The closure of the Strait of Hormuz has sent the vast Asian chemicals industry into a tailspin. Deprived of the likes of Qatari natural gas and Saudi Arabian oil, the region’s fertilizer and plastics plants are slowing production or even shutting down. Everywhere but China, that is.
In petrochemicals, China is unique. As well as a traditional industry that uses oil and gas as feedstock, it has parallel output that relies on its abundant domestic coal. Unsurprisingly, India and other regional powers want to copy and paste the Chinese method. This won’t be easy — or climate friendly.
The consequences will be global. China and India together consume 70% of the planet’s coal, so any extra use will keep the dirtiest fossil fuel in demand for longer. More consumption means more CO2 emissions and more warming.
The Chinese coal-to-chemicals industry is a huge contributor to this. Take urea, an important nitrogen fertilizer that’s used in rice and corn farming. China produces about 80% of this stuff from coal, while India manufactures almost all of its own urea from oil and gas.
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Despite its massive scale, this Chinese industry has gone largely under the radar. Yet it consumes about 380 million metric tons of coal as a feedstock. If it were a country, it would rank as the third-largest consumer of coal, behind China and India, and ahead of the US, Japan and other top coal users.
India has pledged nearly $4 billion to quickly start up a coal-to-chemicals business, aiming to process as much as 75 million tons of the fossil fuel into fertilizers, plastics and other synthetic products by 2030. The New Delhi government will cover 20% of the building cost for new plants and will help earmark coal reserves for forthcoming projects, guaranteeing long-term supply.
