Coal companies expanding into the chemical industry
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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 enterprises in the metallurgy, chemical industry, 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 business areas. Amid the ongoing shortage of energy, 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 such that 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 development trend, 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 group 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 Pingdingshan Coal Industry Group in Henan 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 processing of 10 million tons of coal per year, with an annual production capacity of 1 million tons of polyvinyl chloride, 1 million tons of ion-exchange membrane caustic soda, 1 million tons of low-salt heavy soda ash, 1 million tons of ammonium chloride, and 1 million tons of products derived from methanol through further processing. In terms of coal chemical industry, Yankuang Group stands out. 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 provinces. They vigorously pursue a strategy of expanding overseas operations and make significant efforts to industrialize the core technologies of coal chemistry. Following the development direction of \"large-scale projects – combined production – industrial bases,\" efforts will be focused on building the Lunan Chemical Industry Park, centered around coal gasification and combined 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, becoming a key industry with output value exceeding that of coal. 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 industry 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 is indeed a \"win-win\" situation. 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 clear surplus of methanol supply by 2010. The principle of \"moderate development of coal chemical industry\" outlined in the **Coal Industry Policy** will further regulate the merger, acquisition, and restructuring of coal enterprises and chemical enterprises, so as to make the most of resource advantages and improve economic efficiency.
Re-reading this excellent article, I wonder whether coal companies still hold such intentions today. It is likely that, aside from a few large state-owned enterprises with substantial resources, most coal chemical companies have the desire to form partnerships with coal companies but lack the capability to do so
We can still be considered quite lucky; the five industry giants – Yongmei, Heemei, Jiaomei, Zhongyuan Dahuahua, and Henan Province Gas Group – came together to form Henan Coal and Chemical Industry Group, thereby creating a combination of coal and chemical industries. This new entity became the largest state-owned enterprise in Henan Province. After the restructuring, Henan Coal and Chemical Industry Group had total assets of 72.8 billion yuan, with net assets amounting to 26 billion yuan. In 2008, its operating revenue exceeded 78 billion yuan, with profits reaching 5.4 billion yuan. The number of employees reached 160,000. The group has set its goals for 2009: to make it into the top 100 companies in the country, with operating revenue reaching 100 billion yuan ； Achieve profits and taxes of 10 billion yuan ； Coal production needs to exceed 50 million tons ； The total investment scale for new projects exceeds 26 billion yuan ； Employees’ wage income levels and various benefits are higher than those in 2008. Strive to establish as soon as possible an industrial structure centered on the coal and chemical industries, supported by sectors such as non-ferrous metals, equipment manufacturing, power generation, and logistics trade, with the steady development of other industries as well; aim to become one of the world’s top 500 companies at the earliest possible time.
As the market recovers, mergers between chemical companies and coal enterprises, or the acquisition of coal mines, remains a hot topic.
Coal chemical enterprises, especially those that use coal as their raw material, are closely linked to coal resources; 70% of their production costs come from the cost of these raw materials. If such enterprises possess their own resources, their costs will be lower, their resilience to risks will be greater, and their profits will increase. Therefore, the integration of coal chemistry with coal mining enterprises is beneficial for the survival and development of these enterprises! But many coal companies have entered the coal chemical industry!
That’s quite an amateurish way of putting it. If one has their own resources, and coal prices are high, they can simply sell the coal; why would they sell it at a low cost to their own downstream chemical companies? Now, economic considerations have to be taken into account; doesn’t the chemical plant below still purchase goods at market prices! Coal chemical industry… You see, the chemical industry doesn’t actually generate much profit. As soon as you start making money, they raise the price of coal: lol, leaving you in a very difficult situation
Well said. Coal companies hold onto non-renewable resources and are powerful and dominant, while the chemical industry consists of fragmented and weaker entities – an unequal situation: lol. Sometimes I think that if this crisis isn’t followed by a reshuffle of the landscape, all the suffering might be in vain; it could even illustrate the meaning of the word \"struggle\": Q
The shortage of energy ensures that coal maintains its unshakable position; marriage alliances can only be established through administrative means