Analysis Report on the Development Situation of China's Modern Coal Chemical Industry
Compiled by: Spring Zhao NESC
Executive Summary
Against the background of increasing global energy supply uncertainty and China’s strong demand for energy security, the modern coal chemical industry has become a strategic pillar for ensuring national energy supply and optimizing the energy structure. Based on policy support, technological breakthroughs, and large-scale industrialization, China’s modern coal chemical industry has achieved leapfrog development from technical demonstration to large‑scale commercial operation.
In terms of development achievements, the industry has witnessed continuous expansion of production capacity, steady growth in output and economic benefits, and remarkable progress in technological innovation and equipment localization. A number of independent core technologies, including coal gasification, methanol‑to‑olefins (DMTO), and direct/indirect coal liquefaction, have reached international advanced levels. Long‑period stable operation has become normal for benchmark projects, and industrial clusters have taken shape in major coal‑producing regions in western China. The industry has played an irreplaceable role in ensuring the supply of oil, gas and chemical materials.
However, the industry is now at a critical stage of transformation from scale expansion to quality improvement. It faces prominent challenges such as product homogenization and overcapacity of general‑purpose products, insufficient high‑end technology integration, incomplete standard systems, resource and environmental pressure in western regions, inadequate cross‑regional and cross‑industrial coordination, and increasingly stringent market competition and policy constraints.
Looking ahead, driven by national energy security strategy, the modern coal chemical industry will shift toward high‑end, green, low‑carbon and intensive development. The future focus will be placed on developing high‑value‑added coal‑based new materials, breaking through key core technologies and catalysts, strengthening the treatment and resource utilization of wastewater and solid waste, promoting the application of CCUS and green hydrogen, improving the unified industrial standard system, and optimizing regional layout and industrial coordination.
With the leadership of central energy enterprises and the joint efforts of the whole industry, China’s modern coal chemical industry is expected to achieve high‑quality transformation and upgrading, and better serve national energy security and high‑quality economic development.
I. Strategic Positioning and Development Foundation of the Industry
(I) High Attention from the National Strategy
The Party and state leaders have always placed the development of the coal chemical industry at the core of the national energy security strategy, laying a solid policy and practical foundation for the industry.
1. Historical Layout
In January 1996, General Secretary Jiang Zemin inspected the coal liquefaction experiment at the China Coal Research Institute.
In November 2007, General Secretary Hu Jintao inspected the direct coal liquefaction site in Ordos, promoting early technical verification and demonstration of the industry.
2. Strategic Positioning
In August 2009, then Vice President Xi Jinping pointed out:
“Coal-to-liquid is a national energy strategy and an important strategic arrangement for economic development and long-term stability. As a major component of China’s energy structure, expanding, strengthening and improving the coal industry is of far-reaching strategic significance.”
(II) Core Role of China Energy Investment Corporation
As the core enterprise of the industry, China Energy has become a benchmark with a full industrial chain and world-leading scale.
1. Comprehensive Strength
Ranked 92nd in the Fortune Global 500 in 2025, it is a major central energy enterprise restructured after the 19th National Congress of the CPC. It covers coal, power, chemicals and logistics, with 2 A+H listed companies, 4 A-share listed companies and more than 1,000 production units.
2. World’s Largest Scale
It ranks first globally in coal sales, power installed capacity, wind power capacity, and coal-to-liquid / coal chemical scale.
• Annual coal output: 620 million tons; annual sales: 850 million tons
• Total power installed capacity: 355 GW, with renewable energy accounting for 40%
• Coal-to-liquid capacity: 1.08 million t/a
• Coal-to-olefins capacity: 4.23 million t/a
3. Energy Security Contribution
Coal sales account for 1/6 of the national total; power generation 1/8; heating supply 1/8; railway freight volume 1/9. It serves as a “stabilizer” of national energy security.
II. Current Industrial Development: Remarkable Achievements in Scale and Technology
(I) Expanding Scale and Improved Economic Performance
In 2024, the industry achieved simultaneous growth in output and efficiency.
1. Output Scale
Total output of coal-to-liquid, coal-to-gas, coal-to-olefins and coal-to-ethylene glycol reached about 32 million tons, converting about 118 million tons of standard coal annually, up 5.2% year-on-year.
• Coal-to-liquid: 7.517 million t/a
• Coal-to-gas: 5.13 million t/a
• Coal-to-olefins: 12.89 million t/a
• Coal (syngas)-to-ethylene glycol: 6.462 million t/a
2. Revenue and Profit
Operating revenue: approximately 202.66 billion yuan (+4.2% YoY)
Total profit: 11.93 billion yuan (+178.1% YoY)
3. Optimized Capacity Structure
The proportion of coal-to-olefins capacity rose from 9.7% to 34.5%, becoming the main growth driver.
(II) Technological Innovation and Localization of Core Equipment
The industry has broken foreign monopolies and formed an independent R&D and industrialization system.
1. Gasification Technologies
• Entrained-flow gasification: Aerospace Pulverized Coal Pressured Gasification
• Fixed-bed gasification: Saiding Furnace Low-rank Coal Gasification
Domestic market share of pulverized coal gasification exceeds 50%.
By April 2025, Jinhua Furnace 3.0 had been applied in 39 projects, with 91 sets promoted (36 sets exported).
2. Core Conversion Technologies
• DMTO (Methanol-to-Olefins): 36 licensed units, capacity over 24 million t/a (1/3 of national total). The world’s first DMTO-III unit was put into operation at Inner Mongolia Baofeng. The technology won the First Prize of the National Technological Invention Award in 2014.
• Coal-to-SNG: Southwest Research Institute completed process certification; Dalian Institute of Chemical Physics finished design of a 1 billion m³/a process package.
• Direct / Indirect Coal Liquefaction: China Energy developed independent first and second-generation technologies. Synfuels China’s high-temperature slurry-bed technology has been applied in 5 large-scale plants with a total capacity of 6.2 million t/a.
3. Localized Key Equipment
High-pressure coal-oil slurry feed pumps, high-temperature centrifugal coal slurry pumps and other core equipment have been domestically developed, breaking “bottleneck” constraints.
(III) Improved Operation and Initial Low-carbon Progress
1. Long-period Stable Operation
• China Energy Baotou coal-to-olefins: 528 consecutive days
• Direct coal liquefaction: 420 days (exceeding the designed 310 days)
• Inner Mongolia Huineng coal-to-SNG: 652 days at full load
2. Energy Consumption and Emission Reduction
Energy consumption per 10,000-yuan industrial added value continued to decline.
Comprehensive energy efficiency of projects approached 51%.
3. Industrial Clusters
Four national modern coal chemical demonstration zones and five coal-to-oil & gas strategic bases have been formed in Ordos, Yulin, Ningdong and Zhundong, forming a “production in the west, supply to the east” pattern.
III. Core Challenges Facing the Industry
(I) Product Structure: Serious Homogenization and Bulk-oriented Features
• FT synthetic products: high homogeneity, fierce competition, squeezed profits due to consumption tax.
• Coal-to-olefins: dominated by general-purpose materials; few high-end special grades.
• Coal-to-ethylene glycol: single product structure, low added value.
(II) Technology System: Insufficient Integration and High-end Capability
• Weak process integration, mismatched unit scales, low energy recovery.
• Some high-end technologies still rely on imports: low-temperature methanol washing, hydrogenation for direct coal liquefaction, LDPE technology, high-end catalysts.
• Lab-to-industry conversion rate below 30%.
• Environmental technologies lag: high-salt wastewater, gasification slag treatment are difficult.
(III) Standard System: Lack of Top-level Design
• Standards scattered across multiple committees, lacking unified planning.
• Missing key standards for product compatibility, environmental protection, equipment and carbon footprint, leading to compliance risks and higher costs.
(IV) Resources and Environment: Carrying Capacity Pressure in Western China
• Water shortage in western pithead areas.
• Logistics costs account for 25%–30% of terminal price.
• Annual new solid waste: 15–20 million tons.
• High-salt wastewater is difficult to treat; crystalline salt utilization is limited.
(V) Industrial Chain Collaboration: Insufficient Regional and Cross-sector Coordination
• Northwest regions account for 80%–90% of national capacity, but water-resource mismatch leads to redundant construction.
• Low-carbon transformation lags: weak CCUS commercialization, green hydrogen cost 2–3 times that of grey hydrogen.
(VI) Market and Policies: Intensified Competition and Stricter Constraints
1. Market Competition
Refined oil consumption has peaked; polyolefin overcapacity is emerging. PX and PTA chains face expanding supply.
2. Policy Orientation
• Strict capacity control: NDRC Document FGGY [2023] No.773 strictly controls new capacity.
• Encourage high-end transformation: MIIT Work Plan 2025–2026 promotes high-end, diversified and low-carbon development.
IV. Development Situation and Future Trends
(I) Core Situation: Energy Security Highlights Strategic Value
China’s crude oil output is stable at 200 million t/a, with external dependence over 70%.
Demand gaps:
• Crude oil: 50–110 million t/a
• Natural gas: 10–40 billion m³/a
Coal-to-oil & gas is a strategic backup to enhance energy security.
(II) Future Development Directions
1. High-end Products: Develop coal-based new materials, special polyolefins, high-end lubricants and special chemicals.
2. Green and Low-carbon Technologies: Promote water saving, CCUS, green hydrogen coupling, waste and slag utilization.
3. Intensive Layout: Optimize regional allocation, develop industrial clusters and symbiosis systems.
4. Systematic Standards: Improve product, environmental and carbon footprint standards.
V. Conclusions and Recommendations
(I) Core Conclusions
China’s modern coal chemical industry has completed the transition from technical demonstration to large-scale industrialization and become an important pillar for energy security and structural optimization.
The industry is now at a critical stage shifting from volume expansion to quality improvement.
Main constraints: product homogenization, insufficient technology integration, high environmental costs and strict policies.
Future development will focus on high-end, low-carbon and intensive transformation.
(II) Development Recommendations
1. Technological Breakthroughs
Jointly tackle core technologies including coal-to-gas purification, coal liquefaction hydrogenation and high-end catalysts; improve lab-to-industry conversion.
2. Product Upgrading
Develop high value-added coal-based new materials and special chemicals to alleviate homogenization competition.
3. Green Development
Strengthen high-salt wastewater and gasification slag resource utilization; promote CCUS and green hydrogen integration.
4. Policy and Coordination
Establish a unified national standard system; strengthen cross-regional and cross-industry coordination; avoid redundant construction.
Leverage leading enterprises such as China Energy to set demonstration benchmarks for high-quality development.
