Falling coal prices are transferring the profitability of China’s chemicals sector, faraway from traditional oil-based manufacturers to the expanding number of plants that use the solid fuel as their feedstock.
China’s biggest coal-to-chemicals manufacturer, Ningxia Baofeng Energy Group Co., saw first-half profit surge 73%, at the same time as pinnacle miner China Shenhua Energy Co. Reported a close to 20-fold rise at its Inner Mongolia chemical facility. In the meantime, oil refining giant Sinopec lost 4.5 billion yuan ($630 million) at its chemicals unit over the primary 6 months of the year, even worse than the 3.6 billion yuan it discard in the same period in 2024.
The diverging fortunes of the old and new guard are reflected of their outlooks, as overproduction of decrease-value, bulk chemicals reduces expenses and margins. Oil-based totally chemical manufacturers are anticipating a government-led rebuilds that could phase out smaller facilities, requirement enhancements of old plants, and redirect funding to greater profitable superior materials.
But coal-primarily based manufacturers are profitable at current chemicals expenses, thanks to the price of their feedstock dropping to a 4-year low. The industry is observing a 520-billion yuan growth over the next 5 years, probably growing its potential by a third.
Only if Chinese coal remains cheap, the reorientation of the sector could be hard to halt, no longer least as it comes with the additional advantage of cutting the nation’s dependence on foreign energy. China manufactures most of its own coal, and imports most of its oil. Truly, the nation has a excessive of coal that requires to discover a home as renewables take an ever greater share of power generation.
The trade off that would provide policymakers pause associates to decarbonization. Making chemicals from coal is even extra polluting than utilizing petroleum-based feedstocks. Beijing’s purpose of peaking emissions by the end of the decade is possibly to have a sharper target in the next 5-year plan due early in 2026.
The coal-to-chemicals sector released 690 million tons of CO2 last year, as much as 440 million tons more than would have been emitted at traditional plant, according to the Centre for Research on Energy and Clean Air.
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