Since mid-June, the coal tar market has experienced significant volatility, with prices surging from 850 yuan/ton to the current 1,700 yuan/ton due to tight supply and demand conditions. This represents a doubling of prices, and some regions have even seen quotes reaching 2,000 yuan/ton. The sharp increase in coal tar prices, combined with limited availability, has created growing pressure on tar processing companies.
The rising cost of coal tar is having a major impact on these companies. Many are asking: How high will prices go? When will the supply situation improve? When will demand for fuel oil tar decline? And how can they cope with the rising costs? These questions are now at the forefront of concerns among industry players.
In fact, it’s clear that the main driver behind the price surge is the increasing demand for fuel oil-grade coal tar. According to available data, China's annual demand for various types of fuel oil exceeds 40 million tons, primarily consisting of heavy oil and residual oil from petroleum refining. A small portion of coal tar is also burned directly as fuel. Currently, China produces less than 7 million tons of coal tar annually, with about 4.2 million tons processed. The processing rate is nearly 70%, while the rest is exported or used as fuel.
In recent years, the government has promoted the deep processing of coal tar, restricting its export and direct burning to extract valuable rare components and enhance resource efficiency. However, this year’s continuous rise in oil prices has led to higher costs for petroleum-based fuel products. For example, No. 180 and No. 250 fuel oils have reached 2,700 and 3,200 yuan/ton respectively, putting more pressure on downstream consumers. As a result, many are turning to cheaper coal tar and its derivatives, leading to reduced tar supplies as coking plants limit production.
Shanxi, a major producer of coal coke chemicals, has also seen a rush to purchase tar at high prices. Most tar producers are currently holding stock, and many companies report that they are not in stock and must wait for cash advances. In the past, some companies had surplus stock waiting for price increases, but the current ultra-high prices have made them hesitant to hold large inventories.
Previously, Shanxi-based tar processing companies didn’t actively purchase tar, but now they are scrambling to find sources and competing with fuel oil consumers in price battles. Due to higher offers from foreign fuel oil companies, many tar manufacturers prefer to sell to those buyers for better profits, which makes it harder for processing companies to secure raw materials. As a result, many tar processing companies in Shanxi have either halted or reduced production due to insufficient raw material supply.
Meanwhile, downstream tar products have also seen price increases as companies try to pass on rising costs. However, the lag in downstream processing means that these products haven't kept up with the rapid rise in raw material prices, creating further challenges for the industry.
To address the shortage, some companies have started sourcing tar from abroad. Even in Shanxi, where there are many coking plants, some tar processing companies have turned to international markets. For instance, the Shanxi Coking Group Co., Ltd., which is about to start a 300,000-ton-per-year tar processing project, is currently struggling to secure enough raw materials. It has had to seek out tar in other provinces such as Beijing, Tianjin, and Hebei.
Faced with the current supply crisis, many tar processing companies are calling for the establishment of a long-term, stable procurement system to maintain good market partnerships. They also suggest that the industry should accelerate integration, eliminate smaller enterprises, and promote centralized processing of coal tar. This would enhance competitiveness, support deeper processing, extend the product chain, and lead to more efficient, clean, and sustainable development of the coal tar industry.
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