Plastic Fantastic

Coal’s appeal to China is twofold: it could help bring the country’s industrial awakening westward and promote national self sufficiency in basic chemicals and some plastics.

Behind the U.S. (27%) and Russia (17%), China has the third-largest global coal reserves (13%), with much of the fossil fuel already used to feed the country’s exploding energy needs. Increasingly however, China is exploring liquefaction of the hydrocarbon for the creation of chemicals. In late 2007, the country completed its first coal-to-liquids (CTL) plant in the Inner Mongolia Autonomous Region. Built by Shenhua Coal Liquefaction Corp., that facility will have an initial capacity of 20,000 barrels per day, with the tentative goal being to boost capacity to 100,000 bbl/day by 2010.

According to the U.S. government’s Energy Information Administration’s (EIA) “2007 International Energy Outlook,” China’s Shenhua and Ningxia Industry Groups are undertaking feasibility studies for two 80,000 bbl/day coal-to-liquids plants to be sited in the Ningxia Autonomous Region and the Shaanxi Province.

The EIA reports that government and industry groups in China have proposed daily CTL capacity of 1 million barrels by 2020. Last summer, ShengdaTech Inc. (Taian City, China) added 40,000 tonnes of annual nano-precipitated calcium carbonate (NPCC) capacity at its factory in Xianyang City, Shanxi Province. The NPPCs are used in tires, paints, polyvinyl chloride (PVC), and other products.

To support these efforts, the Chinese government has shifted its tariff structure for coal exports. In the past, China offered an 8% export tax rebate to encourage exports, but it now imposes a 5% export tax on coking coal, with an additional export tax on steam coal under consideration. The country has also lowered its 2007 export cap to 46 million tons, which is roughly half of its coal exports in 2003.

ShengdaTech invested roughly $10 million to add two new lines, each with 20,000 tonnes of annual capacity, to its factory at Shengda Industrial Park.

Black gold

At the company’s annual Global Petrochemical Conference, Paul Pang, managing director of Chemical Market Associates Inc.’s (CMAI; Houston) Shanghai branch, outlined China’s CTL efforts as they relate to chemicals and plastics. Pang said that the country’s latest five-year plan calls for development of heavy industry in the west, including chemicals and metals. As China sill imports 20 million lb of basic chemicals annually, Pang said it is working toward adding large-scale coal-fed petrochemical sites, with 24 million lb of basic chemical capacity added by 2011.

The primary plastic derived from these efforts has been polyvinyl chloride (PVC), with coal-derived capacity jumping from 2 million tons in 2002 to 7 million by 2007. By 2012, Pang says coal-based methanol and PVC throughput will double from current levels, with more than 90% of China’s PVC being derived from coal. The coal will also be used to produce propylene and ethylene, monomer feedstocks for polypropylene and polyethylene among other resins, with the state backing several large-scale projects. Over the next three to four years, the Middle East will add huge amounts of resin capacity, with much of the production intended for China, but in PVC, at least, Pang says China’s CTL path is economically competitive, with the end product roughly $100 cheaper than PVC derived from petroleum.

Pang’s CMAI associate, Steve Zinger, reported at the same conference that there are 12 coal-to-polyolefins projects being looked at in China, calling the effort a “game changer in olefins.” Zinger added, “There’s a lot of internal pressure to get self sufficient in other basic commodities, and certainly ethylene is no exception,” pointing out that as in steel, China’s government will wholeheartedly encourage domestic development of basic industries.