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Reality falls short of expectations; how many hurdles must the coal chemical industry in Shanxi overcome to break through? Author/Source: China Energy News Date: 2019-06-13 Clicks: 8 Shanxi, a major coal-producing province, announced last year that it would focus on advancing 100 coal chemical projects across the province, with the goal of completing half of them by the end of that year. Now, over a year later, the progress of the project falls far short of expectations, and the pace and intensity of advancing the projects that have already been launched are also unsatisfactory. Experts point out that, faced with various challenges such as resource constraints, planning issues, funding problems, and environmental concerns, the development of Shanxi’s coal chemical industry has a long and difficult path ahead. Clean coal conversion has involved the use of over 20 million tons of coal; enterprises above a certain scale have generated sales revenue of 87 billion yuan, while the entire industry has invested 16 billion yuan in fixed assets. The Shanxi Provincial Department of Industry and Information Technology recently released its action plan for 2019, aiming to establish a \"modern coal chemical industry framework characterized by large-scale operations, multiple product outputs, and integration.\" It also set out specific tasks such as developing modern coal chemical industry clusters, upgrading traditional coal chemical industries, and advancing key technologies in this sector. The determination to accelerate the transformation of the coal chemical industry is evident. In fact, this is not the first time Shanxi has set a “grand goal.” Just a year ago, the former Shanxi Provincial Economic and Information Commission proposed a plan to \"focus on advancing the construction of 100 projects,\" stating that it aimed to have 50 of them completed and operational by that time, in order to achieve sales revenue of 70 billion yuan by 2018. At that time, the large number of projects and their scale of development indeed caused quite a stir in the industry. Ideals are lofty, but reality is harsh. Reporters have recently learned from various sources that constraints related to resources, funding, and environmental protection are making the transformation of Shanxi’s coal chemical industry a difficult process. Some experts have stated outright that due to \"unrealistic planning,\" some projects are not even feasible. How to identify the right direction for transformation is the primary challenge facing Shanxi. A total of 100 key projects have been planned. Shanxi aims to establish a modern coal chemical industry layout. By shifting away from the traditional model of simply selling coal, the province is striving to develop its modern coal chemical industry. A relevant official from the Shanxi Provincial Department of Industry and Information Technology stated that this is the right direction for promoting the clean and efficient utilization of coal resources, and it also serves as a crucial foundation for Shanxi to become a “pioneer in the national energy revolution”. “As early as 2018, building on our resource advantages and industrial foundation, and following a five-pronged approach that includes enterprises, projects, products, technologies, and parks (bases), we formulated the 2018 Action Plan for the Development of the Modern Coal Chemical Industry in Shanxi Province. This plan aimed to establish a coal chemical industry system with Shanxi’s own characteristics, with the goal of shifting from \"raw material manufacturing\" to \"material manufacturing\". ” Based on this, Shanxi launched 100 key projects last year, setting a goal to bring 50 of them online within that year, with an aim to invest over 16 billion yuan, representing a 10% increase compared to the previous year. Further investigation by the reporters revealed that these projects include not only traditional products such as fertilizers, methanol, and chlor-alkali products, but also the six main areas of the modern coal chemical industry. In addition, there are fine chemicals and new chemical materials such as lubricants, paraffin, and alcohol-based fuels. “In other words, it covers almost all the sub-sectors you can think of. By launching a full 100 projects at once, Shanxi has quite the ambitious plan. ”Described by Qi, an industry insider familiar with the local situation. More than a year has passed now – how is the project performing? In an interview, the official from the provincial department of industry and information technology said that \"the construction is progressing smoothly, there are significant improvements in energy savings and consumption reduction, and the industry’s core competitive capabilities have been markedly enhanced.\" “At present, a number of demonstration projects for coal-based chemicals and clean energy fuels, such as coal-to-oil, coal-to-ethylene glycol, coal-to-olefins, and coal-to-gas, are being constructed or put into operation, with the key demonstration projects operating stably. At the same time, a number of large-scale modern coal chemical projects have entered the construction and implementation phase. ”The individual cited examples such as Lu’an Group’s 1.8 million tons per year integrated demonstration project for the clean utilization of high-sulfur coal for oil, chemicals, and heat production, Jinneng Huayu’s 1 million tons per year methanol production project, and Yangquan Coal Group’s Pingding Chemicals’ 200,000 tons per year coal-to-ethylene glycol project. As for whether the 50-project goal will be achieved on schedule and what the amount of investment attracted will be, the response did not provide any details. The person also mentioned that, based on this, Shanxi * subsequently released the “2019 Action Plan for the Chemical Industry”. The plan aims to “establish a modern coal chemical industry structure characterized by large-scale operations, multiple product streams, and integration”, with the goal of achieving “three transformations”: shifting products from being resource-based to material-based; moving the industrial chain from upstream to downstream segments; and elevating the value chain from low-end to high-end levels. However, the reporter noticed that in this year’s list of key projects, Shanxi only listed the names of 5 projects scheduled to be completed and put into operation, 6 projects scheduled to start construction, and 5 projects in the preliminary stage. Of the once 100 projects, some of them are no longer around. Progress in reality falls short of expectations; there are various constraints related to planning, funding, resources, and environmental protection. The goals are ambitious, but the actual situation is full of difficulties. The reporter learned from several authoritative sources that, despite the strong calls for its development, the progress of Shanxi’s coal chemical industry is not as smooth as the authorities claim. “To be honest, at present, at least half of the projects are facing difficulties in implementation or simply not being implemented at all. The progress is slow, and the efforts put forth are insufficient. Some even remain at the ‘statistical’ level only; the project initiation and the options themselves are flawed, the planning lacks feasibility and cost-effectiveness, making it difficult to implement them later on and to achieve any tangible results. ”Qi spoke frankly. This situation has also attracted the attention of Cui Jun, an analyst at the China Chemical Industry Information Research Institute. Taking coal-based ethylene glycol as an example, Cui Jun pointed out in the “Strategic Planning Report on China’s Coal Chemical Industry – Shanxi Chapter” that there are currently over 15 projects in Shanxi that have been completed and put into operation or are included in the planning. Nationwide, the total production capacity of ethylene glycol reached 10.54 million tons last year ； At the current pace of development, it is expected to rise further to around 30.58 million tons in 2022. Last year, China’s apparent demand for ethylene glycol was 16.68 million tons, and it is expected to rise to approximately 20.24 million tons in 2020. “Based on this assessment, there is a risk of overcapacity in coal-based ethylene glycol production. Moreover, there is no demand for ethylene glycol in Shanxi itself, so the product must be transported over long distances to regions such as East China. With the coal-based route not yet able to fully replace the oil-based route, the project faces dual bottlenecks, both industry-related and inherent to itself. Given future constraints such as low-price competition and low utilization rates, is the current layout really reasonable? ” “Behind the term “unreasonable” lie many additional constraints. Qi admitted that the coal chemical industry is capital-intensive, but at present, enterprises in Shanxi generally face significant financial pressures. “Some companies face the task of reducing their debt, and they dare not or are unable to take out loans ； In some cases, the attractiveness for investment promotion is insufficient; in particular, it is very difficult for private enterprises to obtain financing. Compared with regions such as Shaanxi and Inner Mongolia, which also develop the coal chemical industry, Shanxi has no advantages in terms of coal prices, electricity prices, or other related costs; in particular, the ex-factory price of raw coal is high, resulting in weaker cost competitiveness. ” The resource endowment dominated by anthracite and coking coal also imposes certain limitations to some extent. Cui Jun said that the coal resources in Shanxi have a high ash fusion point, poor slurry-forming properties, and poor grindability; approximately 85% of it is pulverized coal, and existing technologies have limited adaptability to such types of coal. “In response, Shanxi is actively developing gasification technologies suitable for the local conditions, and some enterprises have already taken this into consideration. Technologies that are truly suitable and cost-effective are of crucial importance. ” The resource situation also affects the actual layout of the coal chemical industry. Shanxi’s current reliance on traditional industries such as coking means that its products remain at a basic level, resulting in low added value and limited profits. “Moreover, these traditional projects were put into operation earlier, and the average scale of each unit for most of them is also below the industry average. Some devices, even after improvements, still have high energy consumption and poor environmental performance, which in turn limits their development. ”Cui Jun said. In addition, environmental capacity is also a major constraint. Several people pointed out unanimously that Shanxi Province is mostly composed of hills and mountains, making it a region severely affected by water scarcity. The environmental capacity, including water resources, precisely determines the upper limit for the development of the coal chemical industry. “Recently, the Central Environmental Protection Inspection Team pointed out that Shanxi’s coking industry is plagued by serious problems such as water pollution and unregulated emissions. In recent years, the utilization rate of coking production capacity has remained below 60%, with the industrial structure falling into a vicious cycle of “the more adjustments are made, the more problems arise”. As one of the specialized industries, coking is considered one of Shanxi’s strengths. The current situation is already like this; where will it go in the future? ”An environmentalist who wished to remain anonymous said. Development should not focus solely on coal; there is an urgent need to create comprehensive, large-scale cluster effects. The development of Shanxi’s coal chemical industry should no longer rely on an expansionist approach that focuses merely on scale. Which traditional projects can be maintained and to what extent, which emerging projects are suitable for development, and which industries can be expanded downstream to increase added value – these are practical issues that need to be addressed urgently. Develop one project to full maturity before moving on to another; development should not be rushed. ”Considering the current situation, Wang Xiujiang, deputy secretary-general of the Coal Chemicals Committee of the China Petroleum and Chemical Industry Federation, summarized. In the short term, Mao Baoqi, vice president of the Shanxi Chemical Industry Association, pointed out that a concerted effort is urgently needed for development. “Throughout the years, Shanxi’s coal chemical industry has relied on working in isolation, with each company focusing on its own projects, which has prevented the development of any scale effects. To address this, it is necessary to further integrate resources across the province, with unified planning and management. First, unify it, and then expand and strengthen it. ” Cui Jun also said that Shanxi lacks large-scale coal chemical industrial parks with a high degree of concentration, which has resulted in a low level of industrial integration over the long term. “While carrying out technological upgrades, industrial upgrading, and increasing the added value of products, scale-based cluster effects become more competitive in the face of internal and external competition from other major coal chemical provinces as well as the petrochemical industry. ” The reporter learned from the Shanxi Provincial Department of Industry and Information Technology that “cluster development” has been identified as a priority at present. This year, Shanxi will establish special funds for technological upgrades in modern coal chemical industry clusters and coking industry clusters, allocating 600 million yuan to provide key support for projects within these clusters. “A map of Shanxi’s modern coal chemical industry cluster was drawn to clarify the distribution of this cluster, providing guidance for industrial planning. This approach aims to gradually develop a competitive industry cluster characterized by leading enterprises, industrial cooperation and supporting facilities, extended industrial chains, and an optimized structure of key products. ”The relevant official said. From a long-term perspective, Liu Zhongmin, an academician of the Chinese Academy of Engineering and director of the Dalian Institute of Chemical Physics under the Chinese Academy of Sciences, pointed out that the development of the coal chemical industry in Shanxi is by no means simply a matter of focusing solely on coal. “Relying solely on ‘coal’ means that, in the end, it remains in a stage of ‘imitation’ and ‘copying’. To achieve the goals of the energy revolution, Shanxi should pursue a path of clean development. I believe that integrating the coal chemical industry with other surrounding energy sources is the way forward. ” Taking Datong in Shanxi as an example, Liu Zhongmin further explained that in addition to coal resources, the area is also rich in resources such as solar and wind energy. “Simply developing the coal chemical industry, regardless of the means used, will always increase carbon dioxide emissions. At present, the cleaning of energy sources is an international trend, and the energy structure is in a transition phase from high-carbon to low-carbon and carbon-free. If the currently fragmented forms of energy can be integrated, and renewable energy sources can be used to compensate for the shortcomings of coal-based chemical industries, then through rational and optimized coupling technologies, oil products and bulk chemicals can be produced, thereby enabling true development that is clean, low-carbon, safe, and efficient in the future. ”