High Oil Prices Deliver a Windfall for China’s Coal-to-Chemicals Industry
High Oil Prices Deliver a Windfall for China’s Coal-to-Chemicals Industry What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the… China’s biggest coal-to-chemicals producer reported record profits for the first half, raking in the equivalent of $1.4 billion as crude oil prices soared internationally, strengthening the business case for converting coal to chemicals.
Bloombergreportedtoday that Ningxia Baofeng Energy Group Co., which accounts for about a third of China’s coal-to-chemicals output, had an especially strong second quarter when oil prices spiked amid the Strait of Hormuz oil flows disruption.
The first-half figure was an almost twofold increase on an annual basis.
“Crude oil prices rose rapidly and were highly volatile, significantly increasing feedstock costs for oil-based olefins,” the company said in its first-half statement, as quoted by Bloomberg.
“Domestic coal prices increased moderately, and feedstock costs for coal-to-olefins production rose only slightly.” China’s coal-to-chemicals industry got a major boost from the Middle East war.
The sector’s stocks jumped by 30% between the end of February and mid-March, Reuters reported at the time, with investors rewarding the energy industry’s ability to use coal for the production of fertilizers and other petrochemicals without actually using petroleum.
The rewarding will likely continue, with the Middle East disruption unlikely to end anytime soon.
While oil prices have moderated from spring peaks, they are still palpably higher than they were before the war began, meaning they would continue to provide support for coal-to-chemicals producers.
Thanks to the technology, China is already making 85% of its methanol and ammonia from the solid hydrocarbon, according to data from the International Energy Agency, as quoted by Bloomberg.
Coal prices have also risen on stronger demand, but they remain significantly lower than the prices of crude oil and natural gas, strengthening the business case for coal-to-chemicals production.
Yet Chinese energy companies are not stopping there.
Earlier this year, Reuters reported that PetroChina was developing a project for the extraction of gas from coal rock, eyeing output of 30 billion cubic meters by 2035.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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