Why Modern Coal Chemical Projects Become "Abandoned Sons"——The Coal Chemical Industry under the Background of "Double Carbon" Strategy and "Two Highs" Restricted (Part 1)

Following Sinopec's abandonment of the planned investment of 23 billion yuan in Guizhou's 600,000-ton/year coal-to-olefin project and changing it to a "degradable new material project", Shanxi Coking Coal Group Feihong Chemical also recently reported that it plans to invest 600,000 yuan in the company.
Tons/year olefin and coke oven gas-to-methanol integration project implemented "suspended progress", and started the demonstration and promotion of "transformation undertaking project"
.
This can't help but make people feel that the modern coal chemical project has become an "abandoned child"
.

In fact, going back further, in recent years, there have been reports of large-scale modern coal chemical projects suspending production, delaying construction, and directly dismounting
.
One of the most striking is the Shaanxi Coal Yulin Chemical Coal Separation and Utilization of New Chemical Materials Demonstration Project with a total investment of 126.
2 billion yuan, which was suddenly suspended in July last year, causing speculation and concern from all walks of life
.

Why is the modern coal chemical project with a planned investment of tens of billions of yuan becoming an "abandoned child"? The author analyzes that this is related to the strong resources and strong cycle attributes of the entire industry
.
Because the coal chemical industry is highly dependent on industrial policies, resource endowments and market cycles, it can be said that it is "seeing the sky to eat".
Once the policy and the market are "turbulent", it will hurt the bones
.
Judging from the several suspended, delayed and rebuilt projects disclosed by the industry, they are all subject to industrial policies, market environment and prospects
.

First, it is trapped in the restriction of energy and coal consumption
.
The coal chemical industry has relatively high energy consumption and carbon emissions.
Under the background of the domestic "dual carbon" strategy, it is obviously difficult for the production capacity to expand significantly
.
In the past 10 years, in order to promote the healthy and orderly development of the coal chemical industry, the state has issued a series of highly targeted environmental protection policies
.
As a prelude to the "dual carbon" strategy, "dual control" of energy consumption has become the main force behind the green and low-carbon transformation of the economy
.
In the past two years, relevant state departments and local governments have intensively issued relevant policies to resolutely curb the blind development of "two high" projects
.
Some provinces have implemented alternative systems for the reduction of production capacity, coal consumption, energy consumption, carbon emissions, and pollutant emissions for "two high" projects, making it difficult for new coal chemical projects to obtain sufficient incremental indicators, and it is even more difficult to find alternative sources
.
In addition, in the past few years, the development and reform department has insisted that "fuel coal and raw coal are equally included in the energy consumption assessment indicators", resulting in coal chemical enterprises "hard to cook without rice"
.

Second, it is difficult to increase the cost of coal use
.
Last year, domestic coal prices climbed steadily and accelerated in the third quarter
.
Especially after October, with the arrival of the heating season, the demand for coal has surged, and the supply in many places is seriously insufficient.
Coal companies have rushed to buy the supply of middlemen in the market, which stimulated the coal price to climb to 1900 yuan / ton, a historical extreme value.

.
From late October to early November, the long-term contracts of some coal-using enterprises were cut off, which further aggravated the impact on the power, chemical and other industries
.
The price of raw coal has skyrocketed, resulting in a sharp rise in production costs, and companies are burdened with huge cost pressures.
Most coal chemical projects only increase revenue but not profits
.
The serious shortage of raw coal supply has also made it difficult for some enterprises to maintain normal production and have not recovered their vitality so far
.
Statistics show that the production load of fertilizer enterprises in Henan, Shandong and other provinces is only about 80%
.

The third is limited by the deterioration of expected benefits
.
The profitability of the modern coal chemical industry is closely related to the trend of coal and crude oil prices
.
Since the "Thirteenth Five-Year Plan" period, affected by the sharp fluctuations in raw material prices, modern coal chemical enterprises have achieved unsatisfactory performance in other years except for the relatively good operating results in 2018 and 2021
.
Especially from 2019 to 2020, in addition to the still profitable coal-to-olefins, coal-to-oil, coal-to-gas, coal-to-methanol, and coal-to-ethylene glycol all lost money, and the industry as a whole was not profitable
.
As a result, some enterprises were burdened with heavy burdens, and some were forced to suspend production for maintenance, which made latecomers feel chills
.
Of course, in addition to market reasons, some large-scale modern coal chemical projects, due to their huge investment, long construction period and heavy financial expenses, also lead to high production costs and lose the ability to deal with market fluctuations
.
And the soaring coal price in 2021 will make the cost of the company upside down, and the market is deeply impermanent
.
Due to the worsening of expected benefits, some projects were suspended, delayed construction, and decisively stopped losses; some enterprises changed their processes in a timely manner and switched to new chemical materials and other products
.

The high-end coal chemical industry chain has shortcomings.
Under the impact of petroleum route products and imported products, the profitability of the industry continues to be affected
.
From the perspective of several coal chemical projects in the industry that have adjusted their construction plans, their notable features are that they have lengthened the industrial chain and enriched product categories.
Added value and profit margin, this is a good development direction for modern coal chemical enterprises
.