Coal companies are entering the chemical industry

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Coal companies are expanding into the chemical industry. Not long ago, the **Coal Industry Policy** issued by the National Development and Reform Commission stated that further policies will be introduced and stabilized to encourage large coal enterprises to participate in joint ventures with companies in the metallurgy, chemicals, building materials, and transportation sectors. **The basic approach to steadily advancing the coal industry and continuously developing the coal chemical industry in order to alleviate the shortage in oil supply has become further clarified. This will undoubtedly further accelerate the mergers and reorganizations of coal companies and chemical enterprises. In recent years, coal companies have begun to break down industry barriers, leveraging their resource advantages to develop advanced coal processing and open up new areas of operation. Amid ongoing energy shortages, coal companies have turned to the coal chemical industry. Some large coal mining enterprises have brought chemical companies under their control through joint ventures, acquisitions, and partnerships, thereby building up their strength and creating a second front in the coal chemical industry alongside the first front represented by coal mining. Pu Hongjiu, the first vice president of the China Coal Industry Association, said that many coal enterprises in China are developing a circular economy development model supported by four key industries: coal, electricity, building materials, and chemicals. It is understood that coal companies currently account for over 60% of the total output in the urea industry, thus holding a dominant position in it ； Leading the way in coal-to-oil projects ； It also holds a pivotal role in projects such as methanol. Among the five major coal enterprise groups in Shanxi, a province renowned for its coal production, Jincheng Coal Industry Group, Yangquan Coal Industry Group, and Lu’an Group have achieved a balance where coal-related industries and non-coal industries each account for half of their operations. At present, the annual production capacity of synthetic ammonia and urea in Shanxi’s coal industry has exceeded 6 million tons. Among this, Jincheng Coal Industry Group’s ammonia production exceeds 4 million tons, accounting for one-fifth of the total national production ； The annual production capacity of fertilizers such as urea at Jincheng Orchid Group has exceeded 3 million tons. Based on the current trend of development, by the end of the 11th Five-Year Plan period, the sales revenue from non-coal industries in Shanxi’s coal sector is expected to reach 100 billion yuan. Starting in May 2004, relying on its advantages in anthracite resources and utilizing capital operations as a means, Jincheng Coal Industry Group successfully acquired control over 11 chemical enterprises in seven major grain-producing regions including Shanxi, Henan, Hebei, Jiangsu, Shandong, Anhui, and Hubei. This enabled the company to enter the field of coal chemicals. By 2007, its total production and operation volume reached 30 billion yuan, of which the non-coal industries accounted for 65.84% of the total production and operation volume, while contributing 78.28% of the profits. The coal chemical sector achieved output value of 12.8 billion yuan, accounting for 42% of the total production and operation volume, thus becoming a competitive advantage for the group company. In recent years, the Henan Pingdingshan Coal Industry Group has been actively engaged in capital operations, resource integration, and corporate mergers and acquisitions, with a focus on expanding its scale as well as adjusting its product and industrial structure; it has acquired a number of local coal and chemical enterprises over the course of time. By acquiring and reorganizing Kaifeng Dongda Chemical Group, the Fine Chemical Plant, and Kaifeng Chemical Research Institute, not only was Pingmei’s coal chemical industry expanded, but a large number of professionals in the chemical field were also added, providing technical and human resources support for the future development of coal chemical circular economy industrial parks. The total investment in the coal-salt integrated chemical circular economy industrial park planned to be built by Pingmei Group is approximately 24.45 billion yuan. Once completed, it will generate annual sales revenue of 21.611 billion yuan. It will enable the local conversion of 10 million tons of coal per year, resulting in an annual production of 1 million tons of polyvinyl chloride, 1 million tons of ion-exchange membrane caustic soda, and low-salt heavy products. In terms of coal chemistry, Yankuang Group stands out as a unique player. Leveraging their advantages in technology, management, brand, and capital, they actively participate in the development of coal resources in Heze in Shandong, Guizhou, Shanxi, and Shaanxi. They vigorously pursue a \"go global\" strategy and work hard to industrialize the core technologies of coal chemical industry. Following the development approach of ’large-scale projects – integrated production – industrial bases’, efforts will be focused on developing the Lunan Chemical Industry Park, centered around coal gasification and integrated production; the Yanzhou Chemical Industry Park, focused on coal coking and the processing of downstream products; and the Zoucheng Chemical Industry Park, aimed at the clean utilization of high-sulfur coal extracted directly from mines. These parks will together form a energy and coal chemical industry hub in Lunan. By 2010, it is planned that the coal chemical industry will achieve annual sales revenue of 25.84 billion yuan, thereby becoming a key industry with output value exceeding that of coal mining. Currently, Shenhua Group is the leading player in China’s coal chemical industry. In Xinjiang, Shenhua holds a 51% stake in Xinkuang Group through capital increases and share expansions, and works with it to develop coal liquefaction projects with a production capacity of tens of millions of tons. China Coal Group is the second-largest coal enterprise in China after Shenhua; it has launched projects in Harbin for the production of 600,000 tons of olefins and 2.2 million tons of methanol per year, with investment amounts expected to reach 10 billion yuan. In addition, China National Coal Group has also begun to advance its coal chemical projects in Ordos. For the coal industry, developing coal chemical industries can maximize its resource advantages and improve economic efficiency ； For the chemical industry, the involvement of coal companies can ensure a supply of resources. Therefore, this can be considered a ‘win-win’. However, for investors, choosing new projects also comes with its own advantages and disadvantages. For example, a trend of uncontrolled growth in methanol production is already emerging; if this continues, there will be a significant surplus of methanol supply by 2010. The principle of ’moderate development of coal chemical industry’ in the **Coal Industry Policy** will further regulate the integration, mergers, and reorganizations between coal enterprises and chemical enterprises, so as to make the most of resource advantages and improve economic efficiency.