The overall coal consumption growth for the coal-to-chemical industry in 2023 is projected to be modest, likely ranging 1-3%, given the constraints of increments and low operating rates, Fang Zhujun, futures and paper trader of market department, Zhejiang Rongsheng Holding Group Co., Ltd., stated at a conference in Nanning of Guangxi on September 7.

 

This projection is based on the forecasted increase in chemical production capacity, Fang said during the China Coal Market Summit 2023 & Beibu Gulf Port Field Trip held by Fenwei, the operator of coal industry portal Sxcoal.

 

Methanol-producing profit has been on recovery due to the decline in coal prices, but still in losses as a whole and stayed at comparatively low levels. Methanol prices have also fallen with a drop in coal prices, which, coupled with a lack of improvement in demand, resulted in an average capacity utilization of below 70%.

 

With a downward trend in coal prices, the urea sector is expected to maintain relatively high operation for the entire year, driven by favorable urea profits and heightened production enthusiasm among enterprises.

 

The overall profit of PVC this year has been moderate, with the capacity utilization remaining low despite the recent improvement in profitability. For the second half of 2023, the growth of supply is expected to outpace that of demand. Domestic demand is predicted to recover while foreign demand to be weakening and the market is likely to continue the relative oversupply situation.

 

Ethylene glycol overall is in deep loss, with the overall capacity utilization hovering around 60%.

Throughout the year, the supply-demand fundamentals are expected to be loose and prices to be in moderate fluctuations.

 

On the whole, cost-side weakness undermines support for coal chemicals. Except for a few products like urea, which maintain relatively favorable profits, profitability remains poor for most chemical products such as methanol, ethylene glycol, and PVC, leading to weaker cash flows for producers.

 

Chemical products are adequately supplied, whereas downstream demand is flat. Moreover, there is no noticeable improvement in demand prospect. The overall supply and demand is relatively loose, Fang said.

 

Regarding chemical products output, methanol is forecast to maintain a relatively low growth rate for the entire year of 2023, with around 4.46 million tonnes per annum (Mtpa) of new effective capacity being added, and the year-on-year growth staying within the range of 3-4%.

 

The plan for 2023 involves adding 4.46 Mtpa of new capacity in the urea sector. Yet considering potential delays in urea unit installations, the actual new capacity may reach 3.24 Mtpa, with y-o-y growth at 4% or so.

 

Some 1.3 Mtpa is planned to come online for PVC in 2023. However, due to uncertainties of actual capacity expansion, the new effective capacity of 0.55 Mtpa is expected to be added, up 2% year on year (calcium carbide method).

 

A new coal-based capacity of 0.2 Mtpa is planned to be added for ethylene glycol in 2023. As the 1.8 Mtpa capacity added by Shaanxi Coal and Chemical Group before end-2022 is expected to start production this year, the production growth is estimated to rise 7% for the full year.

 

Considering the relatively low operation and thin profit margins for various products, the actual production for each product might fall short of expectations, accompanied by the phase-out of outdated capacities.

 

Against the backdrop of the dual control system of total energy consumption and intensity, stricter requirements are imposed on the construction of new coal chemical projects. Approval and management procedures for new projects such as coal-based olefins and coal-based aromatics are more standardized. Administrative licensing processes related to safety, environmental protection, and water resource preservation are more stringent. This implies heightened technical and environmental demands on coal chemical projects.

 

Under the constraints of the "Dual Carbon" targets, coal must make a transition towards cleaner and more efficient utilization. This involves the transformation of high-carbon energy sources into low-carbon utilization, ensuring energy security while fulfilling the commitments of the "Dual Carbon" goals.

 

In recent years, coal consumption in the chemical industry in China has exhibited an overall upward trend. Moving forward, the clean and efficient utilization of coal will be a long-term direction for the industry's development.