I was asked today what the net improvement in petcoke and calcined coke would be for the USA as a result of the loss of smelting capacity at the 3 Alcoa plants and the Mt Holly smelter.
It’s not a difficult calculation to do. Assume a certain net carbon consumption for the 4 plants, say 440kgs/tonne or perhaps a little lower. Assume that the anodes are 92% CPC and 8% coal tar pitch. Assume that the process of calcining petcoke delivers a yield of say 76%-78%, for the horizontal kilns used in the USA.
But all that misses the point. There’s no change in aluminium demand. The metal needed for cars and cans and planes and pans is still needed, but will now have to come from smelters somewhere else. That reality has already hit the physical premium market, which popped yesterday on Alcoa’s news.
Alcoa itself predicted a small shortage in global aluminium supply for 2016. That shortage can easily be made up from other smelters, thanks to a phenomenon called capacity creep. Depending on what assumptions Alcoa made in their model, China can easily fill the gap. So the net result of some smelters closing in one part of the world will not necessarily lead to a net increase in supply of petcoke for the world.
It may not lead to a big change inside the USA either. I am not sure about this, but I think Mt Holly was getting its anodes from China. That means a zero change in petcoke or CPC supply, if I am right. For the 3 plants belonging to Alcoa, although purchase orders might have been cancelled with suppliers such as Oxbow, if I were Alcoa I wouldn’t yield my hold on that petcoke too quickly. Alcoa is aware that in the longer term, there is a shortage of petcoke looming. Penalising suppliers by cancelling purchase orders is a sure way to get punted to the back of the queue when that shortage starts to bite. So I suspect Alcoa would have been canny about the situation, agreeing to hold the Purchase Orders in place but with a change to delivery address and perhaps delivery date.
Although on surface it may appear that a reduction in smelter output would lead to a reduction in petcoke demand, when one considers that China is already supplying more than 55% of the world’s aluminium, and it is in China where the shortage of petcoke will appear first, the cuts to Alcoa’s plants and Mt Holly will be of little comfort to US-based petcoke buyers.
If someone has better information on Mt Holly’s supply of carbon, please submit a comment.