankings. At present, the developed countries and regions in the fine chemical industry are China, Japan, North America, and Western Europe. China ranked fourth in the world in 2005 and third in 2009. The trend of the shift in the center of gravity of the fine chemical industry is becoming increasingly obvious.

In 2005, the total sales of fine chemicals in the above four regions accounted for 85.7% of the global sales, which dropped to 80% by 2010. Among them, Europe dropped from 33% to 25%, North America dropped from 28.2% to 27%, Japan dropped from 13.5% to 12%, and China's share increased from 11% to 16%.

Processing outsourcing is a form of industrial transfer

The main areas of the world's fine chemicals include: pharmaceutical raw materials and intermediates, pesticide raw materials and intermediates, special polymers, cleaning agents, electronic chemicals, building chemicals, surfactants, etc. Among them, the top two market shares are pharmaceutical raw materials and intermediates and pesticide raw materials and intermediates, accounting for 20.1% and 12.2% of the fine chemical market size, respectively.

Currently, the growth rate of the pharmaceutical and pesticide industries in emerging countries far exceeds that of developed countries. IMS data shows that the compound annual growth rate of the global pharmaceutical market in the past 5 years was 7.76%, and the compound annual growth rate of the pharmaceutical industry in emerging market countries in the past 5 years reached 12%~13%, while the compound annual growth rate in developed countries was only 4%~5%. Among them, emerging market countries mainly include China, India, South Korea, Brazil, Mexico, Russia, and Turkey.

The rapid development of R\u0026D and processing outsourcing markets is a major manifestation of industrial transfer.

In recent years, from the perspective of producers, in order to reduce R\u0026D and production costs, reduce the pollution caused by front-end raw material production to the environment, and accelerate the R\u0026D and listing of new drugs, the front-end raw material production in the industrial chain has been transferred; from the perspective of suppliers, due to overcapacity and excessive competition, there is a demand for new opportunities and new markets. Relying on advantages such as resources, talents, costs, and large environmental capacity, they have undertaken some industries transferred from developed countries.

In 2007, the global outsourcing ratio of pharmaceutical R\u0026D and processing costs was 19%, US\$44 billion, while in 2010, this ratio reached 25%, US\$85 billion, with an average annual growth rate of 14.1%. In the next 3-5 years, 30%-50% of R\u0026D and processing funds will be invested in service outsourcing, and the average annual growth rate of outsourcing costs will be 18.1%-30.8%, and a large part of these investments will go to China and India.

Domestic fine chemical output value increases by more than 20% annually

In the process of transferring the foreign fine chemical intermediate industry, China has gradually undertaken the industrial transfer of pharmaceutical and pesticide intermediates due to abundant bulk chemical raw material resources, advantages in the R\u0026D and production of intermediates and raw materials, standardized intellectual property protection, complete infrastructure, and suitable climate.

The pesticide and pharmaceutical intermediate industries originate from the international division of labor under the background of economic globalization. Due to the complex production technology, lengthy process links, and rapid update speed of pesticide and pharmaceutical products, no enterprise can maintain a relative cost advantage in the entire R\u0026D, production, and sales links.

Therefore, multinational companies make full use of global resources, focusing on R\u0026D and sales, while transferring the front-end raw material links in the industrial chain to countries with relative cost advantages and technical foundations (such as China and India), which has led to the emergence of enterprises in these countries that focus on the production of intermediates and raw materials. The low-cost advantage is a favorable basis for Chinese enterprises to undertake industrial transfer.

China has a sufficient supply of basic chemical products at low prices, and the fine chemical market is extremely fragmented, with 17,000 fine chemical enterprises that can produce 20,000 fine chemicals in 16 categories. Competition also reduces manufacturing costs. At the same time, the salary levels of R\u0026D personnel and industrial workers in China are different from those in developed countries, and the costs of equipment procurement, installation, and construction in China are low, resulting in rapid growth in the output value and export of pharmaceutical and pesticide intermediates in China.

Data from the National Bureau of Statistics show that by the end of 2009, the output value of state-owned and above-scale non-state-owned fine chemical enterprises reached 1.8 trillion yuan, with an average annual growth rate of 21.64% from 2006 to 2009.