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Agrochemical producers and traders are becoming increasingly concerned for the future of their industry following the release of a report by the Food and Agricultural Policy Research Institute (FAPRI) which warns that, “The next 10 years could be difficult for farmers.” With bad times predicted for the US agricultural industry, then Agchem suppliers are likely to have an equally tough time over the coming years.

In a recent press release, Pat Westhoff, director of FAPRI at the University of Missouri  said, “We are looking at several years of pretty tight financial situation for U.S. agriculture. Farm income is less than half of the 2013 peak and we expect it to remain low for the next several years.”

The institute, which is also affiliated with Iowa State University, blames the predicted drop in US farm revenue on falling crop and livestock prices that have not been offset by cost reductions.

The full report can be read here, but it makes for difficult reading, as it outlines various predictions of pricing models, explained as follows, “The FAPRI baseline uses a model with different variables to project a range of market outcomes for 2017-2025. Modest increases in net farm income are projected in the baseline report, but when adjusting for inflation, 2025 net farm income will be about the same as it was in 2015.”

Agchem industry heads are concerned about the knock on effect of decreasing farm incomes on fertiliser and farm chemical prices, especially as it comes at a time when the Chinese economy is also feared to be heading towards a downturn.

Darren Hudson, an agricultural economist at Texas Tech, highlighted these fears when he said, “Because China purchases so many imported agricultural goods when its economy is healthy, a not-so-healthy Chinese economy is bad news for the global market. The Chinese are very large consumers of U.S. ag products, so if there is a serious downturn it will have a significant effect on U.S. agriculture”

It seems that there is little that either farmers or Agchem producers can do to improve the situation given the global forces that are keeping prices low. As Hudson further explained to journalists when he said that, “The market adjustment that is occurring is doing that as a result of the uncertainty that exists around Chinese economic growth and related things like exchange rates and energy (costs).”

For fertiliser, pesticide and herbicide traders are now having to decide whether the challenging times ahead requires them to make their own cost savings. Or will greater competition for sales in the coming decade mean that now is the best time to increase marketing efforts?

So you’re thinking about trading chemicals in China. Well, who wouldn’t? The spectacular rates of growth seen there over the last 20 years have raised everyone’s eyebrows. And whilst there is some uncertainty over the state of the economy today, according to the Wall Street Journal 2015 still saw GDP grow by 6.9%.

The figure for chemical industry growth for the coming years may well be much higher given that, according to a recent PWC report, “Global sales of chemicals more than doubled over the last decade, hitting a record US$5.2 trillion by 2013 (americanchemistry.com). Emerging economies drove a large share of these gains, most notably in China, where chemicals sales expanded at an average compound annual rate of 26 percent over that period.”

The huge expansion of megacities has caused demand for chemical raw materials on an unprecedented scale. Added to that is China’s enormous manufacturing output of everything from clothing to food stuffs, from electronics to cars. China needs chemical suppliers.

So what do you need to know to gain access to the Chinese chemicals market? Well here are a few tips.

1. Find a Chinese Chemicals Trading Partner

The first and most important thing anyone hoping to trade chemicals in China can do is to find a local partner. The best partner will be an established Chinese-owned chemicals company, or a businessperson with good contacts who can navigate the complicated regulations and legal processes and perhaps most importantly, deal with the Chinese government directly.

As Peter Adriaens, a professor at the University of Michigan’s Stephen M. Ross School of Business and a professor of entrepreneurship at Sichuan University’s Suzhou Institute in Suzhou, says “It’s not like you just get money and a product and you’re up and running, like in America,”

A good partner may be an incorporated company that is about the same size as your business, it should be at least partly Chinese-owned, and well-connected in the Chinese chemicals market, Adriaens said.

Many firms wanting to access the Chinese chemicals market locate a partner through an online marketplace such as Spotchemi.eu. This website (which hosts this blog) enables you to find a buyer or seller for any chemical product you want. Plus it has a huge database of chemical buyers and sellers which can assist you in finding the chemicals business partner you need.

2. Understand the Business Culture

China is culturally a long way from America or Europe, and more than a world away when it comes to doing business there. In America, contracts, deals and other arrangements are fairly transparent between businesses working together. This is less true in China.

Shan Nair, co-founder of Nair & Co. (now trading as Radius) a service outsourcing company, said that understanding how Chinese business culture works is vital for anyone who wants to trade there.

“If you know what you’re doing, it’s not hard, but if you don’t know what you’re doing, it can be time consuming and expensive,” Nair explained. “There are some complications, but if you’re in contact with someone who is used to the obstacles, it can be quite straightforward.”

Again the need for a Chinese partner or someone who knows the chemicals market is important.

3. Understand the Bureaucracy

China is famous for its complicated bureaucratic web, and it has gained a reputation as a place where deals and contracts are often treated more like suggestions than concrete agreements.

In recent years, however, the Chinese chemical industry climate and regulatory structure has improved, and experts and business people say that with a little effort and knowledge, chemicals trading in China is now easier than ever.

4. Innovation

There was a time when people asked if China was innovative, but not anymore. Today, Chinese chemists are at the forefront of scientific research, and the global impact of that innovation will be increasingly visible. Whilst hundreds of midsize companies in the Chinese industrial chemical sector are providing ever-more-serious competition to Fortune 1000 competitors.

They are no longer focused simply on cheap, and have an increased understanding of the importance of quality and reliability. They are also a growing force in the speciality and bespoke chemical sectors, as well as taking larger market share in biotech, pharmaceutical and medical technology.

To stay competitive in this area, ensure your chemical products are of the quality being looked for. Whilst it can be tempting to trade in cheaper standard items, quality does show and China is now looking for quality.

5. Corruption

Whilst corruption has uptill now been a major problem in China, businesses will now need to recognize that anti-corruption initiatives and the rule of law are now long-term foundational elements of the political leadership’s platform. President Xi has consistently declared the objective of advancing the rule of law.

Such openness is a blessing to those wanting to break into the Chinese chemicals market. It is creating a fairer playing field where the best quality and best priced chemicals get the deal.

China is no longer the Wild West of the chemical industry that it was before, but it is still a land of opportunity for well-informed chemical traders. You can take advantage of globalization to sell your chemical products, and with the right help, it won’t be as scary as you think.

The chemical industry is highly advanced. Today’s processing plants use state of the art equipment and are computer controlled. Meanwhile, chemical supply chains are organised on computers and modern software designs new chemical compounds in an office, instead of a lab. The digital world is everywhere in the chemicals industry; except in sales. For the buying and selling of industrial chemicals is still largely done by meeting traders and manufacturers at conferences, emailing known customers and by picking up the phone.

The worry now is that this old school way of business will have a detrimental effect on the industry’s effectiveness. Indeed, many think that a lack of digital sales management will see the collapse of many chemical businesses.

For example, according to Paul Taylor, SAP expert and Forbes magazine contributor, “A digital transformation is being driven by a set of technology mega trends including mobility, hyperconnectivity, super-computing and real-time big data analytics, cloud computing and social.” And he believes that if your chemical business isn’t doing any of these things, then it could be in trouble. He even notes a study that found, “In the next 10 years it is estimated that 40% of the S&P 500 will no longer exist if they fail to keep up with these technology trends and recognize that the world has changed.”

This is a belief supported by a recent CapGemini Consulting report entitled, ‘The Digital Advantage’ which states that, “companies who have embraced the digital world and execute on their digital strategy register real gains in shareholder and stakeholder value. Typically they boost revenues by 9%, increase profitability by 26% and gain 12% in market valuation.”

This is an idea supported by Stefan Gurtzgen, senior director of chemicals at SAP and contributor at specchemonline.com, when he recommends using real-time pricing management as a competitive chemical business strategy. He writes, “Today, customers demand accurate pricing information at all times in order to make smart purchasing decisions. In the new digital economy, it is now possible to provide on-the-spot, competitive pricing for customers and prospects, including delivery commitments.”

This may go in some way to explain the meteoric growth of online trading companies, such as Alibaba and Amazon, as well as B2B online trading hubs like Spotchemi (who specialise in chemical E-networking and who host this blog page).  They are embracing the changing times, and can see the strategic advantages of using modern digital business techniques to gain advantages.

Certainly millennials, the new wave of business thinkers born after 1985, think that the Internet is a better way to communicate and therefore do business. In a 2011 report by PWC, called “Millennials at Work”, it was found that the traditional ways of selling chemicals (networking, attending conferences, meeting potential customers) clashed with the way they expected to do business. It stated that, “With technology dominating every aspect of millennials’ lives, it’s perhaps not surprising that 41% say they prefer to communicate electronically at work than face to face or even over the telephone. Millennials routinely make use of their own technology at work and three-quarters believe that access to technology makes them more effective at work.”

This means that your next prospective client, feedstock supplier or chemicals purchasing manager is likely to prefer digital contact over face-to-face introductions. And if you are not sufficiently digitised and taking advantage of databases, E-networking and targeted online campaigns to promote your industrial chemical products, then you competitors are.

So what’s the next step in getting your chemical business into the 21^st century? Well according to the experts at CapGemini Consulting, “The digital transformation must be led from the top.”

So who’s leading your revolution to a digitized way to chemical sales?