Since mid-June, the coal tar market has experienced significant volatility, with prices surging from 850 yuan/ton to as high as 1,700 yuan/ton due to tight supply and demand conditions. This represents a doubling of prices, and some regions have even reported quotes approaching 2,000 yuan/ton. The sharp increase in coal tar prices, combined with limited availability, has created mounting pressure on many tar processing companies.
The rising cost of coal tar is causing serious concerns among industry players. Questions like “How high will prices go?†or “When will the situation improve?†are now common. Companies are also wondering when fuel oil demand will decrease and how they can manage rising costs. These uncertainties are top of mind for tar processors across the country.
In fact, it’s clear that the main driver behind the price surge is the growing demand for fuel oil-grade coal tar. According to data, China’s annual demand for various types of fuel oil exceeds 40 million tons, primarily including heavy oil and residual oil from petroleum refining. A small portion of coal tar is also used directly as fuel. Currently, China's coal tar production is below 7 million tons, with about 4.2 million tons processed, resulting in a processing rate of nearly 70%. The rest is either exported or burned as fuel.
In recent years, there has been a push to deepen coal tar processing and reduce exports or direct burning to extract valuable resources and improve efficiency. However, this year’s rising oil prices have caused a significant increase in the cost of petroleum-based fuel oils. For example, No. 180 and No. 250 fuel oils have reached 2,700 and 3,200 yuan/ton, respectively, putting more pressure on downstream industries. As a result, many consumers are turning to cheaper alternatives like coal tar and its derivatives, leading to increased competition between fuel oil users and tar processors.
Shanxi, a major coal coke and chemical producer, has seen a rush to buy tar at high prices. Most tar producers are currently holding stock, but many companies say they are not in stock and must wait for cash advances. In the past, some companies were willing to hold inventory hoping for price increases, but today’s extreme prices make them hesitant to stock up. Previously, Shanxi-based tar processors didn’t actively purchase tar, but now they are scrambling to find sources and competing with fuel oil buyers for limited supplies.
Due to higher offers from foreign fuel oil companies, many tar manufacturers prefer to sell to these buyers for better profits, making it harder for tar processors to secure raw materials. As a result, several tar processing companies in Shanxi have either halted or reduced production due to the lack of available tar. Meanwhile, downstream products are also seeing price increases, but their growth lags behind the rising cost of raw materials, creating additional challenges for the industry.
To cope with the shortage, some companies have turned to importing tar from abroad. Even in Shanxi, where coking companies are abundant, many tar processors are now sourcing tar from overseas. For instance, the Shanxi Coking Group, which is about to start a 300,000-ton-per-year tar processing project, is struggling to secure enough raw material locally and is now purchasing from Beijing, Tianjin, and Hebei.
Faced with the current supply crisis, many tar processors are calling for the establishment of long-term, stable procurement channels and stronger partnerships in the market. They also suggest accelerating industry consolidation, eliminating smaller enterprises, and promoting centralized processing to enhance competitiveness. This approach would support deeper tar processing, extend the product chain, and drive the industry toward more centralized, energy-efficient, and environmentally friendly development.
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