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Each year, Antaike, the government media company that belongs to the CNIA, holds a conference on the China aluminium industry. It is usually held in the last 2 months of the year, but in a southern China city, the northern cities being too cold by then.
It has to be one of the worst conferences in the industry. We mentioned some of the problems in a post almost 2 years ago – see here. Last year was no better.
In 2013 however, they have sunk to new lows. The conference hotel (and we understand some of the nearby hotels) have agreed to only accept bookings for the conference dates provided you are a registered attendee of the conference. And forget about booking a meeting room. There aren’t any available.
What’s more, they have scheduled the conference to a Saturday and Sunday, immediately before the American Thanksgiving week. Why on earth, I hear you ask, would they put it on a Saturday and Sunday? Because the event has been bumped to make room for a Chalieco event being held immediately after. Chalieco, being the engineering arm of Chalco and a very big player in CNIA and Antaike, have made an arrangement with a new upstart group called IBAAS.
IBAAS is the brainchild and creation of an Indian guy, whom I am told was previously part of ICSOBA. Now, ICSOBA is a learned organisation with a fine reputation for its technical side. IBAAS is trying to muscle its way into ICSOBA’s space, by tying with the Chinese. It’s just a shame that Antaike sold out its clients for the sake of some political machinations.
(Sorry about so many acronyms!)
The bottom line is, AZ China has elected not to attend. We would have only attended as “outsiders”, since they refuse to allow us to register as a local company (the registration fees are much higher for foreigners), but now we can’t even do that.
While we always look forward to meeting up with our clients, many of them have told us that they also will not be attending. And who can blame them.
Rain CII, one of the world’s largest producers of Calcined Petroleum Coke (CPC), has announced it will be returning to its historical heart and home of Louisiana.
The company was forced out in 2005, thanks to Hurricane Katrina, though back in those days it was still known simply as CII. Katrina was devastating to the region, the city, to hundreds of companies and tens of thousands of families and individuals, and some people at RCII still have harrowing stories to tell of that time.
The company moved to Kingwood Texas, where it has been since 2005. RCII is building a new corporate headquarters on the north shore of Lake Pontchartrain, and will move into the new offices in the Fall of 2014.
At a public event to announce the move, Rain CII President & CEO said “Greater New Orleans is the historic home of our company, and a natural location for our headquarters… It affords the best blend of proximity to our operations, quality of life for employees, and exposure to the cultural events of the New Orleans area.”
Speaking as a former customer of the old CII, there’s no doubt that visits to Rain CII will be much more interesting for visitors going to NOLA than to Northeast Houston.
Following the posts on this blog combined with several discussions on Linkedin, some people have chosen not to express their views in public, but have written to me on a 1-to-1 basis.
The most common thread among the private responses has been:
- Only a full investigation will truly determine all the contributing factors, their sequence, their “weighting” in terms of the contribution they made to the line closure and the extent to which they could have been prevented.
- The range of possible contributing factors goes way beyond what was initially reported. A 20 metre long pot full of molten metal, with so much electricity running through it, and with its temperature at roughly 950c, is a highly delicate and somewhat unpredictable situation to manage. One correspondent described it to me as being “like a patient in intensive care. The doctor must continuously check the vital signs, and adjust the medicines and conditions carefully to ensure the patient (the new start up pot) survives and gets to full health. Rushing it is not an option.
- That last point was also a common thread in the correspondence I received on the subject. While everyone who wrote to me acknowledged that they were not involved in the Ma’aden start up, they all said that a start up must not be rushed. Several expressed concern that Alcoa’s rush to manage cash flow, reduce costs and achieve milestones could have compromised the start up process.
- Everyone agreed that the AP37 technology that is installed in Ma’aden should have been no surprise to any experienced start-up team. It’s a well known, proven technology. Several writers expressed puzzlement at how the pot control system could have been at fault. The Pechiney standard template called for Alpsys technology, and this would have been mandatory in the licence agreement, according to some correspondents.
- Most agreed that the process of getting Line 1 back up and running is likely to take longer than the 6 months suggested by the official announcement from Alcoa. However, there was some disagreement as to whether the pots would have suffered enough damage to need relining. It comes down to how they dig out the metal, said one
- The biggest worry expressed by those who wrote to me was that lessons from line 1 may not be applied, or applied rigorously enough, in line 2. The rush to get metal flowing should not overrule the need to take corrective actions.
One writer saw a bright side to the situation at Ma’aden. He hopes that the delays at Ma’aden will cause Alcoa to delay execution of the smelter at Point Henry. It is not the same cash cost basis, but the fact that Alcoa did not declare force majeure with its customers (I understand it did with its suppliers), means that Alcoa needs to get replacement metal from somewhere.
A couple of days ago, China’s State Council issued an edict concerning over-capacity in aluminium, steel, and other industries.
While any announcement from a country’s Cabinet must be treated as important, this one fails to excite. The edict is full of rehashed edicts, contradictory actions, and wishful thinking.
Calling for smelters with an operating rate below 160KA to close is a good move, except that this edict was first issued 3 years ago. It was issued again 2 years ago and yet again earlier this year. These plants should have been closed a long time ago!
The same thing happened when the bar was set at 100KA. It took years after that edict before the bulk of those plants finally closed. We believe there are still some plants operating at 100KA.
The edict also announced some measures relating to electricity pricing. The edict calls for a 10% price hike if the smelter is operating above 13,700KWH/t, while at the same time allowing smelters to negotiate power contracts with power stations directly. The electricity consumption rate is a closely-held secret in smelters around the world, so it’s unlikely that China’s smelter community is going to yield this information when a 10% impost is the reward. And it is hard to see any reason why a power company is going to give a better price when there is no gain available.
The call for China’s aluminium companies to build capacity outside China is the one which is most fanciful. China generally has a poor record at major outbound projects, and few of China’s aluminium companies have the combination of capital, incentive and experience. I wonder whether the announcement was more about supporting Nanshan Aluminium, the Shandong Province-based company that announced a new smelter in Indonesia.
I fail to see any reason to believe there will be a foreign-based smelter operating this side of the year 2020, despite Nanshan’s optimism.
Perhaps putting aside his ceremonial title of Aluminium Ambassador, Rusal’s Oleg Deripaska has announced further production cuts for 2014.
According to the company’s press release, Rusal has cut aluminium production by 324,733 tonnes, or by 8 percent of 2012 production. The company had previously said it would cut output by 357,000 tonnes this year.
The company plans to cut 2014 aluminium production by 647,504 tonnes, which is a 15% cut based on 2012. So far, aluminium production had been mothballed at the Volgograd, Urals and Volkhov aluminium smelters, as well as at the first phase of the Novokuznetsk smelter and at the Alscon smelter in Nigeria. Aluminium production has been mothballed at some potrooms of the Bogoslovsk smelter and of the Nadvoitsy smelter as well.
Output cuts at the above-mentioned facilities will amount to 247,000 tonnes in 2013 and will result in an output decrease of 516,000 tonnes in 2014, Rusal said. Production volume at the Sayanogorsk, Irkutsk, Novokuznetsk and Khakass aluminium smelters has also decreased. Output reduction at these smelters will amount to 77,724 tonnes in 2013 and an expected 131,442 tonnes in 2014, the company added. In early October it also postponed the start of production of its Boguchansk aluminium project until June 2014.
China’s Gross Domestic Product came at 7.8% versus 7.5% previously.
China’s Industrial Production (YoY) (Sep) came at 10.2% vs 10.4% previously, while Retail Sales (YoY) (Sep) saw 13.3% vs 13.4% previously, while China’s Urban investment was 20.2% vs 20.3% prior.
Most commentators expected GDP to come in at around this mark. The question plaguing everyone is, will this pickup continue into Q4? The answer generally seems to be no. At AZ China, we believe some of the momentum seen in Q3 was in reality a false start. We think some of the steam will come out of the economy in Q4.
It is interesting that on a quarter on quarter basis, GDP came in at 2.2%, compared to 1.9% in Q2. That run rate is too high.
We are hearing that one problem at one pot eventually brought the whole line down.
We understand that Pot A48 had a problem with the pot controller. The pot controller would not respond when the operators tried to reset it. Eventually they had no choice but to hit the emergency stop button for the entire line. When they tried to restart the line, they suffered multiple trips to the electrical circuitry. The team dropped the load line to 200KA, but by then they were suffering multiple clad failures, followed by a huge number of burnoffs.
But why did this happen in the first place? There are two reasons, according to our sources. One is that the control systems were the wrong type. According to some engineers, the cheapest control system was purchased, not the best. The pot controller at pot A48 simply failed.
The second problem is even more inflammatory. According to some at the plant, too many pots were started too fast. It’s a complicated process to start up pots. You need “bath material” which you must retrieve from the first pots you start. But while you are busy siphoning bath material, you can’t fall behind on tapping the pure metal from the bottom of the pots.
According to our sources, this is exactly what happened. The crew got behind in extracting the metal from some pots, and some metal levels in some pots got too high. That’s a precarious position to be in, and it seems that the pot control problem came just at the worst time.
This doesn’t mean that the operators were at fault. The plan to run some pots to generate bath material, and to start pots at a certain rate, is not a plan made on the factory floor by the crew when they start their shift. It’s a decision made in board rooms, and in the interface between plant management and the technology company.
Based on what we are hearing, there is a lot of frozen metal in the pots. That means those pots will need to have the metal excavated from those pots. But that can lead to damage to the linings. It’s highly unlikely the plant would have enough spare lining sets to replace up to 360 pots. Even the area in the plant that is devoted to cleaning the pots, inspecting and repairing or replacing the linings will be a bottleneck.
So when the company says that the line will not come back into service until Q2 2014, you better believe it.
The good news is that the problems initially identified should not cause delays to line 2, although it will be interesting to see if a decision is made to replace the pot control system.
Alcoa has announced overnight that they have had to shut the potline at their flagship smelter in Saudi Arabia. No specific reason was given other than “pot instability”.
Ma’aden has AP37 pots, so it’s a well-established technology. Pot instability can mean anything, from electrical problems, carbon/anode problems to poor worker disciplines. We are attempting to find out more about what the problems are, precisely.
Alcoa has said that the plant will now try to press the second line into service much faster. The plan had been that both lines would be fully operational by the end of the year.
More information when we receive it.
AZ China will be Media Sponsor of the upcoming 3rd Asian Bauxite & Alumina Conference in Singapore. If you are planning to attend as well, it would be great to catch up with old friends and meet new ones! Please schedule a meeting time with firstname.lastname@example.org.
Given the impending Indonesian ban on bauxite exports, coupled with China’s increasing dependence on the ore, there is an increasing focus and uncertainty over where the middle kingdom will source its new imports. Equally, the situation presents itself with new opportunities for miners across the region and the industry finds itself at an important crossroads in its development. The conference provides a unique forum for key players to discuss and gain insight into all the latest developments in the industry, covering both metallurgical and non-metallurgical sectors. This is the perfect opportunity to meet with your potential customers and suppliers and strengthen your business for the year ahead.
Sinoway Carbon has appointed Mr Dylan Wang as acting General Manager for the new plant in Weifang, Shandong. Dylan replaces Angelo Danese, who left the company about 4 or 5 months ago.
Dylan’s first order of business will be to ready the plant for the invasion of VIPs and guests for the official opening of Phase 1, and kick-off ceremony for the start of construction for Phase 2. ( That day, October 21, promises to be a long one – the official ceremony takes place at 10am, with a gala dinner that evening. I am not sure what the guests will be doing between events. There’s virtually nothing in the local area, which is a good hour out of Weifang city.)
When Phase 2 is completed in about 12 months time, the plant will be at 560,000t capacity. The new plant has been producing marketable CPC for a few months now.