The coal industry is in poor shape – what impact will this have on coal chemical industry?

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As long as the coal is mined, it can be sold at a good price； As long as there are coal resources, that place will become a prosperous area ； As long as one can get their hands on coal mines, they can make huge profits; coal owners have become a synonym for China’s richest people ； There is a fee to transport coal out of Shanxi Province, and this fee lasts for 10 years; the annual cost amounts to over 10 billion yuan... This is a true reflection of the golden decade for the coal industry in this century. But almost overnight, the coal industry plummeted from a state of great prosperity to one of dire struggle. How bad is the coal industry? Coal, once hailed as \"black gold,\" has become cheap and common. The price of thermal coal with a calorific value of 5,500 kcal/kg in Qinhuangdao has dropped from a peak of 860 yuan per ton to around 380 yuan per ton, while the price of anthracite has fallen from over 1,000 yuan per ton to around 300 yuan per ton ； Over 90% of coal enterprises across the country are operating at a loss ； The seven major coal companies in Shanxi, a province that was once prominent in the coal industry, had total debts of over 1.19 trillion yuan by the end of the first quarter this year – an amount almost equivalent to Shanxi Province’s total GDP last year… These once financially strong coal companies are now forced to find other ways to survive. Longmei Group, Heilongjiang’s largest coal enterprise, has started to sell off its assets; 77 of its physical assets were listed for sale on the website of the Heilongjiang United Property Rights Exchange in the middle to late March as items to be transferred ； The coal mines in Jincheng, Shanxi, are turning their attention to other areas of business; some plan to build photovoltaic power plants, grow vegetables and fruit trees, while others intend to produce agricultural by-products such as tofu and vermicelli. Some have already opened restaurants and supermarkets, etc. With the coal industry in such a poor state, what impact will this have on coal chemical industry, which is one of the direct downstream industries of this sector, especially modern coal chemical industry? At first glance, the coal chemical industry has benefited. The sharp drop in coal prices has led to a significant reduction in the production costs of coal chemical enterprises. Generally, in the production costs of coal chemical enterprises, coal accounts for 70%. Coal prices have dropped by more than half, or even two-thirds, which has reduced the largest cost component for coal chemical enterprises. Furthermore, the transformation and upgrading of China’s economy has reduced the demand for coal, resulting in an ample supply of coal in the market. This has shifted the market from a seller’s market to a buyer’s market, meaning coal processing companies no longer need to cater to the wishes of coal producers, which is certainly beneficial for them. However, the coal chemical industry and the coal industry are closely linked partners, in a relationship where one depends on the other. When one prospers, all prosper; of course, when one suffers, all suffer as well. Previously, the golden decade of the coal industry paved the way for a golden decade in the coal chemical industry. And the poor performance of the coal industry will also pose challenges to the coal chemical industry. A review of the origins of some coal chemical projects that attracted significant attention in previous years shows that in almost all cases, the owners of these projects were coal companies. In an era where resources are king, coal resources are necessary to develop coal chemical industries, and resources are precisely the advantage of coal enterprises. Now that the coal industry is in a poor state, do coal owners still have enough money to invest heavily in coal chemical industries? As a capital- and technology-intensive industry, how can the coal chemical sector thrive if subsequent investments in it, particularly those related to technological upgrades and environmental protection, fail to keep up? Furthermore, coal is a pillar energy source in our country. To build a moderately prosperous society in all respects and achieve the great rejuvenation of the Chinese nation, it is inconceivable to have an industry based on coal that does not develop healthily. Therefore, the dire situation of the coal industry has drawn the attention of **top officials. Well, on February 5th, the State Council issued the \"Opinions on Reducing Excess Capacity in the Coal Industry to Achieve Sustainable Development,\" with the main aim of helping coal enterprises overcome their difficulties by reducing production capacity and closing mines. At the same time, **it is also planned to allocate 100 billion yuan primarily for covering the costs associated with retraining workers as part of the process of phasing out excess production capacity in the coal industry. In essence, these policies are aimed at controlling coal production capacity and reducing coal supply. And the most direct result of this is a stop in the decline and a rise in coal prices. According to the State Council’s plan, starting in 2016, it will take 3 to 5 years to phase out a coal production capacity of around 500 million tons per year, with another 500 million tons of production capacity being reduced through restructuring. In other words, coal supply in the market is set to decrease by 1 billion tons over the next three to five years, which is roughly 27% of last year’s output of 3.695 billion tons. With such a large amount of supply gone, coal prices are bound to rise. But at the same time, international crude oil prices, which serve as a benchmark for the prices of key products in modern coal chemical industry, have remained bearish. The price of raw coal has risen, but the prices of finished products have not increased accordingly; it seems that the situation for the coal chemical industry will only get worse. Statistics show that by 2020, the entire coal chemical industry will consume 750 million tons of coal, while domestic coal production is set to decline by 1 billion tons during that time. At that time, will the supply of coal, the raw material for coal chemical industry, be as smooth as it is now? These impacts are right before our eyes. The coal chemical industry should consider taking countermeasures. (Source: China Chemical Industry News)