Coal-based chemical boom set to reshape China LPG trade flows

Stock image for referential purposes only

China's coal-based chemical projects will be commissioned intensively over 2026-2028. Coal-based LPG marketable volume reached 1.80 million tonnes in 2025, accounting for 7 per cent of the national total. Coal-to-chemicals are far more profitable than oil-based routes, with margins exceeding RMB 1,000 per tonne. New capacity concentrated in Xinjiang and Inner Mongolia could reshape LPG trade flows, southern Xinjiang's outflows will shift southward, and the northwest trade hub may move toward Xinjiang.

Also read- Coal vs renewables: The electricity cost battle influencing aluminium production pattern

Thanks to maturing domestic coal-chemical technology and low-carbon support, a wave of coal-to-olefins and direct/indirect coal liquefaction projects will come online in Xinjiang, Inner Mongolia, and Shaanxi over 2026-2028. In 2025, coal-based LPG marketable volume reached 1.80 million tonnes, accounting for 7 per cent of China's total LPG supply. The cost advantage of the coal route is striking (coal accounts for only about 25 per cent of production costs versus 65-75 per cent for crude oil in oil-based routes), with margins exceeding oil-based routes by over RMB 1,000 per tonne, driving massive project investments.

Most new capacity over the next two years will be concentrated in northern Xinjiang and Inner Mongolia. Coal-to-olefins units produce olefinic C4 and propane as by-products, while direct/indirect liquefaction units produce mainly residential LPG. This new capacity may upend the traditional pattern where southern Xinjiang has been the primary LPG exporting region. Shipments from south to north will decrease, while southern Xinjiang's LPG will flow more to the south, adding supply pressure on areas like Chongqing and Sichuan. However, the Tarim Ethylene Phase II project has already started up, its large-volume captive LPG consumption will ease local supply pressure and reduce outflows.

Note: This article has been issued by MySteel and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.