An insight into the boom in secondary transactions of coal chemical projects

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Insight into the boom in transactions of coal chemical projects Author/Source: Sinochem New Network Date: 2019-08-20 Clicks: 40 The modern coal chemical industry is currently going through a period of restructuring. A few state-owned enterprises such as Shenhua, China National Coal Energy, and Sinopec are becoming increasingly powerful, while many other state-owned energy companies are choosing to withdraw from this sector in various ways； Foreign giants have almost all withdrawn from this sector. Are there any patterns to be followed by companies that succeed in the modern coal chemical industry? As the saying goes, \"Happy people are all similar; those who are unhappy each have their own reasons for being unhappy.\" ”In the construction and operation of modern coal chemical projects, the proactive companies are quite similar to each other; they are generally those that make profits and achieve excellent overall performance. As for the companies that withdraw from such projects, their reasons vary – some do so because of various environmental issues related to land use, water resources, air pollution, etc., which make it difficult to proceed with the projects, leaving them stalled for long periods of time ； In some cases, it is because the project takes a long time yet still fails to pass the environmental impact assessment or approval processes ； In some cases, it is due to insufficient funds, technology, or management capabilities, which results in projects being built but not operating effectively, failing to generate the expected profits and even becoming a continuous burden. Of course, there are also instances where companies make proactive strategic withdrawals based on their predictions regarding coal prices and the chemical products market. There are various reasons, but in summary, they boil down to two points: one is the inability to handle it oneself, and the other is a lack of confidence in its prospects. The prospects vary from person to person, so we will set that aside for now; instead, the author would like to focus on analyzing how to play effectively. After more than a decade of exploration, an increasing number of enterprises have made significant progress in the development of modern coal chemical industry; they have continued to generate profits, achieved considerable overall benefits, and seen their development improve steadily. Therefore, those who retire in disappointment should look for reasons within themselves: a lack of competitiveness, economic inefficiency, and an inability to manage new projects successfully – how can they expect to establish a stable and successful presence in such circumstances? Why does Sinopec continue to expand its operations? The reason is that Sinopec has made profits from coal-to-olefins projects and has tasted success as a result. The coal-to-olefins project in Ordos in which it has an interest generated a profit of 2.2 billion yuan last year. Moreover, as China’s largest producer of olefins, Sinopec boasts a range of advantages in terms of technology, talent, market access, and management. Expanding its production of olefins from coal will also help to optimize its product portfolio and further strengthen and expand its influence in the domestic olefins market – which is indeed what strategic efforts requiring enhanced capabilities entail. In addition to taking over the coal-to-olefins project at State Power Investment’s Dalu Park, the coal chemical project in Anhui in which it has an interest has been put into operation and the entire production process has been successfully established. The 600,000-ton/year polyolefins project in Guizhou has also been approved, and the expansion phase 3 of the project in which it holds a stake is also under construction, demonstrating a clear attitude of ambition and confidence. China Coal Energy is a model of coal companies that have succeeded in entering the field of modern coal chemical industry. In recent years, all of its modern coal chemical projects established within the energy and chemical industry’s \"golden triangle\" have been successful, with no failures. A senior expert within the company revealed the secret: coal enterprises that venture into modern coal chemical industries must, without exception, recruit specialized talent. However, unlike the approach adopted by the decision-makers in other coal companies, who tend to follow a strategy of \"I will handle the strategy while you carry out the tasks,\" China National Coal Group’s \"harmony\" culture advocates the principle that \"regardless of where one comes from, once one joins China National Coal Group, they become part of its team.\" There is no doubt when it comes to hiring people; it is quite common within China National Coal Group for outsiders and newcomers to take on key roles. “Amateurs trying to direct experts, newcomers failing to integrate into the system – there are reasons why projects don’t succeed or aren’t carried out well. The decision-making level at China Coal is willing to let outsiders take on key responsibilities, entrusting projects worth billions or even hundreds of billions to them. They know how to select the right people for tasks, delegate authority fully, and do not rely on personal connections; by doing so, they truly make us the ones in charge, thereby stimulating a sense of mission and responsibility to work hard and innovate. This reflects the strength of China Coal’s \"harmony\" culture. ”The expert said that it was also thanks to these unique individuals that China National Coal Group, which had no prior experience in coal chemical industry, was able to gradually grasp the principles underlying the development of modern coal chemistry. One major project after another was built, and each one was completed successfully, with almost no detours along the way. Furthermore, Shenhua’s advantages as the leading coal company in terms of acquiring and integrating various resources, Shaanxi Coal Group and Yankuang Group’s commitment to research and innovation, and Baofeng Energy’s innovative approaches to operating coal-to-olefins plants at low costs are all valuable experiences that have helped them stand out. Modern coal chemical enterprises can more clearly see the gap by comparing themselves with others; success is not accidental, while failure is inevitable. Modern coal chemical industry is a high-risk area for investment, but there are still patterns that can be followed to succeed in it. The past cannot be changed, but the future can still be pursued.