The polymer materials industry is developing towards high performance, multifunctionality, and intelligence.

1. Development history of the polymer materials industry

Development history of the polymer materials industry

Source: PwC Advisory

2. Barriers in the polymer materials industry

(1) Brand and location barriers

Polymer materials are important raw materials for plastic products, and downstream customers have high requirements for quality consistency, environmental protection indicators, and supply stability. Once suppliers are locked in, they will not be replaced without significant quality or price changes, otherwise it will affect production continuity and quality consistency, increasing costs. Therefore, polystyrene companies have relatively stable cooperation with downstream customers, with first-mover and brand advantages, forming customer and brand barriers. At the same time, chemical raw material commodities have sales and procurement radii, making it difficult for new entrants to choose locations, thus creating location barriers.

(2) Customer barriers

The main use of polymer materials is in rubber products, highway and airport facility construction, automotive industry, household appliances, medical and health, toys, home decoration, construction projects, etc., for processing and production of end products. Some industries, such as toys, home decoration, automotive industry, and medical health, have high requirements for product quality and safety. Companies' recognition of raw material quality is usually based on long-term cooperation. Procurement generally requires strict procedural review, and companies will choose suppliers with strong scale, high technical level, and stable product quality, requiring a high comprehensive level of technology and production capacity from production enterprises. Moreover, due to the differences in modified formulations, the same product from different manufacturers has significant differences in performance indicators, resulting in a certain degree of customer stickiness. For new entrants in the industry, it is challenging to capture existing production enterprises' customers to expand the market.

(3) Capital and scale barriers

The polymer materials industry is capital-intensive, requiring significant investment in production and construction. At the same time, the state has extremely strict environmental protection, safety supervision, and fire protection requirements for chemical projects. In addition to purchasing normal production equipment, companies also need to configure corresponding safety equipment, environmental protection facilities, fire protection facilities, etc., leading to a longer construction period for new projects, significantly increasing investment amounts and time costs for new entrants. Therefore, this industry has high capital and scale barriers for new entrants.

(4) Qualification and access barriers

The main raw materials for styrene-butadiene transparent impact-resistant resin and elastomers are mostly flammable hazardous materials, requiring qualifications such as "Hazardous Chemicals Safety Use Permit" for production, and factory construction must undergo strict approval and acceptance by multiple departments, with a long cycle and high access threshold. In addition, the state requires "chemical enterprises to enter parks," and new entrants must build in specific chemical parks, making site selection and construction difficult, further raising the access threshold. Therefore, new entrants in this industry face high approval and qualification barriers.

(5) Technical barriers and talent barriers

Styrene-butadiene transparent impact-resistant resin and mercaptoethanol products have technical barriers, forming a research and development and production system through process and formulation improvements and long-term accumulation, establishing competitive advantages and access thresholds. There are many key links in production that affect quality, requiring high standards for technical personnel. New companies find it difficult to stabilize production without relevant personnel, and the technology for mercaptoethanol is often based on the experience of frontline personnel, making it hard for new entrants to accumulate experience in a short time. SBS and SIS, as new types of polymer composite materials, involve multiple technical links in research and development, requiring high standards for preparation technology and equipment, presenting significant technical challenges and high technical barriers.

Therefore, the existing companies in this industry have accumulated technical research and development systems, innovation capabilities, talent teams, and production process experience, creating significant technical barriers for new entrants.

3. Development prospects of the polymer materials industry

(1) New technologies promote the rapid development of polymer materials

For polymer materials, the integration of cutting-edge new technologies such as nanotechnology and molecular design technology has brought about revolutionary changes. Nanotechnology allows for more precise control of the microstructure of polymer materials, endowing them with new performance characteristics such as ultra-strong mechanical properties, unique optical properties, and excellent thermal stability. Molecular design technology acts like a dedicated "genetic code" for polymer materials, enabling researchers to design synthesis routes precisely at the molecular level according to expected performance requirements, thus producing polymer materials with special functions, such as self-healing capabilities, shape memory functions, and good biocompatibility, continuously expanding the application range of polymer materials in high-end fields such as aerospace, biomedical, and smart wearables, driving the polymer materials industry towards high performance, multifunctionality, and intelligence.

(2) Downstream industries drive the expansion of polymer materials demand

Polymer materials are widely used, and end products are closely related to daily life. The development of the national economy, improvement of living standards, and introduction of consumption policies have led to a continuous growth trend in downstream demand, with high average annual compound growth rates in multiple fields, and the application range of styrene-butadiene transparent impact-resistant resin is continuously expanding. Industrial structure upgrades and increased environmental awareness have led to increased demand for environmentally friendly materials in downstream sectors, structural optimization, and a broad market space for modified polystyrene. The development of fields such as new energy vehicles, electronic information, and biomedical will also significantly boost the demand for corresponding high-performance, functional, and biomedical polymer materials.

(3) Increasingly strict environmental policies

Due to the increasingly stringent environmental policies of the state and the impact of supply-side structural reforms, some enterprises that do not meet environmental and safety production requirements are continuously being eliminated, leading to a purification of the industry, promoting standardized production, and benefiting the long-term and sustainable development of the industry.

In July 2017, the General Office of the State Council issued the "Notice on Printing and Distributing the Implementation Plan for Prohibiting Foreign Garbage from Entering the Country and Promoting the Reform of Solid Waste Import Management System," which comprehensively prohibits foreign garbage from entering the country, continuously cracking down on foreign garbage smuggling, and by the end of 2017, prohibits the import of waste plastics from living sources. This has had a significant adverse impact on recycling companies that use imported "waste plastics" as raw materials, forcing some production enterprises to shut down, while some recycling plastic processing companies have moved their factories abroad, reducing the effective supply in the market and providing good market opportunities for polystyrene manufacturers that strictly adhere to the "environmental protection and safety" guidelines. In summary, with the increasingly strict environmental policies and the prohibition of "waste plastics" imports, on one hand, it directly raises the industry access threshold, while on the other hand, it eliminates small and medium-sized enterprises that do not comply with environmental policies, allowing outstanding companies in the industry to rely on technological advantages to further increase market share and continuously enhance profitability; on the other hand, it promotes the scaling and standardization of the entire market, benefiting the healthy and orderly development of the industry.

4. Competitive landscape of the polymer materials industry

The overall concentration of the polymer materials industry is relatively low, but it shows a gradually rising trend. With the intensification of market competition and continuous technological advancement, some small enterprises with poor R&D capabilities and low technical levels are gradually being eliminated or merged, while companies with technological strength and scale advantages are gradually growing stronger, continuously increasing their market share. Large multinational companies such as BASF, Dow Chemical, and DuPont are leading the global polymer materials market with advanced technology, strong R&D capabilities, and a global market layout, holding a monopoly advantage in high-tech, high-value-added products, which are widely used in high-end fields such as aerospace, electronic information, and biomedical. Domestic companies like Jinfa Technology, Guoen Co., and Pulite are gradually enhancing their market competitiveness in the domestic market and some international markets by continuously improving their technological level, expanding production scale, and optimizing product structure, with products widely applied in the automotive, electronics, and communications fields. Meanwhile, small and medium-sized companies have made breakthroughs in specific areas through technological innovation and differentiated competition, such as some enterprises focusing on niche product production in segmented markets to meet the needs of specific customer groups; others have secured a place in the fierce market competition by providing personalized customization services.

The main companies in the industry include BASF, Dow Chemical, DuPont, 3M, Jinfa Technology, Wanhua Chemical, Hengli Group, and Rongsheng Petrochemical.