China Market Insider Coal Chemistry in China – A Great Future with a Small Catch?

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Coal chemistry has "great potential" in China, says China's president. Xi Jinping makes this statement - which makes climate activists around the world sit up and take notice - during a visit to one of the traditional coal provinces of the People's Republic. The most powerful politician in the country, which consumes the most coal in the world, visited coal chemical companies at the Yangjiagou Revolutionary Base in Yulin, Shaanxi province. PROCESS' China Market Insider explains what these statements mean.

Beijing/China – Shaanxi in northwest China is one of the strongholds of coal mining and coal chemistry in the People's Republic. China's all-powerful party and state leader thus deliberately chose a fitting stage for his statements on the future of coal chemistry.

"He emphasized that coal chemistry has great potential and great promise," reported the state-run energy trade portal Shiyou Huagong Luntan. Indeed, China has been investing heavily in the coal-to-olefins industry for several years, and coal is currently a relatively small but fast-growing feedstock sector for the country's chemical industry.

A closer look, however, reveals that Xi Jinping is simultaneously demanding a massive transformation from the industry. The president is interested in "modern coal chemistry", in "special fuels based on coal", in "biodegradable" products made from coal such as PBAT or PBS, Chinese media commented.

PBAT in particular, a biodegradable copolymer that can be easily produced from coal, is currently experiencing a kind of "gold rush" in China, writes the trade magazine C&EN - and quotes forecasts according to which PBAT production in China alone is expected to almost triple from around 150,000 to 400,000 tons by 2022.

More competition for BASF

His country wants to "actively research and produce special fuels and biodegradable coal-based materials" from now on, China's state and party leader said on the sidelines of the Shaanxi coal mines, according to Chinese state media. This will, among other things, make competition much fiercer for BASF in this segment.

With its product Ecovio, the German multinational is one of the pioneers of PBAT production and last year licensed the technology to the Chinese manufacturer ‘Red Avenue New Materials’. In a modern PBAT factory in Shanghai with state-of-the-art process technology from Germany, 60,000 tons of the environmentally friendly plastic substitute will be produced in a first phase starting next year.

China, which also produces the most plastic waste on earth, had been heavily criticized in the course of the international debate on the pollution of the oceans with plastic debris. The increased interest in PBAT production is partly explained by the country's political leadership's attempt to move from being the world's whipping boy to being a pioneer in green technologies of all kinds.

Coal presents China with particular challenges in this regard. The People's Republic has rich coal deposits, but is heavily dependent on imports for crude oil. Coal-fired power plants are still the backbone of China's energy supply. 57 % of China's total primary energy consumption came from coal in 2020, Liu Bingjiang, an official of China's Ministry of the Environment, said at a press conference in Beijing in February.

Beijing has launched its own version of an energy transition, and the relative share of fossil fuels in energy production is falling, but more clearly needs to be done in light of the Chinese Government's ambitious new climate targets.

Conversion to ‘green’ coal chemistry

Xi Jinping's remarks in the coal province now clearly point to the strategy of not giving up coal as a raw material in the chemical industry in the coming years. However, the conversion to a ‘greener’ coal chemistry is to be accelerated.

Beijing is very serious about its climate goals, as it has already begun with the first suspensions of new coal chemistry projects that cannot demonstrate specific emission savings targets or otherwise prove their usefulness for the new climate goals. One of the projects has been put on hold in, of all places, Yulin - the same region that Xi Jinping has now visited with his ‘message for the future.’

China's coal chemistry is thus at the center of a dilemma for Beijing: On the one hand, the production of olefins from coal and also the production of biodegradable materials from coal itself are more energy- and emission-intensive compared to processes using crude oil as a raw material. This clashes with Beijing's new climate targets. On the other hand, the Chinese Government is making efforts not to jerkily stall its country's economic development because of climate targets and also to show coal chemistry a way into the future. Not using the country's massive coal reserves is not an option for Beijing.

‘Green products’ such as PBAT, which are produced with the latest process technologies in a way that is at least a little more emission- and energy-friendly than conventional coal chemistry products, will therefore be promoted even more strongly from now on.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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