For years China has been a magnet for the chemicals industry, attracting European and American companies with its cheap production costs and growing market.

Now China has another attraction for the energy-intense chemical industry: vast supplies of coal that can replace oil and natural gas as raw materials for chemical production.


In the last two years, China has built nearly 20 plants that convert coal into a gas that can be used to make such things as plastic and pharmaceuticals, according to the Gasification Technologies Council, an industry trade group. The new plants draw on technology developed by companies such as General Electric Co. and Royal Dutch Shell PLC.

Now, Western chemical firms are getting in on the action. Celanese Corp. opened a plant this year that uses coal-based feedstock to make a chemical used in paints and food sweeteners. Dow Chemical Co. has partnered with Chinese energy company Shenhua Group Corp. to study a project to convert coal into plastics. Mining company Anglo American PLC is also looking at a coal-to-chemicals project. Suppliers to the chemical industry, such as Praxair Inc., are vying to open accounts with the new coal-to-chemical plants.

"Coal to chemicals is an opportunity that's literally exploding [in China] right now," says Timothy Vail, chief executive and president of Synthesis Energy Systems Inc., a company that builds coal-gasification plants.