Ed Ballard
The historic spree of coal burning that powered China's economic rise is finally leveling off. But the fossil fuel does have other uses -- and war in Iran is giving one in particular a big boost.
The conflict has been calamitous for much of Asia's petrochemicals industry, which largely relies on oil from the Middle East to make ingredients for everything from PVC pipes to paracetamol. The effective closure of the Strait of Hormuz has meant higher costs and, in some cases, shortages.
But the war is proving a boon for Chinese producers who make chemicals, as well as liquid fuels, from coal. Not only are they insulated from rising costs but they're benefiting from higher prices for their products. In response, they're ramping up production.
Demand for coal from the chemicals industry was up 11% year-over-year in April, McCloskey reports. Shares of coal-based chemicals producers have soared since the war started, while those of oil-dependent rivals have languished.
Even before the Iran crisis, this business was taking the shine off China's tentative progress in decoupling growth from fossil-fuel consumption. The chemicals sector was the main reason why emissions from China's industrial sector climbed last year, according to the Centre for Research on Energy and Clean Air. The nonprofit estimates that the sector used 440 million tons of coal last year -- nearly as much as total U.S. demand.
The trend is a reminder that, despite the breakneck growth of green electricity in China, the world's factory still largely runs on polluting processes that are hard to electrify.
China's coal-based chemicals play emerged because coal miners' search for new markets aligned with Beijing's energy-security priorities. For a country that will never be self-sufficient in oil, the ability to turn coal into chemicals is "a vital geopolitical shock absorber," according to Chemical Market Analytics.
The idea of transmuting black rock into useful products was born out of similar energy-security anxieties a century ago. Many of the chemical processes underpinning the modern industry were developed by German scientists in the early 20th century. They allowed oil-deprived Nazi Germany to turn coal into fuel and even margarine in World War II. The same core technology is used to produce transportation fuel in coal-rich South Africa.
Now, another war is vindicating Beijing's decision to view this as a critical sector. Producers' improving margins also boost the case for building more plants. They would have to align with China's climate goals by using green electricity and carbon-capture technology, but few industries are tougher to clean up. Spinning coal into the stuff of modern life is inherently less efficient than the conventional petrochemicals industry, and far more carbon-intensive.
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This Week's Top Stories
Natural disasters are rewriting home-insurance costs. Hailstorms, wildfires and wind damage are hammering places once thought to be shielded from the worst rate hikes, a Wall Street Journal analysis of premiums and natural disasters nationwide found.
Renewable energy is booming again. Exports of solar-energy equipment from China doubled in March, a sign that the chaos in the energy industry from the Iran war is convincing countries to shift to more renewable sources.
The oil cartel is splintering. The United Arab Emirates' decision to withdraw from OPEC signals a new era in the Middle East. It's the latest sign of a global energy order that's breaking down.
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Quoted
The Climate & Your Money
If you want to bet on the Iran war boosting renewables, avoid investing in Chinese clean-tech manufacturers, Avi Salzman writes for Barron's. "The companies are subject to the whims of the government and have a habit of overproducing." Global renewable-energy providers could be a better bet.
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The Data Point
Few stocks have benefited more from AI hype than Bloom Energy, up roughly 2,500% in two years. Bloom makes fuel cells that are in demand to power data centers. They run on natural gas, but emit a bit less CO2 than gas turbines. Bloom expects full-year revenue to come in between $3.4 billion and $3.8 billion. It's valued at more than $80 billion.
The Long View: Climate Tipping Points
Global warming could be marked by disruptive shifts in the climate system as well as rising average temperatures. As scientists' understanding of these tipping points improves -- and emissions continue -- investors and companies are beginning to size up the implications.
Torolf Hamm, a climate-risk expert at insurance broker WTW, said some clients are asking what it would mean for weather patterns if the cycle of ocean currents that keeps Europe warm collapses. The Atlantic Meridional Overturning Circulation, or AMOC, sends warmer water across the Atlantic. Rapidly accumulating evidence shows it is slowing as Arctic ice melts. A dramatic slowdown could shift which areas are suitable for crops, and food-and-drinks producers are among those asking questions, Hamm said.
The AMOC is most likely decades from the point of no return, and would take decades more to wind down. But these scenarios will only become more relevant to long-term investment decisions. "We're hearing more and more clients saying, 'you know what, perhaps this is something I should take into account,'" Hamm said.
About Us
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Today's email was written by Ed Ballard in London. Contact him at ed.ballard@wsj.com. Contact the team at climate@wsj.com.
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April 30, 2026 09:30 ET (13:30 GMT)
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