Potential risk increase of new coal to olefin proj

2022-08-05
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On November 30, Deloitte Co., Ltd., a global consulting company, released a market analysis report titled "China's coal to olefin industry: exploring the next golden mountain of coal chemical industry". According to the report, since the 11th five year plan, coal to olefin has been established as one of the priority development directions of new coal chemical industry in China, and the diversified development policy of olefin raw materials has further promoted the rapid growth of the industry. However, while pursuing business opportunities, new entrants to the market should not ignore potential risks and challenges such as falling oil prices, overcapacity and carbon tax

according to the report, in order to realize the strategy of raw material diversification, all parties in China are actively exploring the production routes of coal to olefin (CTO) and methanol to olefin (MTO), so as to provide a useful supplement to the route of petroleum to olefin. While actively promoting the development of coal to olefin industry, the Chinese government has also taken a series of measures to prevent overheating and disorderly development in the industry. The national development and Reform Commission strictly controls the examination and approval of coal to olefin projects and strengthens the regulation of the industry

it is reported that the national development and Reform Commission is currently focusing on key issues such as site selection, construction speed and technology selection of new coal to olefin projects, in order to prevent energy consumption and environmental damage that may be caused by blind development of small projects. However, for the methanol to olefin project where the reduction value of bamboo powder has become relatively flat, the state has not yet issued special regulatory measures, and the future development trend needs to be continuously observed

it is learned that in 2011, China's coal to olefin industry set off a commercialization boom, and four units of Shenhua Baotou, Shenhua Ningmei, Datang Duolun and Sinopec Zhongyuan were put into operation successively. According to the coal deep processing demonstration project plan (7:1.5:1.5), from 2012 to 2015, China will focus on promoting 15 coal chemical upgrading demonstration projects, of which at least 5 are coal to olefin projects. The main investors will include Sinopec, Shenhua Group and other enterprises. Sinopec has launched four coal to olefin projects in Inner Mongolia, Anhui, Henan and Guizhou and made substantial progress, with a total olefin production capacity of 3.1 million tons

at present, many enterprises, including coal enterprises and power enterprises, have entered the field of coal to olefins and methanol to olefins in an independent or cooperative manner

Guan Yang, head of Deloitte China chemical industry, said: "It is estimated that by the end of the 12th Five Year Plan period, China's annual olefin production capacity will reach at least 56million tons. However, the uncertainty of the new methanol to olefin project may lead to further expansion of production capacity. Taking into account the new project is to adapt to the pressure of relatively large pulling force to increase production capacity and slowing demand growth. There may be overcapacity in the olefin industry in the next few years. Moreover, after 2015, overcapacity may increase."

in order to clarify the economics behind China's coal to olefin project, Deloitte chemical team has built a simplified financial model to analyze the profitability of the project. Initially, China's coal to olefin project has a good profitability. From april2011 to april2012, the estimated average profit margin of main business was about 35%; Compared with the traditional petroleum (naphtha) route, the coal to olefin route has certain cost advantages. However, the profitability of the coal to olefin project is greatly affected by the fluctuation of oil price and coal price. The sensitivity analysis of the financial model shows that when the oil price drops to $80/barrel, the coal to olefin project may suffer a comprehensive loss

in addition, coal to olefin has a series of other challenges and risks that need attention. For example, the stability of coal price and quality, the acquisition and cost of water resources, the reliability and maturity of methanol to olefin technology, as well as the sales capacity and downstream integration level. It is estimated that the cost of enterprises with coal resources will be 5%~10% lower than that of other enterprises

Guanyang warns: "carbon tax is a major uncertain factor affecting coal to olefin projects. According to some academic journals, if carbon tax is levied, the additional carbon tax that coal to olefin needs to pay can reach up to 2000 yuan/ton compared with the oil route, which will offset the cost advantage of the coal to olefin route."

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