China's Baofeng Energy reports record $1.4 billion H1 profit as oil prices surge
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China's Ningxia Baofeng Energy Group, the country's largest coal-to-chemicals producer, reported a record first-half profit of $1.4 billion, nearly double the year-earlier figure, as crude oil prices surged, Bloomberg reported. The second quarter was especially strong amid the Strait of Hormuz disruption, and sector stocks jumped 30% between late February and mid-March. The gain came even as oil prices moderated from spring peaks but remained well above pre-war levels.
Record Profit
Ningxia Baofeng Energy Group, which accounts for about a third of China's coal-to-chemicals output, posted an almost twofold increase in first-half profit to $1.4 billion, according to Bloomberg. The second quarter was especially strong as oil prices spiked during the Strait of Hormuz oil flow disruption. The company said crude oil prices rose rapidly and were highly volatile, significantly increasing feedstock costs for oil-based olefins, while domestic coal prices increased only moderately.
Coal Price Advantage
China's coal-to-chemicals sector stocks jumped 30% between the end of February and mid-March, Reuters reported, as investors rewarded producers that use coal to make fertilizers and petrochemicals without petroleum. China already makes 85% of its methanol and ammonia from coal, according to International Energy Agency data cited by Bloomberg. Coal prices have risen on stronger demand but remain significantly lower than crude oil and natural gas prices, supporting the business case.
PetroChina Coalbed Gas Project
Chinese energy companies are expanding beyond coal-to-chemicals. PetroChina is developing a project to extract gas from coal rock, targeting output of 30 billion cubic meters by 2035, Reuters reported earlier this year. The Middle East disruption is unlikely to end soon, and oil prices remain higher than before the war began, which is expected to continue supporting coal-to-chemicals producers.
What's Next
PetroChina's coal-rock gas project targeting 30 billion cubic meters by 2035 is the next major capacity expansion under way. It remains unclear whether coal-to-chemicals producers can sustain record margins if crude prices retreat further from spring peaks.
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China's Baofeng Energy reports record $1.4 billion H1 profit as oil prices surge
