Gross Profit Margin Percentages for South Korean versus US Chemical Companies

Recent gross profit margin percentages (GPM %) for 14 large and mid-size South Korean chemical companies have been computed to be on average 17%.   2012 sales for these companies ranged from approximately 575 million to 36 billion US dollars.  The gross profit and revenue amounts used to determine the 17 GPM % average were obtained from the companies’ websites.   The South Korean chemical companies are all listed on the Koran Stock Exchange as chemical companies.   Click here to go to the Korean Stock Exchange website and to find stocks listed as chemical companies.

The 17% GPM % is low when compared to an average GPM % for US chemical companies.  For example, in a blog I wrote in December 2013, I indicated that a recent average GPM % for 27 US companies (small, mid-size, and large) is 28%.  Click here to read this December 2013 blog.  If correct, such a large difference in GPM % between South Korean and US chemical companies suggest that on average US chemical companies are much more profitable.

An explanation for the large GPM % difference might be that the costs of raw materials from which chemical products are produced are much higher in South Korea.  This is consistent with South Korea’s lack of chemical product-related natural resources.  Another reason might be South Korean chemical companies are not able to demand higher prices from their customers.

A Benchmark for a Country’s Chemical Industry Productivity

A European Chemical Industry Council (CEFIC) report (click here to go to the report – PDF file) gives total 2011 chemical sales for several countries.  These total sales apparently represent an estimated total revenue amount that products produced by the country’s chemical industry generated in 2011.

Using the data in the CEFIC report (and for a few countries, data from other sources), a chemical products sales amount per person amount was computed using 2011 country population data. World Bank 2011 population data was used.  Click here to see this data.

The computed results were then used to generate the graph shown below.

So, what might the chemical sales per person for a country show?  Perhaps one demonstration is a comparison of the “robustness” of a country’s chemical industry productivity.

Also, the chemical products sales per person amount can be used as a benchmark for improvement.  For example, if by 2015, India has a $288 per person amount, a conclusion would be that India’s chemical industry has made progress in becoming more productive.

Chemical and Material Shortage Alerts – March 2014

The purpose of this blog is to identify chemical and material shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is March, 2014.

Section I below lists those chemicals and materials that were on previous Chemical and Material Shortage Alerts lists and continue to have news releases indicating they are in short supply. Click here to read the February 2014 Chemical and Material Shortage Alerts list.

Section II lists the new chemicals and materials (not on the February alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releaseswww.bio.org/wc/cen.   Chemicals and materials identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Chemicals and materials that continue from February to be reported as in short supply are: construction materials (United Kingdom). 

Section II.   Shortages Reported in March not found on the Previous Month’s List

Iron ore.  India is experiencing shortages of iron ore for use in steel manufacturing; primarily due to government crackdowns on illegal mining operations.

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none

2.  Production not keeping up with demand: none

3.  Government regulations: iron ore (India)

4.  Sources no longer available: none

5.  Insufficient imports:  none

6.  Supply not keeping up with demand:  none

Some Observations about India’s Chemical Industry

There seems to be very few large Indian chemical companies.  Searching the internet for Indian chemical companies found only eight with revenues greater than $500 million((Reliance Industries; Asian Paints; Tata Chemicals; Narmada Valley Fertilizers; UPL (formerly United Phosphorus Limited)); Pidilite; India Glycols; and Mangalore Chemicals), and only three with revenues granter than $1 billion (Reliance Industries; Asian Paints; and Tata Chemicals).   However, smaller chemical companies (revenues less than $500 million) seem rather numerous.

Estimates found on the internet suggest recent total India annual chemical product sales revenues are in the $100 to $175 billion range, with a 10 to 12% growth rate.  This chemicals sales total seems very low for India’s population.  Another estimate found is that India’s per capital consumption of chemical products is only 1/10 the world average.  These statistics, if reasonably correct, suggest the potential for great growth in chemical product consumption in India and for companies selling chemical products there.

The Indian chemical companies would also benefit from greater emphasis on increasing efficiency.  For 22 chemical companies for which revenues and numbers of employees could be found, the average revenues to employee ratio is about $280,000 per employee, much below what is found in the United States (see a recent blog I wrote on comparing revenues to employee ratios  between US and Chinese chemical companies, by clicking here).

Acrylonitrile Production in China

Based on data found on the internet, China in recent years has produced around 1,100,000 tonnes (metric tons) of acrylonitrile per year.  Demand has perhaps been 30% greater than this production, with the difference being made up by imports. The demand in China for acrylonitrile is expected to grow at about 7 to 8% per year.  Again from the internet, eleven production facilities have been identified, all located within petrochemical complexes, meaning sites with a petroleum supply.  The reported major uses of acrylonitrile are for acrylic fibers, acrylonitrile butadiene styrene polymer (ABS), and polyacrylonitrile (PAN) production, used in carbon fiber production.  The sites with the facilities producing the acrylonitrile often also contain the facilities producing the fibers and polymers.  Most, if not all, of the acrylonitrile production uses propylene ammoxidation technology.  The eleven production sites are identified below and their suspected production capacities are reconciled with the presumed actual production amounts.

Five of the eleven acrylonitrile producing facilities are owned by, as subsidiaries, the giant, state-owned petroleum company PetroChina (China National Petroleum Corporation).  The five are: Jilin Petrochemical Co. (Jilin Province), with a acrylonitrile production capacity of 424,000 tonnes per year (the largest in China); Fushun Petrochemical Co. (Liaoning Province), production capacity, 94,000 tonnes per year; Daqing Petrochemical Co. (Heilongjiang Province), production capacity, 88,000 tonnes per year; Daqing Refinery and Chemical Co. (Heilongjiang Province), production capacity, 50,000 tonnes per year; and Lanzhou Petrochemical Co. (Gansu Province), production capacity, 31,200 tonnes per year.

Three of the eleven acrylonitrile production facilities belong to the other giant, state-owned petroleum company, SINOPEC (China Petroleum and Chemical Corporation).  These are:  Anqing Petrochemical Co.  (Anqing Province), production capacity, 210,000 tonnes per year; Shanghai Petrochemical Co. (Shanghai Municipality), 130,000 tonnes per year; and Qilu Petrochemical Co. (Shandong Province), production capacity, 80,000 tonnes per year.

The remaining three acrylonitrile production facilities are: Secco Petrochemical Co. (Shanghai Municipality), production capacity, 260,000 tonnes per year (the second highest in China); Qitai Petrochemical Co. (Shandong Province), production capacity, 8,000 tonnes per year; and Keyuan Petrochemical Co. (Zhejiang Province), production capacity unknown.

The total production capacity of these eleven facilities given above is 1,375,200 tonnes per year (the individual amounts are based on data found on the internet).  This capacity amount is above the 1,100,000 tonnes believed to be the recent amount produced in China.  But, these production facilities are unlikely to run at 100% capacity.  The capacity of these eleven plants agrees reasonably well with what is believed to be the actual production amount in China.

Please email me if you are interested in further research and analysis related to Chinese chemical production.

Chemical and Material Shortage Alerts – February 2014

The purpose of this blog is to identify chemical and material shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is February, 2014.

Section I below lists those chemicals and materials that were on previous Chemical and Material Shortage Alerts lists and continue to have news releases indicating they are in short supply. Click here to read the January 2014 Chemical and Material Shortage Alerts list.

Section II lists the new chemicals and materials (not on the January alert).  Also provided is some explanation for the shortage and, when appropriate, geographical information.  This blog attempts to list only actual shortages situations – those shortages that are being experienced during the period covered by the news release.   Chemicals and materials identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Chemicals and materials that continue from January to be reported as in short supply are: construction materials (India, Malaysia); natural gas (Iran).  See the January alert (click here) for explanations for the shortages.

Section II.   Shortages Reported in February not found on the Previous Month’s List

Road salt.  Several localities in many US states had shortages of road salt due to higher than expected snow and cold weather.

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none

2.  Production not keeping up with demand: none

3.  Government regulations: none;

4.  Sources no longer available: none

5.  Insufficient imports:  none

6.  Supply not keeping up with demand:  road salt

Chinese Chemical Companies Have Lower Revenues to Employee Ratios than US Chemical Companies

The revenues (sales) to employee ratios for 32 Chinese chemical companies were determined from revenues and employee numbers found on the chemical company websites.  The average ratio for these companies is $366,815 per employee (converting 2,384,298 CNY per employee using the exchange rate 6.5 CNY = 1 USD).

For 20 US companies, Securities and Exchange Commission (SEC) filings were used to find sales to employee ratios.  The resulting average ratio for all 20 companies is $544,556 per employee.   Assuming the Chinese company revenues and employee numbers found are reasonably accurate, US companies are much more effective in generating revenues per employee ($544,556 versus $366,815).  The US companies had an average employee number of 7,641 and the Chinese companies, 10,377.

Economists often indicate that the quality of a country’s labor force is the primary factor determining that country’s ability to grow its economy.  The revenues to employee ratio is an indicator of such quality, with the larger revenues to employee amount indicating a higher labor force quality.

The Chinese companies chosen to include in the analysis were based on an extensive searching of the Internet.  All Chinese and US companies used in the analysis have between one billion and fifteen billion of dollars in revenues.  The companies chosen primarily provide chemical products.  The revenues to employee ratios were determined by totaling the revenues for the 32 Chinese and 20 US companies. Then, these totals were divided by the total number of employee for the 32 and 20 companies.

Chinese chemical company websites seem to be the primary, perhaps in most cases the only, source of data about the companies.  So a problem about data on Chinese company websites is being unable to easily find independent sources, such as SEC filings, to verify the data.   The websites do not seem to be updated on a timely basis. 

However, website standards for Chinese companies do seem to include that at least sales and employee data be presented.  It is possible that the sales and employee data on the websites are reasonably accurate (as of the date of the data) since such data is likely monitored by other Chinese companies and the state, and incorrect data might be quickly noticed, and be a source of embarrassment for the company.

If you are interested in how I might help you with further research and analysis related to Chinese chemical companies, please email me.