Alchemy Rubber Group is ready to move on to the next phase of its development, starting with a new website.
The specialty chemicals trading company launched its new site to offer product information and market research, as well as its greater transparency in sourcing chemicals from China, Director Tom Bohan said.
"We wanted to keep everything very simple and easy to access. It's there to tell a story and present information," he said.
Alchemy's story goes back to its formation by Jeff Rand, president of HB Chemical, as a method of improving the sourcing and buying models from China, Bohan said. The company established connections directly with chemical suppliers in China to trace products to their source and provide transparency.
Having started with just one employee on the ground in Shanghai, Alchemy has built up to five employees working with suppliers in China, Bohan said. It has offices in Shanghai, Hong Kong and Twinsburg, Ohio. Though the company has worked mainly with HB Chemical in the past, it's opening its doors wider to new customers now.
"Now we're kind of in the second phase of the business model with Alchemy and beginning to market our services to other customers worldwide," he said. "We've built up our infrastructure in China and achieved all of our goals in terms of revenue and staffing. We wanted to make sure all of those things were in place before we start to expand from a sales perspective."
Alchemy has expanded its supply base and started carrying a few new product lines, adding plasticizers at the end of 2017, he said. It's built out its logistics infrastructure with service providers to facilitate both transportation and market information. With its growth, Alchemy has complete audit capabilities of its supply base, building up employees to strengthen relationships with suppliers.
At , Alchemy actively provides market updates and intelligence, Bohan said. From the supply side in China, it covers topics such as pricing, capacity and availability, or other factors that affect the cost of chemicals offered in China.The company also provides economic data that influences forecasting capabilities, as well as transportation news that affects importing products from China.
"So if there's market intelligence related to freight costs or capacity, we'll include that," Bohan said.
The website also includes a calendar, which will actively list events that affect the market, he said. For example, the calendar marks the Chinese Mid-Autumn Festival, which falls on Sept. 22-24 this year.
"If there are global conferences or any type of government-related activity on the world or regional stage, the Chinese government may influence manufacturing in order to improve the environment, or security around the conference," Bohan said.
Environmental pressures
Last year, the chemicals market in China was under pressure as China's Environmental Protection Administration indiscriminately shut down all facilities facing high pollution levels. The shutdowns were sudden and could be indefinite. That environmental scrutiny continued through the end of 2017, and then backed off, Bohan said.
Inspections slowed down during the beginning of 2018, which gave smaller operators a chance to start back up and eased concerns among customers, he said. But near the beginning of May, the government's environmental teams began affecting operations in Hunan province, disrupting general supply base operations there.
Bohan said he's uncertain where the government's environmental scrutiny is going, but he doesn't see it relaxing. Though smaller operators have restarted processes, they'll face difficulty surviving long term with other regulations incoming.One hurdle chemical suppliers face is a 2017 guideline that requires chemical producers to relocate plants in urban areas to chemical-specific industrial parks to manufacture product, Bohan said. The deadline for smaller chemical companies to make that move is 2020, while larger operations have until 2025.
"This is really going to be a catalyst that forces some of that old infrastructure out, and I think that's part of it," Bohan said. "There is new technology to reduce wastewater and things like that."
China's new Environmental Protection Tax Law also puts pressure on chemical producers, as it taxes chemical companies on wastewater and carbon dioxide output. The new tax, effective as of April 2018, doesn't affect all companies equally, Bohan said.
"If you have advanced pollution control systems, the impact is very low," he said. "But if you're an old, dirty plant, it puts an economic strain on the business. That is going to affect the smaller producer that hasn't invested in their infrastructure."
Bohan said these overlying issues would affect production capacity and increase the price, but demand is very low. Beginning in May of this year, the market has seen a gradual price slide.
"Domestic demand in China is very, very low right now specifically for rubber chemicals," he said. "I don't know if it can be tied to tariffs, or if companies have reduced production because they see their export volumes being reduced."
Alchemy gathers market data both by working with various information sources and doing its own legwork. In the past year, it's seen record sales, and is continuing to expand its coverage of the chemical supply chain to bring more reliable information to the process. The company is continuing development of a pedigree program that will allow customers to track Chinese-supplied chemicals to the source, Bohan said.
"It's our goal to provide complete transparency to the supply chain," he said.
