Coal chemical sector sees four stocks hitting daily limit-ups! Cost advantages are fully evident, benefiting from the closure of the Strait of Hormuz and prolonged high oil prices.

How Can Cost Advantages in Coal Chemical Industry Drive Sector Prosperity Under High Oil Prices?

In early trading, the coal chemical concept sector performed actively. Four stocks hit the daily limit up: Shanxi Coking Coal, Xinjiang Tianye, Yunmei Energy, and Jinye Technology. Shanxi Coking Coal, Hangyang Co., Hubei Yihua, and others rose over 5%.

The current market speculation on coal chemicals is centered on the fact that, under high oil prices, the cost advantages of various coal chemical routes are fully highlighted, significantly expanding profit margins. Meanwhile, against the backdrop of reshaping global energy patterns and increasing domestic energy security needs, coal chemicals—relying on abundant domestic coal resources as an autonomous and controllable energy replacement—are undergoing a valuation re-assessment, with industry prosperity continuing to rise.

Recently, Brent crude oil prices climbed to $110 per barrel, far exceeding the break-even points for various coal chemical routes, establishing the economic advantages of routes like coal-to-olefins, coal-to-oil, and coal-to-natural gas. Multiple institutions have issued research reports indicating that, as international oil prices remain high, the cost advantage of coal chemicals relative to petrochemicals will further expand, and the profitability of related companies is expected to improve significantly.

CITIC Securities research reports suggest that, amid a sharp rise in global energy prices and suppressed consumption, sectors potentially most affected include high-valuation sectors, high-energy-consuming industries, and demand-restricted cost-increasing industries. Favorable sectors include: 1. industries benefiting from the closure of the Strait of Hormuz and sustained high oil prices, such as coal chemicals, new energy, energy storage, nuclear power, and power grids; 2. defensive stocks with stable cash flows, such as coal and hydropower; 3. growth stocks that may be unfairly punished but are certain to grow, like AI-related supply chains and power shortage chains.

CITIC Securities reports that the Middle East geopolitical conflict has lasted over three weeks, with overseas oil and gas prices showing good persistence; although domestic and international coal prices are relatively weak, CITIC believes that, as the conflict continues and energy prices transmit domestically, coal prices in China are expected to gradually enter an upward trend, with sustained price increases. The firm remains optimistic about the sector, recommending companies with coal chemical operations, those with advantageous valuations, and overseas companies with coal resource layouts.

Related Industries:

Coal-to-Olefins: As the most economically favorable coal chemical route currently, the break-even oil price for coal-to-olefins is only $45–50 per barrel, with profit margins expanding as oil prices stay high. Fixed costs account for over 50% of the cost structure, with raw coal costs making up about 20%. This route is less sensitive to coal price fluctuations but more sensitive to product prices. Leading companies will fully benefit from industry dividends.

Coal-to-Oil: As a strategic reserve route for energy security, coal-to-oil involves direct and indirect liquefaction technologies, with break-even points as low as $55–60 and $60–65 per barrel, respectively. Its high fixed cost proportion makes it highly elastic to rising oil prices, and companies with coal reserves and technological expertise will find development opportunities.

Coal-to-Natural Gas: With a break-even point around $60–70 per barrel, and a production cost of approximately 1.59 yuan per cubic meter based on 300 yuan/ton coal, significantly lower than imported LNG prices, this route has strong regional competitiveness. As domestic natural gas demand steadily increases, coal-to-natural gas projects in the northwest with abundant coal resources will see a peak in implementation, benefiting related companies.

Coal Chemical Equipment and Technical Services: The construction of coal chemical projects demands high-end equipment such as vacuum chambers and heat exchangers, with urgent needs for energy-saving and consumption-reducing process upgrades. Companies capable of manufacturing core equipment and providing process solutions will benefit from project deployments, with patent implementations by Luxi Chemical also driving technological upgrades in the industry.

Industry Chain Companies:

Baofeng Energy: As a leading domestic coal chemical enterprise, the company has laid out multiple industry chains including coal-to-olefins and coal-based ethylene glycol. Leveraging low-cost coal resources in Ningxia, it has strong cost control capabilities. Under high oil prices, its profit elasticity is ample, and performance growth is highly certain.

Luxi Chemical: With years of experience in coal chemicals, the company recently obtained a patent for online cleaning of heat exchangers in coal chemical synthesis gas systems, helping coal chemical companies maintain equipment online, reduce downtime losses, and further consolidate its leading position in coal chemical technical services. The company’s deep accumulation in integrated coal chemical industry layout also supports growth.

Zhongkong Technology: Its Flying Squirrel robotic system is designed for high-risk, explosion-proof areas in coal chemical plants. Using cable track systems with multiple sensors, it enables large-scale continuous inspections, improving safety management and operational efficiency. Its products have been deployed in several large coal chemical projects.

Datang Inner Mongolia Duolun Coal Chemical: The company is advancing green hydrogen production coupled with coal chemical projects, replacing traditional gray hydrogen with green hydrogen for methanol synthesis and polypropylene production, achieving a green transformation of coal chemicals and providing a low-carbon development model. The project has now entered commercial operation.