Why have modern coal chemical projects become ‘discarded pieces’”

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——“The Coal Chemical Industry under the \"Dual Carbon\" Strategy and Constraints on High Carbon Emissions and High Energy Consumption (Part 1) Following Sinopec’s decision to abandon its plan to invest 23 billion yuan in a 600,000-ton-per-year coal-based olefins project in Guizhou and replace it with a \"degradable new materials project,\" it was recently reported that Shanxi Coking Coal Group’s Feihong Chemical plans to suspend the development of its 600,000-ton-per-year olefins and methanol production from coke oven gas project, and instead start working on evaluating and advancing alternative projects for transformation. This inevitably gives the impression that modern coal chemical projects have become expendable. In fact, looking further back, in recent years there have been reports from various regions of large-scale modern coal chemical projects being shut down, their construction delayed, or completely abandoned. Among them, the most notable is the demonstration project for the selective utilization of coal to produce new chemical materials, with a total investment of 126.2 billion yuan and under construction; this project was suddenly suspended last July, sparking speculation and concern across various sectors. Why have modern coal chemical projects involving planned investments of tens of billions of yuan become “abandoned projects”? The author analyzes that this is related to the strong resource and cyclical nature of the entire industry. Since the coal chemical industry relies heavily on industrial policies, resource availability, and market cycles, it can be said to be at the mercy of these factors; any change in policies or markets can have a severe impact on it. Judging from several projects that have been suspended, delayed, or modified as disclosed by the industry, they are all affected by industrial policies, market conditions, and future prospects. First, it is constrained by limitations on the use of coal. The coal chemical industry has relatively high energy consumption and carbon emissions; under China’s \"dual carbon\" strategy, it is clearly difficult to expand its production capacity significantly. Over the past 10 years, **a series of highly targeted environmental protection policies have been introduced to promote the healthy and orderly development of the coal chemical industry. As a precursor to the \"dual carbon\" strategy, the dual control of energy consumption has become a key mechanism to drive the green and low-carbon transformation of the economy. In the past two years, **relevant departments and local authorities** have introduced a series of policies to firmly curb the uncontrolled development of high-energy and high-emission projects. Some provinces have implemented systems for reducing capacity, coal consumption, energy consumption, carbon emissions, and pollutant emissions in relation to high-value and high-impact projects; as a result, it is difficult for new coal chemical projects to obtain sufficient additional quotas, and alternative sources are even harder to find. Coupled with the policy upheld by the development and reform departments over the past few years, which requires that both fuel coal and raw material coal be included in the energy consumption assessment criteria, coal chemical enterprises find it difficult to operate effectively in such circumstances. Second is the increased difficulty and cost of using coal. Last year, domestic coal prices kept rising, with an even faster increase in the third quarter. Especially after October, with the onset of the heating season, demand for coal surged, leading to a severe shortage in many areas. Coal-using enterprises rushed to purchase coal from intermediaries in the market, which pushed coal prices up to 1,900 yuan per ton, reaching an all-time high. From late October to early November, the interruption of long-term supply contracts for some coal-using enterprises further exacerbated the impact on industries such as electricity and chemicals. The soaring price of raw coal has led to a significant increase in production costs, placing heavy financial pressure on enterprises; as a result, most coal chemical projects experience only increased revenue without corresponding profit gains. The severe shortage of raw coal supply has also made it difficult for some enterprises to maintain normal production levels, and they have yet to recover so far. Statistics show that the production capacity of fertilizer manufacturers in provinces such as Henan and Shandong is only around 80%. Third, it is constrained by deteriorating expected benefits. The profitability of the modern coal chemical industry is closely related to the price trends of coal and crude oil. “Since the 13th Five-Year Plan period, affected by significant fluctuations in raw material prices, modern coal chemical enterprises have seen unsatisfactory operational performance in all years except for 2018 and 2021. Especially during 2019–2020, aside from coal-to-olefins which was still profitable, coal-to-oil, coal-to-gas, coal-to-methanol, and coal-to-ethylene glycol all suffered huge losses; the entire industry failed to generate any profits. Some companies have thus been burdened with heavy loads, while others have been forced to suspend production for repairs, which sends a chilling message to those entering the industry later. Of course, aside from market factors, some large-scale modern coal chemical projects suffer from high production costs due to their massive investment requirements, long construction periods, and heavy financial expenses, which renders them unable to cope with market fluctuations. In 2021, the continuously soaring coal prices further led to inverted costs for enterprises, making them acutely aware of the unpredictability of the market. Due to deteriorating expected benefits, some projects have had their construction halted or delayed, with decisive actions taken to limit losses ； Some companies promptly changed their production processes to manufacture products such as new chemical materials. The high-end development of the coal chemical industry chain faces shortcomings, and its profitability continues to be affected by the competition from products produced via petroleum-based methods as well as imported products. Looking at several coal chemical projects in the industry that have adjusted their construction plans, a common feature among them is the extension of the industrial chain and an increase in the variety of products. By integrating with petrochemical, salt chemical, and fluorosilicon chemical industries through co-production, these projects manage to boost the added value and profit margins of their products, which represents an excellent development direction for modern coal chemical enterprises.