China’s Coal-to-Olefins Industry Reaches 15.4 Million Tons/Year as Focus Shifts to Efficiency

China’s coal-to-olefins (CTO) industry has reached an industrial-scale capacity of 15.42 million tons/year after years of technological development. At the same time, policymakers are increasingly moving away from further capacity expansion and focusing instead on higher-value products, greater efficiency and lower-carbon production.

According to a report published by China Chemical Industry News, Fu Xiangsheng, Vice Chairman of the China Petroleum and Chemical Industry Federation (CPCIF), discussed the progress and challenges facing China’s modern coal chemical industry at the 14th Coal Chemical Industry Development Conference, held in Urumqi, Xinjiang, from August 26-28.

Fu said modern coal chemicals remain strategically important for China because of its abundant coal resources and comparatively limited oil and gas reserves. However, the industry is entering a new stage where controlling excess capacity, increasing product differentiation and reducing emissions are becoming more important.

CTO Capacity Reaches 15.42 Million Tons/Year

China’s CTO capacity reached 15.42 million tons/year by the end of the 14th Five-Year Plan period, supported by continued advances in domestic technologies.

The Dalian Institute of Chemical Physics’ methanol-to-olefins (MTO) technology has reached its third generation, reducing feedstock consumption by more than 20%, according to the report.

Resource efficiency has also improved during the 14th Five-Year Plan period. Coal consumption per unit of CTO output declined by 8.3%, energy consumption decreased by 3.7%, and water consumption fell by 22.2%.

China has established several major modern coal chemical hubs in coal-rich areas including Ordos, Yulin, Ningdong and Zhundong. Major CTO producers such as Baofeng Energy and China Coal Energy were highlighted as examples of companies that have developed alongside the industrialization of the sector.

Coal-Based Olefins Retain Cost Advantage Over Naphtha

The economics of coal-based olefins have strengthened their role within China’s diversified feedstock structure. CPCIF data cited in the report showed that the production cost of coal-based ethylene in China was around CNY 4,300/ton in 2025, compared with approximately CNY 5,600/ton through the conventional naphtha route and CNY 5,070/ton using imported ethane.

This gives domestic coal-based production a clear cost advantage over naphtha cracking. Naphtha continues to account for more than 70% of China’s olefins feedstock structure and remains closely connected to crude oil prices.

However, coal-based production is still less competitive than ethane-based production in regions with access to low-cost feedstock. Ethylene production costs from ethane were estimated at around CNY 2,760/ton in the US and CNY 2,390/ton in Saudi Arabia.

The report therefore described coal-based olefins as an important feedstock diversification option for China rather than a direct competitor to the world’s lowest-cost light-feedstock producers.

China Tightens Approach to New CTO Capacity

Despite its domestic cost advantage, China is signaling stricter controls on further CTO capacity expansion as its modern coal chemical strategy moves away from the previous focus on scale.

During the 15th Five-Year Plan period, Fu expects the industry’s role to shift from supplementing petroleum-based feedstocks toward serving as a “strategic reserve.”

The policy direction calls for tighter control over overall capacity and new additions, with greater emphasis on technological improvements at existing facilities.

The report specifically called for preventing unauthorized additions in basic modern coal chemical products and commodity materials, including coal-to-olefins, coal-to-MEG and coal-to-ethanol.

Instead, China is expected to prioritize strategic projects such as coal-to-oil and gas, specialty fuels, coal-based aromatics and biodegradable materials. New projects will also face stricter requirements concerning energy and water efficiency as well as carbon emissions.

High Carbon Intensity Remains a Major Challenge

Despite improvements in resource efficiency, environmental performance remains a major challenge for the CTO industry.

The report estimates that carbon emissions per ton of coal-based olefins are around three times higher than those from the conventional oil-based route. This is linked to the additional gasification, purification and methanol synthesis stages required before olefins can be produced.

The disadvantage is becoming increasingly important as China moves toward its 2030 carbon-peaking target. Government efforts to reduce carbon emissions, combined with existing overcapacity and strong competition in commodity chemicals, are expected to place greater pressure on producers to upgrade existing facilities rather than pursue another large-scale capacity expansion.

As a result, the next phase of China’s CTO industry is expected to focus less on adding conventional capacity and more on improving efficiency, developing higher-value and differentiated products, and adopting lower-carbon technologies.

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