Are You a Manufacturer or a Trader?

Are you a Manufacturer or Trader?

This is a question we receive every single day from potential customers like you.

Before we respond we always recommend YOU read this blog before we answer your question.

Camachem on Site Visit with African Customer

There is an old Chinese proverb that says, it does not matter if the cat is black or white, so long as it can catch mice, it is a good cat.

At Camachem, we have the same saying, It doesn’t matter if you are a manufacturer,trader, or distributor as long as you can supply quality chemicals, you are a good supplier.

But wait, maybe it matters?

There are several reasons that you may prefer a manufacturer or trader depending on the situation. For example, you may assume that a manufacturer may offer:

  1. Better Quality Chemicals
  2. Is a Better Company because of Size i.e. “The bigger the better”
  3. May have a Better Price
  4. Better Quantity of Cargo i.e. “Capacity”

But is this really the case?

Let us provide you with some examples from China since this is the market we know best and have been operating in for more than a decade.

Our customer’s xanthates in warehouse before export to Zambia

Premise: Manufacturers Offer Better Quality Chemicals

  • This is a simple one. Quality is independent of the type of company. If a trader has good or bad quality products, it is because they sourced them from a good or bad factory.

Camachem working jointly with SGS inspector to conduct testing and sealing of Kenyan customer cargo before pre-export verification (PVOC) report

  • Manufacturers may also produce bad quality products
    • While this may seem obvious, the quality of a product is mainly determined by the manufacturer, not the distributor
    • The distributor can only distribute what the manufacturer makes so it is up to them to select the right manufacturer and understand their strengths and limitations

 

Sodium Hypochlorite being loaded for a customer in Indonesia

Nonetheless, for certain products that are time-sensitive such as sodium hypochlorite, the lead time to the customer highly affects the quality of the product. This product loses potency over time and long distance so it is crucial for customers to this beforehand

Premise: Manufacturing Companies are Bigger than Traders/Distributors = Better Suppliers

Let us take some of the biggest manufacturers in China as examples.

  • Ever heard of Sinochem? (if not, please read their profile here)

  • What about Sinopec? (read their profile here)

  • Better yet, what about China Bluestar International Chemical? (read their profile here)

           

  • These are not only some of the largest chemical companies in China, they are also among the largest in the world!

  • While it is true that each one of them does maintain direct manufacturing, because of their sheer size, brand reputation and market access, they have also become some of the biggest traders in the chemical world.

  • Not only do they supply their own manufactured goods, they also assist other manufacturers distribute their chemicals domestically and worldwide

  • There is not one single company that can manufacture the thousands of chemicals they export each year. But with their supplier network, they are able to diversify into non-core products.
  • Even Sinopec, the largest company in China, does not manufacture the thousands of tons of chemicals and petrochemicals they export. And they should not have to, as this would not be efficient.

  • The goal is to provide the end user with chemicals that are suitable for their usage at a reasonable cost and lead time

Chemical Companies: Is Bigger Always Better?

  • Consider this from the perspective of the manufacturer
    • Some of their best customers are local trading companies that pay them before shipments leave the factory and in the local currency
    • The also have level 1 agents who in exchange for better pricing, guarantee to purchase large volumes from the factory regardless of market conditions
    • This is why trading companies may often have better pricing than that of the manufacturer

Ferric Chloride awaiting loading at manufacturers yard in Hebei, China

  • Benefits for the manufacturer
    • They do not have to handle international trade and forex risks
    • They prefer dealing in RMB, the local currency to avoid forex risk and delayed payments
    • Working with local exporters guarantees long-term contracts with fixed pricing, fixed quantities in local currency that allows them better production planning

Ferric Chloride Anhydrous at the Manufacturers Warehouse in Hebei

Are Manufacturers Always the Best Option? Other Issues of Working with Manufacturers

What if you cannot meet the Manufacturer MOQ?

  • Take an example of soda ash or caustic soda
  • The average level 1 trading agent MUST order 5000-10,000 tons of product per month in order to maintain their standing as a tier-1 agent
  • If you are able to order such large amounts, you can also deal directly with the factories and enjoy the large discounts that come with such arrangements

Calcium hypochlorite at manufacturer site in Tianjin before sending to port

  • What if the manufacturer payment terms are not flexible?
    • As mentioned above, the factories typically prefer (although in the last few years, they have become more flexible) to be paid in local currency before the cargo leaves their factory
    • Do you expect a factory will agree to payment on CIF/DDP terms for a few containers?

Confirmation of final loading of sodium hydrosulfide for Camachem customer to Southern Africa

  • What if the manufacturer does not know international requirements for importing to your country?
  • Many countries require certificate of origin, pre-export verification, third-party reports to be in English or international languages,exporting company to be registered in destination country(eg Brazil), most manufacturers have limited or no experience with this
  • It is rare that factories may have this knowledge unless they are already dealing with the market you are in. Confirm before your orders
  • What if your company requires more than 1 product and the manufacturer is a single product maker?
    • We at Camachem for example, have some customers import more than 25 different chemical categories and others that require dozens of distinct chemicals

    • One option is to work with 25 factories. This is feasible if the buyer has the workforce to handle 25 different invoices, communication, shipment information from each supplier. But for smaller companies, it is simply not a viable option

  • The other option is to work with Camachem who will coordinate all the manufacturers, logistics, payments etc.

  • Our focus is on xanthates but we have customers that require water chemicals that are used in the same industry, we listened to them and we offer them products and save them the headache of srolling through Alibaba on a daily basis
  • Of course, if you only require 1 or 2 chemical groups, then working a few companies is not an issue

What if the manufacturer has its own trading company?

  • This has been a solution for local manufacturers to deal with the risks outlined above. If you can get a manufacturer that can offer the benefits of an international trading company via a company they own. This can be a win-win situation for the average buyer

Conclusion

There is no direct correlation between a chemical manufacturer in China and the quality/price/service offered. For every experienced manufacturer, there is one focused only on production.

The irony is sometimes some of the best manufacturers have very little direct export due to the issues outlined above. Nonetheless, in the past 5 years, as the domestic market has shrunk, manufacturers have increasingly formed their own trading companies or ‘gone out’ in search of buyers.

Therefore it is always better for you to compare several entities and then make your decision based on the most important factor for your chemical categories, your company rules and your country’s regulations.

How can we help you with your chemical requirements?

✅ Are you a company of 11 - 50 people?

✅ Do you use more than 1000 tons of industrial chemicals per year?

✅ Do you spend too much time finding the right chemical manufacturers?

✅ Are you unsure each time whether you will get the right grade of chemical?

If your answer is YES, Reduce Your Chemical Sourcing Headaches, Contact Us Now for a FREE Consultation and Samples Offer