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Sinochem Corporation is one of the earliest foreign trade companies of China. It has been one of the best enterprises for its high ranking in the volume of import and export. In 1998, Sinochem Corporation, like other foreign trade companies who always run their businesses as import and export representatives, encountered tough challenges. In order to realize the transformation to adjust the company with the market economy, Sinochem Corporation has begun to establish and carry out new development strategy since 1999. Sinochem took a series of actions, including implementing management improvement project, developing market-oriented core competitiveness, expanding the mainstream businesses to upper-stream and downstream sectors both domestically and globally, and establishing three core businesses involving energy, agricultural inputs and chemicals. With these continuous efforts, Sinochem has been transformed into a market-oriented marketing service enterprise from traditional trade representative and recreate a brand new company with energy and vitality.
After years of efforts, Sinochem Corporation, at the same time of continually holding the national leading position in import and export, has already beyond its business scopes from sole foreign trade and established a complete and globally cooperated industry value chain in the three core businesses, oil, fertilizer and chemicals, integrating resources, R&D, production, logistics and marketing & sales. Meanwhile, Sinochem also made great progresses in financial services and real estates &hotel. Its core competitiveness and sustainable development capability have been improved continuously.
In the field of oil business, Sinochem achieved great progress in expanding the business towards both upper-stream and downstream sectors while maintaining the current volume of crude oil export and entrepot trade. In terms of exploration and production, the company successfully purchased two overseas gas and oil fields in 2003 and realized the breakthrough in the upper-stream sector. By the end of 2006, the company had totally produced 14.21 million barrels of equity crude oil and possessed a reserve of 119 million barrels of equity oil equivalent. In 2006, the company successfully purchased partial rights and interests of Zhaodong oil field in Bohai Bay and entered domestic upper-stream sector. In terms of oil refinement, Sinochem is the biggest shareholder of Dalian West Pacific Petrochemical Co., Ltd. which processes the oil refining capacity of 10 million tons per year. Meanwhile, Sinochem has already started to construct oil refineries along the coastline of Southeast China. The import and international entrepot business of crude oil have reached nearly 40 million tons annually. Besides, Sinochem greatly strengthened the development of domestic product oil market and cooperated with Total to jointly construct light oil terminal distribution networks in Bohai Rim and East China, which continuously expand the market influences. In terms of oil warehousing and logistics, the company has established the warehousing and port layout centering Zhoushan oil transshipment base and possessed the storage volume of oil and liquid chemical products totaling 3.8 million cubic meters in Yangtze River Delta Region, Pearl River Delta Region and coastline areas of China. The company is currently expanding its business influences towards Bohai Rim. At present, Sinochem has initially established complete oil industrial value chain integrating oil E&P, oil refinement, crude oil trade, product oil distribution and logistic services. As one of the four largest national oil companies of China, Sinochem takes in charge of the construction and management of Zhoushan National Oil Strategic Reserve Base and makes great contribution to the energy safety of the country.
As for fertilizer belonging to agricultural inputs, Sinochem, on the basis of maintaining the main import channel of fertilizer of China, has established a complete industrial chain integrating resource control, R&D, production, marketing and agricultural chemicals services through expanding its business towards both upper-stream and downstream sectors. In 2006, the sales volume of fertilizer exceeded 12 million tons, which took up 14% of domestic market share. Besides, Sinochem actively invested in the development of kalium ore in Salt Lake of Qinghai and phosphorite resources in Yunnan and Guizhou provinces. Currently the company has become the second largest shareholder of Qinghai Salt Lake Potash Group, which is the largest inland enterprise of salt lake chemical products in China, and its listed subsidiary of Salt Lake Potash Co, Ltd. Sinochem also made investment in two million-ton class production bases of phosphate and compound fertilizer in Linyi of Shandong Province and Fuling of Chongqing City. Meanwhile, Sinochem became affiliated shareholder of local large fertilizer production enterprise, such as Shanxi Tianji Urea, Yunnan Sanhuan, Shandong Luxi Chemicals and Hualu Hengsheng, etc. at the moment, the annual production capacity of fertilizer has reached 5.93 million tons. Sinochem has become the only enterprise with the capacity of producing all of the three fundamental fertilizers, namely, nitrogen, phosphor and kalium. In the field of downstream distribution sector, Sinochem has accelerated the allocation of terminal distribution networks all over the country and established 1,400 fertilizer marketing networks covering over 80% of farmland in China. In July 2005, the fertilizer business of Sinochem was reorganized and successfully listed in Hong Kong Stock Exchange. It became the first overseas-listed stock of Chinese agricultural inputs industry. In April and June of 2007, Sinochem merged Shenyang Research Institute of Chemical Industry and China Seeds Group, which strengthened the business capacity in pesticide and seeds industry and pave the way for further development of agricultural inputs business.
While not only accelerating the development of main business and special products, but also increasing the export of hi-tech and high value-added products, Sinochem makes efforts to develop domestic market and customers, expand the business to the key sectors of the industrial chain like resource, R&D, production and logistics. The company accelerated the transformation from unitary import and export trade into comprehensive service mode, and established the leading position in the fields of fine chemicals, such as fluorine chemicals, rubber, chemical logistics and pharmaceuticals, etc. Moreover, Sinochem actively developed technological devices with independent intellectual property rights and developed into the third biggest producer of HFC-134a product in the world in just four years. The company is able to provide 30,000 tons of CFC-12 annually, which is the best environmental protection substitute for Freon. The project invested by the company has been awarded the prize for “National Model Project of High-tech Industrialization” by National Development and Reform Committee. It provides strong support for the country to implement the international convention of Freon substitute. Sinochem also has the largest fleet of liquid chemical products in China and established the leading position in the domestic trade and marine transportation of high class liquid chemicals.
As for the operation mode, Sinochem practiced the strategy of “Take an active role in market competition, create value for customers through providing value-added services, create value for the company through customers’ satisfaction”. The strategy emphasizes the importance of developing markets and customers and promotes the transformation of business mode from unitery import and export representative into value-added logistic services, which promotes the fast development of business.
During 1999 to 2006, the gross profit of Sinochem Corporation had increased by 6.5 times. It reached RMB 4.376 Billion, with the average annual growth rate of 30.8%; The sales revenue increased by 2.1 times, reaching RMB 184.2 Billion, and the average annual growth rate was 10.85%. Sinochem maintained its position in Fortune Global 500. In 2006, the total assets of the company reached RMB 69.5 Billion and the net assets was RMB 26.3 Billion; The asset liability rate was dropped by 61.8%; The company paid taxes totaling RMB 29.5 Billion to the national revenue during 8 years; Sinochem was selected as the Grade A Enterprise through the evaluation of State-owned Assets Supervision and Administration Commission in the three consecutive years of 2004, 2005 and 2006.
Appendix:
Key Business Index of Sinochem Corporation During 1999－2006
（Unit: RMB）
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