Coal: King of chemicals?

C&I Issue 18, 2009

When oil prices rocketed to record highs in summer 2008, it appeared that the time for chemical feedstocks from coal had come. Several multi-billion dollar projects were in the pipeline in countries throughout the world and oil prices appeared to have nowhere to go but up. Now, however, with the global economy in the doldrums and recovery predicted to be slow, does the bright future of chemicals from coal look as sparkly as it once did?

Today oil prices have fallen from highs of $147/ bbl in June 2008 and now hover around the $70/ bbl mark, having dropped into the low 30s. Added to this, the International Energy Agency (IEA) cut its forecast for oil consumption for 2009 by 1m bbl/day, a move that could further depress prices. The IEA now predicts that oil consumption will be down almost 3% on 2008 levels and has not ruled out further falls in demand.

‘In the past the price of coal didn’t go up much but oil was peaking,’ says Ed Glatzer, from the consultancy Nexant. ‘Now coal prices are rising too. At low oil prices there’s no compelling reason to go with coal.’ He does, however, add that there are compelling reasons for some countries, like China, to invest in coal-to-liquids (CTL) technology. Currently, China is highly dependent on expensive ethylene imports, but what it does have is plenty of coal. This coal can be turned in vinyl chloride monomer, which can be used as a feedstock by domestic chemicals plants (see Box).

But for coal to chemicals to make sense economically it is, of course, dependent on cheap coal – at least relative to oil. James O’Connell, managing editor, international coal publications at Platts, says that for a long time coal has been a forgotten commodity, as prices remained relatively static. The industry was rather ‘sleepy’, he adds, but the market has had a rude awakening in the last two-and-a-half years thanks to a combination of constriction of supply, increased demand and an extraordinary rally on oil prices.

Currently, as things stand, coal remains cheap despite a price spike in 2008 caused by powerful storms in the Pacific, close to Australia, that restricted supply. ‘In Australia there were queues in Newcastle of more than 70 vessels waiting to load or unload their cargo [of coal]. A lot of shipping got caught up there,’ O’Connell says, adding that an increase in demand from China and India also played a significant part in the price rise. This led to prices peaking in June/July last year at $230-$240/t. Prices have since fallen and are now around the $60-$70/t mark. 

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