The chemical industry of China faces innumerable
challenges, including sustainability, feedstock change and human resource
management. Despite the opportunities available to the chemical companies these challenges can prove to be major hurdles in the path to establish a
sustainable economy.
China has been trying to reduce its dependence on
non-renewable resources and its entry into the alternative feedstock sector can
give rise to a new set of challenges. Changing the energy mix will have a
direct impact on the chemical companies. The US petrochemical and energy
sectors have reduced their reliance on heavy feedstock to lighter feedstock, a
change brought about by the shale gas revolution. Thus, increasing number of
crackers are replacing existing naphtha capacities. This transition, however,
may not be so smooth for China. China has and continues to invest in
naphtha-based ethylene capacities. Its crackers are dependent on the refining
sector and naphtha accounts for 75 per cent of the feedstock use.
However, the increasing use of naphtha has pushed the
government to make use of the country’s shale gas reserves to promote
coal-to-gas technology. But this sector is still being explored and the plan of
using coal as feedstock has not materialized. There isn’t a single coal-to-gas
plant that has started commercial production. However, these projects would
require huge investments and are likely to consume enormous amounts of
resources. For instance, a plant producing 4 billion cubic meters of gas per
year will consume nearly 16 million tonnes of fresh water annually.
Despite government and industry initiatives to establish a
sustainable sector, sustainability continues to be a major issue for the
chemical industry. Many chemical companies are yet to understand that
sustainability will not only lead to reduced environmental impacts and carbon
footprints, but also help reduce costs.
Chemical companies in China continue to focus on scale of
operations and capturing new markets. However, forming joint ventures with
firms in Europe and America will encourage Chinese companies to embrace
sustainability. The Chinese government has formulated a plan which focuses on
reducing carbon emissions and encouraging use of clean energy. The government
has introduced scientific means to record carbon emissions of various firms in
major industries.
The government should also encourage heavy industries to
focus on returns as well as environmental protection. However, sustainability
is not the sole prerogative of the government and industry players should also
work toward establishing a sustainable economy.
Certain chemical companies have started investing in new
products, using alternative feedstock and encouraging stakeholders as well as
supply chain participants to be environmentally conscious. But there continue
to be a large number of firms that fail to link their business strategies to
sustainability goals. Sustainability should be made a priority, a vital
business practice, in order to help China make hassle-free transition to a
clean economy.
The industry continues to be plagued by poor management of
human resources. Several enterprises are over-staffed with overlapping
management levels and reduced efficiency. Chemical companies need to bring
about changes in the organization structure and employ talented workforce to
promote diversification and greater flexibility. The need of the hour is to
reform company management and staff training programmes.
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