China's petrochemical and coal chemical industries are moving from traditional cost-based competition toward greater integration and complementarity, analyst said at the Coal Market Outlook 2026 & Sxcoal Annual Conference on December 25.

Petrochemicals and coal chemicals have long competed on economics, with relative costs shifting in response to market cycles. From the perspective of national energy security and chemical feedstock supply, however, the two industries are strategically complementary.

Developing coal chemicals helps diversify petrochemical feedstocks and reduce excessive reliance on imported crude oil, according to Shen Yujie, an analyst at Rongsheng Petrochemical Co., Ltd.

Methanol, olefins and ethylene glycol are currently the three most mature and competitive products. Between 2020 and 2023, methanol profitability was weak, with high coal prices one of the main drags on margins.

As coal prices entered a downtrend, methanol margins recovered in 2024 and 2025, with profitability largely improving in 2025, Shen said.

China's ethylene and propylene capacities continued to expand in recent years. Shen noted that since 2025, profits of coal-based propylene production have been higher than that of oil-based propylene. In mid-2025, coal-based propylene's profits margins peaked, when coal prices were near annual lows, while losses for oil-based propylene reached widest.

Coal chemicals are considered more competitive when the ratio of Brent crude prices (in U.S. dollars per barrel) to China's 5,500 Kcal/kg NAR thermal coal prices (in yuan/t) exceeds 7–8. When the ratio falls below 7, oil-based petrochemical tends to have an advantage, though threshold levels vary by product, according to Shen.

Companies adopted multiple strategies to manage cost volatility, he said. These include technological innovation such as process optimization, cleaner technologies and green hydrogen substitution; feedstock diversification through long-tesm imports of lower-cost coal from Mongolia and Indonesia.

Despite ongoing competition, Shen stressed the necessity of deeper integration between petrochemical and coal chemical industries. China's resource endowment means coal chemicals must serve as an important supplement to petrochemicals, as oil and gas alone cannot meet demand for bulk chemical feedstocks.

Through technological coupling, the two sectors can achieve feedstock complementarity, product optimization and shared utilities. Such integration can lift olefin yields by more than 15%, improve overall system efficiency, and significantly reduce energy consumption and carbon emissions, supporting China's dual carbon goals, Shen pointed out.