Analysis on China's Coal Chemicals Industry over Next Five Years Status quo of coal-to-chemicals industry     

In China, the traditional coal-to-chemicals industry mainly refers to coal coking and converting coal into ammonia, acetylene and methanol etc. These products are widely used in industries ranging from agriculture, steel to light industry and construction materials.
   Today, there is an oversupply in capacity in China's traditional coal-to-chemicals industry. This market is mature. Total production volume is expected to rise stably in the sector while its industrial structure will change greatly - to be more competitive - as China phases out outdated capacities and shift production to central and western regions where coal resources are relatively abundant.
   In China, the new type coal-to-chemicals industry includes projects - using coal to produce olefins (CTO), oil, natural gas and monoethylene glycol (MEG). They are all in the period of demonstration or developing, with a number of projects will be operational in two to three years since 2010.
  To date, China's technology know-how in the new type coal-to-chemicals industry is at the forefront of the world. A number of modern coal-to-chemicals technologies are in scale-up in the country. Products in the new coal-to-chemicals production are mainly used to replace petroleum derivatives, with a big market volume and good prospects. The new type coal-to-chemicals industry has features of huge investment, complicated technology, huge water consumption and high emissions. Considering the resource and environmental factors, China identifies the new type coal-to-chemicals industry as a strategic industry that will be developed with a controlled manner and supplement the petroleum and chemical industry.
   Coal-to-chemicals industry is in line with China's energy development strategy. As demand for new coal-to-chemicals products rises, the sector is a key target market for multinational companies.
   China's new type coal-to-chemicals industry needs to adopt the coal-power-chemicals integrated development mode and should master advanced technologies with its own intellectual property rights. It should also develop differentiated and high value-added products and boost energy conservation to enhance competitiveness.
   China's coal-converted chemical products are facing competition from those petroleum-based chemicals and also products imported from the Middle East. Meanwhile, investment risks include the volatile oil prices and rising environment costs. The domestic coal chemical industry also faces operational risks because the development of infrastructure such as railways and pipelines and related service facilities lags the development of the coal-to-chemicals industry in the rich-in-coal regions.

Directions for coal-to-chemicals industry

China will cap the total scale of the traditional coal-to-chemicals industry during the 12th Five-Year Program period (2011-2015), and improve technology level and concentration rate in the sector. It also aims to reduce energy consumption and pollution in the industry to make it more competitive. The traditional coal-to-chemicals industry will gradually be moved to the resource-rich central and western regions, with more integrated projects. The industry entry threshold will also be raised.
   Players in the new type coal-to-chemicals industry will mainly focus on the operation of CTL (coal-to-liquids), MTO/MTP (methanol-to-olefins/methanol-to-propylene), synthetic natural gas (SNG) and MEG pilot projects. The country will scientifically assess the technology process, economic viability, environmental impact and risks and other constrains to lay the basis of future development. In the new type coal-to-chemicals industry, China has so far made relatively significant achievements in such technologies like coal gasification, transformation and purification, as well as sulfur recovery and synthesis. China will continue to advance technological innovation in the next five years. China will lead a sustainable development in the new coal-to-chemicals industry in accordance to market conditions, technology development and resource and environment situations. Today the government is conducting a special study on the development of the new coal-to-chemicals industry and related policies are expected to be rolled out during 2011 - 2015 step by step.
   China's coal-to-chemicals industry will be mainly developed in such coal-rich regions like the western region during 2011 - 2015, considering factors such as coal reserves, water resources, environment, transportation and regional economic development levels. In the eastern and southern provinces where coal is not sufficient, China will mainly develop coal-based polygeneration projects, integrated gasification combined cycle plants and dimethyl ether facilities (using outsourced methanol as feedstock) to support the nearby refineries and green power plants.
   Water is main factor that restricts the development of the coal-to-chemicals industry in China due to geographic reasons. China will strictly restrict the construction of mega coal-to-chemicals projects in areas short of water, and maximum use of water resources by using reclaimed water and mine water in the industry.
   China should strictly enforce its coal use classification policy to ensure the supply of high-quality clean coal to residential households and the power industry. High sulfur and low-quality coal resources should be used in the coal-to-chemicals industry.
   Considering the industry's impact on ecology, China needs to draft and implement norms and standards to limit waste discharge and convert wastes into resources.
   A technology support system for the coal-to-chemicals industry will also be established.
   Over the next five years, China will speed up drafting the standards and norms for the production and use of dimethyl ether and coal-turned oil and methanol fuel products.