China Coal Chemical Industry Report,2007

Along with the coming of the high oil price era, modern coal chemical industry that focuses on large coal gasification programs has become a hot industry in the global economic development, as the energy resource & chemical integration mode of modern coal chemical industry could decrease the dependence on crude oil resources and effectively solve pollution and emission problems of energy-consuming industries such as traffic, coal-fired power, etc.

China has three advantages in the process of transforming towards new coal chemical industry: firstly, thanks to mature development and solid industrial basis, traditional coal chemical industry has advantages in making use of new technologies to renovate traditional industry and expand newly-rising industry; secondly, China's domestic new coal chemical technologies and equipping level improved a lot through imitation and innovation; thirdly, in order to develop local economy and upgrade the local industry, local governments actively support the enterprises to develop coal chemical programs, which leads to a new round of investment surge. Rational guidance of this trend through scientific plan will be favourable for the development of the industry.

China will introduce advanced and mature coal chemical technologies from abroad during periods of "Tenth Five-Year Plan" (2001-2005) and "Eleventh Five-Year Plan" (2006-2010). The most distinct characteristic of "Eleventh Five-Year Plan" is that domestic technologies and equipments will gradually realize experimental and demonstration operation. Along with the maturity of domestic technologies, large industrialized mode of modern coal chemical industry is expected to appear by about 2010.

Program Outline for the Medium and Long Term Development of Energy has listed coal chemical as the key development industry. The outline of the "Eleventh Five-Year Plan" also states "developing coal chemical and exploiting coal-based liquid fuel to boost coal liquidation demonstration project construction and promote deep processing and transformation of coal". Several Opinions of the State Council of the People's Republic of China on Accelerating the Invigoration of Equipment Manufacturing Industry also considered large sets of coal chemical equipments as one of the sixteen major equipments, which includes coal-liquidation equipment, coal-gasification equipment, and coal-olefin equipment, etc. These industrial policies will drive the rapid development of China's domestic new coal chemical industry.

In the early period of industry expansion, coal chemical equipment industry would take the initiative to grow and share 100 billion-scale market increment. Among the listed companies, Taiyuan Heavy Industry Co., Ltd., a leading coal chemical equipment enterprise, will benefit most. In the middle period of industry expansion, coal-based alcohol and ether enterprises with scale or technology advantage will win the first opportunities of the alternative fuel market, such as scale based Shanxi Lanhua Sci-Tech Venture Co., Ltd and Inner Mongolia Yuanxing Natural Alkali Company Limited and technology based Shandong Hualu-Hengsheng Chemcial Co., Ltd and Yunnan Yunwei Co., Ltd. But if alternative fuel standards could be issued early, Sichuan Lutianhua Company Limited, Inner Mongolia Yuanxing Natural Alkali Company Limited, and Guizhou Chitianhua Co., Ltd could benefit as the first group thanks to the latest release of DME's capacity. From the angle of the industry's long-term development, energy resources & chemical integration enterprises with circular economic characteristics will inevitably become the mainstream of the industry mode, and China Shenhua Energy Company Limited (CSEC) will be one of the major beneficiaries.