Is Coal-to-Gas Conversion Becoming a Trend? How Can Paper Companies Survive

According to information published by the National Center for Biotechnology Information (NCBI) of the National Library of Medicine, coal has long been a fundamental fuel for China's economic growth and for delivering electricity to the country's population.

"China is now the world's largest producer and consumer of coal, consuming half of global coal output, with 20% of global coal trade volumes imported by China in 2018; at the same time, China is also the world's main international financier of new coal-fired power plants.

In 2018, coal accounted for 60% of China's primary energy consumption and contributed 50% of China's fine particulate matter (PM2.5) pollutants and 70% of its carbon emissions."

China has long pursued national policies to address the "smog problem, reduce emissions of environmentally harmful substances, promote the optimization of the energy system and develop clean, low-carbon energy," including phasing out outdated coal-fired boilers and biomass boilers and replacing them with clean gas-fired boilers.

As a result, provinces and cities across the country have introduced new energy plans and action programmes one after another, with centralized heating and industrial electricity production being given equal weight in the north, while the south focuses mainly on industrial electricity production.

According to a notice recently issued by the Dongguan Environmental Protection Bureau, Dongguan is promoting a large-scale shift from coal-fired power to gas-fired power generation.

To support this new change, the city began building 17 new power plants while shutting down 12 coal-fired and biomass boilers.

China's pulp and paper industry relies heavily on coal as fuel

According to Fisher data, China's pulp and paper industry relies heavily on coal as fuel, unlike the paper industries in Europe and the United States, which mainly rely on clean energy such as natural gas.

At present, more than 380 pulp and paper mills in China use coal as their main fuel source.

Among them, pulp and paper mills in Hebei, Guangdong, Shandong, Zhejiang and Guangxi account for about 50% of the country's total paper enterprises.

According to provincial policies, during the 14th Five-Year Plan period (2021-2025) the boilers of these paper enterprises may be fully converted or phased out.

For many pulp and paper mills in Dongguan, the increase in fuel costs may be the challenge they face as energy shifts from coal to natural gas.

In terms of fuel cost, natural gas costs more than twice as much as coal. According to calculations for Guangdong Province, the standard natural gas price is 2.06/m3 (with a 20% float), the provincial pipeline network transport price is 0.15-0.2/m3, the city gas pipeline transport fee is 0.2-2.0/m3, and the total net price to the end user is 2.41-4.2/m3.

For example, according to Fisher data, at present the average fuel cost of Chinese containerboard manufacturers using coal-fired power generation is about 300-400/t.

If natural gas replaces coal, the cash production cost of papermaking could increase by 300-400/t. From a cost perspective, this adds enormous pressure that many small enterprises cannot bear.

As a result, these enterprises may be squeezed out of the market, which will further drive industry consolidation.

Fisher data also confirms that Dongguan's shift from coal to natural gas will affect more than 14 million t of paper capacity, of which about 70% is carton board produced by the three paper giants Nine Dragons, Lee & Man and Jianhui.

After the coal-to-gas transition is completed, if the supply-demand relationship remains unchanged, paper market prices in South China may rise substantially because of increased manufacturing costs.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378305.html