Adjusting Strategies for Transformation and Development — How Modern Coal Chemical Industry Copes with Crises (Part 2)

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Adjusting Strategies for Transformation and Development — How Modern Coal Chemical Industry Can Cope with Crises (Part 2) Author/Source: Sinochem New Network Date: April 24, 2020 Clicks: 5 The modern coal chemical industry plays a vital role in promoting the clean and efficient use of coal. Through years of development, exploration, and practice, China’s modern coal chemical industry has made significant progress in terms of scale, technology, and equipment. However, in the face of the new economic landscape, modern coal chemical industry should also reevaluate its future development from an industrial perspective; perhaps now is the opportune time for this industry to adjust its strategies, turn challenges into opportunities, and pursue transformational growth. 　　First of all, it should be noted that the theory and price support system for modern coal chemical industry have changed. 　　Over the past decade or so, we have developed modern coal chemical industry based on China’s resource profile of abundant coal, limited oil, and scarce gas, as well as expectations of economic globalization and high international oil prices. Under this resource structure and pricing system, derivative products of modern coal chemical industry are more competitive than equivalent products from the petroleum route. However, the situation has changed significantly now. International economists generally believe that this pandemic will trigger a global economic recession or even a prolonged depression; market consumption is likely to become more cautious, and the prices of bulk raw materials may remain low for a long time. Under these circumstances, China’s coal chemical industry should redefine its role, clarify its strategic approach, and adjust its direction. Forward-thinking companies should view the industry from an external perspective, strengthen and complete the value chain, plan in advance by aligning with emerging trends, adopt diversified production methods to mitigate risks, and shift from a resource-oriented approach to a market-oriented one. 　　Secondly, it is necessary to clarify whether modern coal chemical industry must evolve along the petrochemical route. 　　Compared with other existing uses of coal, modern coal chemical industry offers advantages such as high energy conversion efficiency, high efficiency in coal utilization, and reduced pollutant emissions; it can also drive the upgrading or even revolution of related industries. However, over the past decade or so, the entire coal chemical industry has focused on serving as a substitute for oil, with development centered on mid- and upstream petrochemical products that compete directly with petrochemical companies. Under the current circumstances, the author believes that modern coal chemical industry needs to move away from isolated development as a standalone sector. In line with the principles of a circular economy, it should adopt integrated approaches that combine coal processing with power generation and heat production, as well as multi-product manufacturing strategies. This will facilitate the integrated development of the modern coal chemical industry with industries such as coal mining, electricity generation, petrochemicals, chemical fibers, salt chemicals, and metallurgy and building materials. Such an approach will help extend the industrial chain, strengthen industrial clusters, and improve the efficiency of resource conversion as well as the competitiveness of these industries. Through the integrated development of the modern coal chemical industry and related industries, a win-win development outcome can be achieved. 　　Once again, it is necessary to explore how modern coal chemical industries can streamline their industrial chains to become more competitive. 　　In recent years, a new force has emerged in the petrochemical industry: the textile enterprises from Jiangsu and Zhejiang provinces, represented by Rongsheng, Hengli, Hengyi, Shenghong, Tongkun, Xinfengming, and Sanfangxiang. Starting with chemical fibers, they worked their way backward, seizing opportunities in polyester integration and petrochemical integration projects, until they entered the fields of refining and modern coal chemical processing, thereby establishing an industrial chain that spans hundreds of products, from \"a drop of oil\" to \"a piece of fabric\". So, can modern coal chemical enterprises also move downstream and expand their operations in that direction? For example, the issue of limited application areas for ethylene glycol produced from coal is becoming increasingly prominent, which greatly hinders the economic viability and long-term development of this industry. Enterprises can utilize the by-products of production facilities, namely dimethyl carbonate and ethanol, to develop high-value fine chemical products derived from ethylene glycol, thereby increasing the added value of these products. Examples include the production of ethylene glycol ethers from ethylene glycol, ethylenediamine and its derivatives from ethylene glycol through ammonolysis, and ethylenecyanide from ethylene glycol through amin oxidation. 　　Finally, it must be emphasized that the modern coal chemical industry is already overheated, and it is not advisable to act recklessly like moths flying into a flame. 　　In recent years, with the delegation of approval powers for coal-based chemical production, coupled with the good economic returns generated by earlier projects, there has been a new surge in planning and construction of coal-based olefins and coal-based ethylene glycol facilities in China, and the scale of these facilities continues to increase. According to estimates by research institutions, domestic ethylene glycol production capacity will increase by another 5 million tons by the end of this year, with a growth rate that exceeds that of polyesters. However, faced with the competitive advantages of domestic integrated refining and chemical production at low oil prices, as well as the dumping of cheap ethylene glycol from abroad, these new entrants are nothing but moths flying into a flame. For this reason, many industry insiders have recently recommended strict control over redundant construction and investment to prevent overheating. 　　The modern coal chemical industry is a remarkable achievement in China’s chemical sector; it is difficult to develop, and even more challenging to transform. In these difficult times, the modern coal chemical industry indeed needs to seriously consider its future direction. Undoubtedly, no matter which direction the industry takes, it must focus on realizing and enhancing the value of coal, as well as on meeting the demands of rising consumer standards and ensuring the healthy development of the industrial economy. From the very beginning, it is necessary to properly manage aspects such as layout, scale, environmental protection, and investment, in order to avoid repeating past mistakes. At the same time, it is also necessary to pay attention to the capacity release of imported products and other alternative products in order to avoid horizontal risks, and ensure the sustainable and healthy development of the industry by enhancing its competitiveness and cost-effectiveness.