On September 1, a significant move was made by Shanghai Baosteel Chemical Co., Ltd. and 18 other tar processing companies in Beijing. Together, they issued the “Declaration on China Coal Chemical Industry Development,†aiming to reshape the industry’s future. The declaration emphasizes moving away from the traditional, resource-intensive growth model of coal chemical companies and reducing wastage. More importantly, it seeks to consolidate the fragmented and small-scale tar processing sector into a more organized and efficient industry complex.
This joint initiative is also aimed at addressing the recent sharp fluctuations in tar oil prices. Since August, the market has been highly volatile. In key producing regions like Shanxi, tar prices have surged dramatically. Some companies in Taiyuan are now quoting as high as RMB 1,000–1,100 per tonne, while in Linyi, the ex-factory price of tar has jumped by 64.17% compared to April. In East China, the price has even reached RMB 1,700 per tonne, forcing many users to pay on a first-come, first-served basis.
According to Huang Jianguo, Deputy General Manager of Shanghai Baosteel Chemical Co., Ltd., several factors have contributed to this dramatic shift. First, macro-control policies have curbed the steel and coke industries, leading to overproduction and falling prices. This has forced coking enterprises to reduce output or even halt operations, thereby decreasing tar production. Second, rising crude oil prices have driven up the cost of heavy oil, prompting many industries—such as glass, ceramics, and steel mills—to switch to tar and coal-tar fuel oil, creating a sudden demand surge. Lastly, Guangdong, which consumes the most fuel oil in China, has shown higher willingness to pay for tar, drawing supply away from other regions and causing shortages elsewhere.
Shanxi-based tar processing companies have their own perspective. According to an official from Shanxi Hongte Coal Chemical Co., Ltd., coking companies in Shanxi have reduced production since late June, significantly cutting tar output. Meanwhile, tar processing companies have operated at higher rates, leading to tighter supply. Additionally, new projects, such as the 300,000-ton-per-year facility by Shanxi Coking Group and the 160,000-ton project by Linyi Jinhuan Coking Company, have further increased demand, pushing up local prices.
Xue Xiangqi, General Manager of Shanxi Coking Co., Ltd., revealed that the Shanjiao plant requires 900,000 tons of tar, but only 400,000 tons are currently available. With just 10 days left before the start date on September 17, there's a gap of 500,000 tons, highlighting the severe supply shortage.
While tar prices have soared, downstream products like asphalt—accounting for 55% of tar demand—have seen sharp declines. The average price of asphalt has dropped below 400 yuan per ton, a drop of over 50% from the beginning of the year. This has severely impacted the profitability of tar processing companies.
Facing this dilemma, leaders from major companies such as Shanghai Baosteel Chemical, Anshan New Steel, Bengang Coking, Shanxi Coking, and Ma Steel Coking have expressed concerns. Many small-scale companies are struggling, with some forced to shut down due to losses.
In response, the 18 companies gathered in Beijing to call for a more stable and cooperative market environment. They aim to establish long-term partnerships, rationalize pricing, and work together to regain control of the market. As Huang Jianguo noted, unity is essential, though it will take time to adjust and build a stronger industry structure.
Coal chemical expert Xu Guangcheng predicts that in the next 1–2 years, fierce competition will drive consolidation in the tar processing sector. Small enterprises will be eliminated, and China will eventually achieve centralized processing, forming a large industrial complex. This transformation is inevitable as the industry continues to evolve.
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