Analysis of the profitability of coal-to-olefins projects in China in the third quarter of 2018

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Analysis of the profitability of coal-to-olefins projects in China in the third quarter of 2018 Author/Source: Date: 2018-11-07 Clicks: 11 As of the end of October 2018, China had 28 CTO/MTO units in operation, with a total production capacity of 12.1 million tons per year (the MTP units that are not in use in Shandong Province were not included in this figure). Among them, the coal-to-olefins integrated project comprises 10 units, with a total production capacity of 6.48 million tons per year. The three typical regions for coal-based olefins production are Baotou in Inner Mongolia, Zhundong in Xinjiang, and Yulin in Shaanxi; the transportation costs and coal prices vary among these areas. In the third quarter of 2018, the prices of gasification raw coal (5500 kcal) in these three regions were 550 yuan per ton, 240 yuan per ton, and 500 yuan per ton, respectively. The average market prices for polyethylene and polypropylene in East China are 10,750 yuan/ton and 10,100 yuan/ton respectively (including VAT). The costs and profits associated with delivering these polyolefin products to East China are shown in the figure below. A comparison shows that Jundong is located in a remote area with poor transportation facilities and low coal prices; as a result, its raw material and energy costs are the lowest. Correspondingly, its value-added tax and transportation costs are the highest. Nevertheless, thanks to the low coal prices, Jundong still enjoys the highest profit margin. In the third quarter, 11 of the CTO/MTO units already in operation in China were under maintenance or not in use, including 6 CTO units. According to Yahuaxing Consulting’s estimates, during the quarter, the cost of polyolefins produced by CTO units operating at full capacity ranges from 5,700 yuan per ton to 6,500 yuan per ton, while the cost for units that are under maintenance is above 6,800 yuan per ton.