"Will investment in coal-based olefins remain strong during the 13th Five-Year Plan period?

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The construction of modern coal chemical plants, which suffered from persistent high temperatures in the previous two years, is now seeing a slowdown. Recently, in the preliminary drafts of the 13th Five-Year Plans prepared by provinces and regions such as Xinjiang, Shanxi, Shaanxi, and Inner Mongolia, the scale of coal chemical industry development has been significantly reduced. Some large state-owned enterprises have also stated that they will cut investments in the coal chemical sector substantially during the 13th Five-Year Plan period. However, despite the overall downturn in the coal chemical industry, companies remain highly enthusiastic about coal-based olefins. “At the group level, it has been decided to replicate the Jingbian model in order to accelerate the construction of a methanol plant with an annual production capacity of 1.8 million tons, as well as a DMTO plant with an annual production capacity of 600,000 tons, in Fuxian County, Yan’an. ”On December 11, Li Dapeng, the leading expert in coal chemical industry at Yanchang Petroleum Group, revealed this. According to Li Dapeng, as the world’s first demonstration project for the comprehensive utilization of gas oil to produce methanol and olefins, the Yanchang–China Coal Jingbian Energy Chemical Complex uses coal, gas, and residue oil as raw materials to achieve an integrated production capacity of 1.8 million tons of methanol, 600,000 tons of DMTO, 1.5 million tons of DCC, 2×300,000 tons of PE, 2×300,000 tons of PP, 90,000 tons of MTBE, and 40,000 tons of butene-1. Since the production of qualified PE/PP began in July 2014, and following several shutdowns for technical upgrades and optimizations, this demonstration project has achieved stable operation at high load levels over extended periods, thereby verifying the feasibility of the comprehensive utilization of naphtha. Based on this, Yanchang Petroleum Group has decided to accelerate the progress of the 1.8 million tons per year methanol production and 600,000 tons per year methanol-to-olefins project in Fuxian County, Yan’an, which had been put on hold at an earlier stage, in order to ensure that it is completed and put into operation by the end of the 13th Five-Year Plan period. According to the person in charge of China Coal Shaanxi Yulin Energy Chemical Co., Ltd., since the first phase of the Yulin project’s production lines – capable of producing 1.8 million tons of methanol, 600,000 tons of DMTO, 300,000 tons of PP, and 300,000 tons of PE – began operations in 2014, they have generated considerable economic benefits. During the 13th Five-Year Plan period, China Coal Group will initiate the construction of the second phase of these facilities, which will also have the capacity to produce 1.8 million tons of methanol, 600,000 tons of DMTO, 300,000 tons of PP, 300,000 tons of PE, 10,000 tons of hexene-1, 100,000 tons of 2-propylheptanol, as well as products derived from C4 feedstocks. The goal is to turn China Coal Yulin Company into a production base for coal-based olefins on a scale of millions of tons. “Judging from their performance from last year to the present, coal-based olefins and coal-based ethylene glycol have undoubtedly withstood the challenges of low oil prices and possess strong competitiveness. To this end, during the 13th Five-Year Plan period, Shaanxi Coal and Chemical Group will accelerate the construction of the 300,000-ton per year coal-to-ethylene glycol project in Binchang, as well as the 700,000-ton per year coal-to-olefins facility in Pucheng, while expanding the production capacity for coal-to-olefins at the appropriate time. ”Revealed by You Xiti, the executive vice president of Shaanxi Coal and Chemical Group. Sun Qiwen, deputy general manager of Yankuang Group, also said that due to the promising prospects of coal-based olefins, during the 13th Five-Year Plan period, Yankuang Group will rely on the key laboratories for coal liquefaction and coal chemical engineering. While focusing on the development of advanced processing technologies for coal liquefaction products, the group will also increase efforts in researching and developing MTO and MTP processes as well as the key equipment related to these processes, with the goal of establishing MTO and MTP technologies that possess independent intellectual property rights at an early date. Compared to the aforementioned companies, Shenhua Group, which has already reaped benefits from coal-to-olefins projects, has even more ambitious plans in this area and a larger scale of operations. Yan Guochun, general manager of Shenhua Baotou Coal Chemical Branch, said that by the end of 2014, the Shenhua Baotou MTO project had produced a total of 2.115 million tons of PE and PP, generating sales revenue of 23.5 billion yuan, a total profit of 4.3 billion yuan, and a net profit of 3.84 billion yuan. In 2014, the two MTP units at Shenhua Ningdong produced 520,600 tons of PP, resulting in sales revenue of 5.81 billion yuan and a profit of 1.064 billion yuan. The significant economic benefits of the 3 coal-to-olefins plants have further strengthened Shenhua Group’s confidence in developing modern coal chemical industries and investing in coal-to-hydrocarbon projects. “During the 13th Five-Year Plan period, Shenhua Group will continue to increase investment in modern coal chemical projects, including those for coal-to-olefins production. It plans to complete two MTO projects in Xinjiang with a capacity of 680,000 tons each and another in Baotou with a capacity of 700,000 tons. Additionally, it aims to build facilities in Ningdong for producing olefins from by-product pyrolysis gas at a capacity of 1.4 million tons, as well as PP and PE production plants with capacities of 600,000 tons and 450,000 tons respectively. Over a period of 5 to 10 years, the group seeks to establish three industrial bases centered around coal-to-olefins production, each with its own characteristics: one for coal-to-olefins and derivatives in Ningdong, another for polyolefins and their further processing in Yulin, and a third in Baotou. Liu Yanwei, deputy chief engineer at the Petroleum and Chemical Industry Planning Institute, said that due to the strong profitability and competitiveness of coal-based chemical projects including DMTO, during the 13th Five-Year Plan period, China will steadily implement coal-based olefin (including MTP) projects with a total capacity of 13.92 million tons, including 600,000 tons in Zhundong, Xinjiang; 600,000 tons by Sinopec in Shanxi; 600,000 tons in Yimin, Eastern Mongolia; 3.27 million tons in Dalu, Western Mongolia; 3.45 million tons in Ningdong; 4.2 million tons in Yuheng, Shaanxi; and 600,000 tons in Zhongan, Anhui. By 2020, China’s total capacity for coal-based olefins (including MTP and methanol-to-olefins) will reach 20 million tons, accounting for 25%–35% of the total olefin production capacity. “China imports over 10 million tons of polyolefins each year. In the future, with the increasing popularity of family cars and the need to reduce vehicle weight, demand for plastic automotive components will continue to rise sharply, thereby increasing demand for PP and PE as well. From this perspective, there is no risk of overcapacity in the olefin market for at least the next 5 years. Given the current situation in the vast majority of industries, where there is overcapacity, fierce market competition, extremely low product profit margins or even losses, coal-based olefins represent a practical and sensible choice for enterprises: they involve relatively low investment risks, large market potential, and relatively stable and substantial profits. They also help energy and chemical companies adjust their product portfolios and enhance their capacity for sustainable development. ”Eucyti said. Weng Lize, director of the technical platform at the Beijing Institute of Low-Carbon Clean Energy, warned that although the DMTO technology can produce both ethylene and propylene simultaneously, it generates nearly 20% by-products. Although DMTO-Ⅱ reprocesses C4, its one-pass conversion rate is only 50%. The products after the reaction go into the existing separation system; although 10% more olefins are produced, energy consumption increases by 20%. In addition, there are challenges posed by further drops in oil prices and the technology of producing ethylene through methane coupling. Therefore, when planning and launching coal-to-olefins projects, enterprises should carry out further engineering and process optimizations, strive for the hierarchical utilization of energy and resources, minimize costs, and enhance the project’s resilience to risks. Li Wei, general manager of China Coal Jingbian Energy Chemical Company, also said that although there is no risk of oversupply for PP and PE in the next 3 to 5 years, the profit margins for ordinary products will continue to be squeezed. Currently, cross-linked PP, PP for use in vehicles, and metallocene PE all rely on imports in China, while EVA is in severe shortage; this presents a valuable opportunity for coal-based olefin manufacturers. Relevant enterprises should, after ensuring the stable operation of their facilities, increase investment in technological research and development as well as the creation of new products, thereby raising the proportion of specialty polyolefin products with high added value, enhancing their profitability, and promoting the healthy development of both the enterprises and the industry as a whole.