China’s Inner Mongolia Yitai Coal suspends construction of $2.4bn coal-to-chemicals plant

SINGAPORE (ICIS)–China’s Inner Mongolia Yitai Coal Co has temporarily suspended construction of a 1m tonne/year coal-to-chemicals plant in Xinjiang amid higher costs.

The project is owned by Yitai Yili Energy, a 90.2%-owned subsidiary of the company.

“Under the background of high cost of coal for coal chemical products, large fluctuations in international oil prices and significant uncertainty in taxes and fees, continuing to construct large-scale coal chemical projects based on the existing product structure exposes the company to relatively high economic risks,” the Hong Kong-listed firm said in a bourse filing on 8 February.

The yuan (CNY) 16.1bn ($2.4bn) project being built at the Yitai Yili industrial park has production capacities for alkylbenzene, high-carbon alcohols, high-quality light hydrocarbon, fischer-tropsch wax, normal C10-14, white oil, liquid paraffin, liquefied petroleum gas (LPG) and other products, as well as the by-production of mixed alcohol and sulphur.

As of 31 December 2022, the project was still under construction and has not been put into operation, the company said.

“Since the second half of 2020, the price of raw coal has reached new highs. The percentage of raw coal cost in the total cost of the Company’s existing coal chemical project has increased from 35% in 2018 to approximately 60% at present,” Inner Mongolia Yitai Coal said.

Reduced investment in fossil energy as the world pivots toward carbon neutrality and a further tightening of energy supply caused by the Russia-Ukraine conflict will continue to affect the coal markets in the medium- to long-term.

“On the one hand, carbon neutrality has become a global consensus, the capital expenditure of fossil energy has decreased significantly, and more capital expenditure has been invested in renewable energy or non-fossil energy,” it said.

Meanwhile, the Russia-Ukraine conflict that broke out in late February 2022 has had a huge impact on the global supply chain and exacerbated the shortage of energy supply.

“It is expected that the situation of tight international coal resources and high prices will continue in 2023,” the company said.

Inner Mongolia Yitai Coal is involved in the mining, production, transport, and sale of coal and coal-based products in China.

It is a subsidiary of conglomerate Inner Mongolia Yitai Group Co, whose businesses include real estate development.

($1 = CNY6.79)

Thumbnail image: China Inner Mongolia Railway Coal Transportation – 23 Nov 2021 (Source: Xinhua/Shutterstock)

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