China's coal tar is primarily a byproduct of the coking process. With the rapid expansion of domestic coke production, coal tar output has surged dramatically, reaching 7 million tons annually. However, the industry faces significant challenges due to its fragmented structure, outdated technology, and excessive reliance on exporting raw materials. Industry experts argue that the coal tar sector urgently needs restructuring to improve efficiency and sustainability.
The most pressing issue is the "small and scattered" nature of the industry. Many coking companies have entered the coal tar processing field, but their operations are largely unorganized and technologically backward. Internationally, mature coal tar processing facilities operate at scales exceeding 200,000 tons per year, with advanced systems in Germany and Japan capable of handling up to 750,000 tons annually. In contrast, many Chinese enterprises still use outdated equipment from the 1950s, with processing capacities below 100,000 tons per year. This lack of modernization has led to chaotic development, especially in provinces like Shanxi and Inner Mongolia, where numerous small-scale plants have emerged, causing environmental pollution and inefficient resource use.
Additionally, China’s coal tar processing technology remains rudimentary, with most companies only extracting around 40 types of organic compounds, while foreign advanced methods can extract over 200. The reluctance of domestic firms to invest in technological upgrades further hampers progress, resulting in stagnation. This inefficiency is compounded by the wasteful practice of burning raw coal tar as fuel, despite its high value as a chemical feedstock.
Another concerning trend is the phenomenon of "back-selling." Due to China's limited deep-processing capabilities, many companies export raw coal tar, which is then refined abroad and reimported at a much higher value. For example, in 2005, China imported 500.46 tons of industrial naphthalene from Japan, worth $24.24 million—highlighting the economic losses from this cycle.
High export volumes have also strained the domestic market. As international prices rose to $240 per ton, China’s domestic price remained around RMB 1,000 per ton, with an 13% export rebate making exports highly profitable. This led to a sharp increase in exports, exacerbating supply shortages. By mid-2005, coal tar prices doubled, spiking from 600–700 yuan/ton to as high as 2,200 yuan/ton. This surge forced some downstream companies to halt operations due to rising costs, with one Hebei-based firm reportedly losing $5 million monthly.
To address these issues, industry experts recommend several key actions: First, the government should promote industry consolidation, invest in technological upgrades, and establish a centralized, efficient, and clean coal tar processing system. Second, policies should be introduced to curb exports, such as reducing or eliminating tax rebates and imposing specific taxes to reduce profit margins. Third, regulations should be tightened on burning raw coal tar to prevent waste. Finally, the creation of an industry association is essential to manage competition, share information, and ensure sustainable resource use.
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