[Basic Chemicals] Are coal chemical companies (coal-to-olefins, coal-to-ethylene glycol, coal-to-methanol) making money right now?

[Basic Chemicals] Are coal chemical companies (coal-to-olefins, coal-to-ethylene glycol, coal-to-methanol) making money right now?

For coal-to-olefins, roughly 7.08 tons of coal produce 1 ton of olefins, and with processing costs estimated at about 2,800 yuan/ton (product prices, costs, coefficients and other factors can change over time; same below), the production cost for coal-to-olefins with a captive coal mine is 3,932 yuan/ton, while for coal-to-olefins using purchased coal it's 9,300 yuan/ton.

If you buy methanol to make olefins, with methanol at 2,500 yuan/ton, methanol consumption at 3.1, and processing costs at 1,500 yuan/ton, the olefin cost comes to about 9,250 yuan/ton—comparable to the current cost of coal-to-olefins using purchased coal.

Right now propylene in Shandong is around 7,400 yuan/ton, and Sinopec's ethylene is about 7,500 yuan/ton. So if you use purchased coal or methanol, you're losing about 1,900 yuan per ton of olefins. If you have your own coal mine, you're making 3,400 yuan per ton.

Producing olefins with a captive coal mine is currently the most competitive route. Even if olefin prices keep falling, coal-to-olefins can stay profitable—something other olefin production methods can hardly match.

Second, the current economics of coal-to-ethylene glycol.

Coal-to-ethylene glycol is one of the important directions for China's coal chemical industry and a major way to fill the ethylene glycol supply gap. The downstream is mainly used for polyester production.

I previously wrote "Are ethylene glycol producers losing badly?"—those interested can click to read.

The economics of coal-to-ethylene glycol also depend on whether the coal is from a captive mine or purchased. Different coal sources mean different production costs and huge differences in economics.

Based on a captive coal mine, using 3.2 tons of coal to produce 1 ton of ethylene glycol and processing costs of 2,500 yuan/ton, the cost of coal-to-ethylene glycol with a captive mine is about 3,000 yuan/ton, while with purchased coal it's about 5,500 yuan/ton.

Currently ethylene glycol market price is about 4,400 yuan/ton, so purchased-coal ethylene glycol would lose about 1,100 yuan/ton, while captive-mine ethylene glycol still earns 1,400 yuan/ton.

I think if ethylene glycol prices keep falling and crude oil stays high, captive-mine ethylene glycol producers can hold on, but oil-based producers may face across-the-board losses and need to consider shutting down.

Third, the current economics of coal-to-methanol.

Coal-to-methanol is the front-end production step in the coal chemical industry. Many coal-based chemicals require methanol as an intermediate, and coal-to-methanol is also the key link determining their production economics. Coal-to-methanol first gasifies raw coal, then produces methanol via syngas.

Coal-to-methanol companies almost all have captive coal mines now; only a few need to buy coal.

Based on 2.5 tons of coal producing 1 ton of methanol and processing costs of 850 yuan/ton, the cost of methanol with a captive mine is about 1,250 yuan/ton, while with purchased coal it's about 3,200 yuan/ton.