Category Archives: calcined coke
Unconfirmed reports are coming through that UC Rusal is to cease buying green petroleum coke from China. No details yet, so the rest of this post is speculation. And we speculate that perhaps they are planning to switch to buying more calcined coke and anodes. Rusal already buys some CPC from China, and owns two cathode plants here as well.
If this is true, it would be part of a general trend in the aluminium industry to re-think coke strategy. Following the efforts of Alcoa to establish a JV in a calciner in 2009, there have been several other companies seeking to do something a little different here in China. Late last year, Mubadala signed a JV agreement with ZCGG, who in turn have a partnership with Mitsubishi. Vedanta has been active in the China market, even to the point of telling Weifang Lianxing that they would be a long-term buyer of CPC from that company. Other Chinese companies are being courted by or have already joined with foreign partners for brownfield and even greenfield projects.
All this activity suggests that these aluminium companies are taking the same view as we do here at AZ China – that China is likely to continue to grow in importance as a supplier of coke to the smelter industry. As the companies rush (at snail’s pace in some cases) to join with Chinese partners, those who come to the “feasting table” last may find that there’s nowhere for them to sit and no more coke share to go around. Those not already in a long-term strong relationship with Chinese suppliers are likely to find themselves locked into either the traditional suppliers in the USA, India, or perhaps hang out for additional capacity in the Middle East. Not that calcining or anode producing capacity is ever the key issue – supply of anode quality green coke is. (With an additional wish list of qualities such as reliability, consistency, stable pricing and trust in one’s partners.)
Reports from Europe indicate that the failed aluminium smelter in the Netherlands, commonly referred to as Zalco, had some calcined coke on the way to the plant at the time that the power switch was turned off.
Apparently the coke was shipped as far back as last October, but was in a hold in a Panamax that was making several stops. Zalco went bankrupt mid December. The plant included an anode plant which also made anodes for its sister smelter, which I understand is now also closed.
One presumes title to the coke is clearly laid out in the contract, passing to the buyer either at FOB point or at CIF time. One hopes for the sake of the seller that the CPC was sold under letter of credit, otherwise the bankruptcy receivers will treat the debt like any other.
It’s a relatively small parcel destined for a relatively small smelter, and normally I wouldn’t bother mentioning it. But with Alcoa announcing 240,000t of capacity closures, RTA partially closing some capacity (mostly unplanned), and Hydro Norway closing potline 1 at Kurri Kurri, raw materials managers around the world are no doubt reviewing their contract positions and inventory levels. I understand one smelter group has already started calling in suppliers, similar to what happened in 2009.
It is not a good time to be long in raw material inventory, but equally, it’s not a great time to be selling these materials to the world’s smelters, who no doubt are asking for reduced prices at the same time as they reduce volumes.
Zhenjiang Coking Gas Group company (ZCGG) has today issued a press release announcing the formation of a Joint Venture with Mubadala Development Company, to construct and operate a calcining plant.
The plant will be on the Yangtze river, near the present-day ZCGG plant, and will have an annual output of 500,000t. Construction will commence by the end of this year, with marketable grades of CPC produced by the end of 2012.
Mubadala is best known in the primary aluminium industry for its part-ownership of Emirates Aluminium, or EMAL, in Abu Dhabi. ZCGG, through their subsidiary Surun, is China’s largest exporter of calcined coke, and also enjoys an excellent reputation among their customers. The JV partners have formed a company called Jiangsu Suyadi Tancai Company Limited (“Suyadi”).
There will be a ground-breaking ceremony on Monday. AZ China has been invited to attend, so we will provide more information, and hopefully photos, after that.
Sinoway Group’s pet coke calcination plant project in Weifang, Shandong province has laid foundations and is scheduled to start the first heat-up steps in April 2012, with marketable grades of calcined pet coke being produced by August. This is according to the press release that Sinoway has issued.
The plant will be known as Sinoway Carbon and is 100% owned by Sinoway. Sinoway did explore the feasibility of working with its Indian partner on the project, but the two groups have since amicably parted ways.
The plant will supply calcined petroleum coke for markets in Australia, the Middle East and other regions and looks to be a world-class plant in terms of operating efficiency and product quality.
In the previous post, I talked about how the FUD factor – fear, uncertainty and doubt – is affecting aluminium prices.
Much the same argument can be made about petroleum coke and calcined coke prices.
Readers of our monthly Black China Reports will know that calcined coke prices in China are sitting in the low- to mid-$400 range. They have been almost unchanged for a couple of months now. But this level is nowhere near the mid-$500 prices in the USA or Europe, nor the $600 prices in India.
With an arbitrage situation like that, one would expect that buyers would be flocking to China to pick up bargsins.
But it hasn’t happened, for two reasons. Chinese producers don’t have vast amounts of spare capacity available, especially at bargain basement prices.
But equally, buyers are dealing with the FUD factor. A move to China CPC is fraught with danger. Buyers are worried that as soon as they switch, CPC prices will rise above US prices. It has hapened before.
At the same time, international sellers are not blind to the benefits of the FUD factor. As price negotiations for the second half drag on, those buyers who point to Chinese prices and ask for a reduction are being told, “Go right ahead and buy from China at that price – if you dare.”. They know the history of Chinese CPC as well as buyers do.
The real sting is in the tail,however. That invitation to go ahead and cancel orders and buy from China comes with one condition… Don’t come back expecting us to have coke for you when the Chinese eventually let you down.
The CPC market is not the relationship-based club it used to be.
We expect that CPC prices will remain disconnected for at least the rest of this year. For more information on calcined coke prices, contact AZ China.
I mentioned a moment ago that calcining plants in Nanjing had been ordered to close by the end of July, though there is a distinct possibility that the plants will escape the ruling.
Some other announcements are worth bearing in mind as you plan your calcined coke purchases over the next two years.
CNOOC has announced that their Huizhou refinery calciner will reduce to 1/3 normal operating rate next month. This cutback is due to the “Universiade” taking place in Shenzhen August 13 – 23. Clearly, the local authorities are keen to have blue skies and low pollution while they host so many overseas students. But I can’t help wondering whether CNOOC is doing this in the spirit of cooperation despite not being a polluter, or because the calciner is a polluter. Given that the plant is only a year or two old, one hopes they had enough sense to install some decent emissions collection systems in the plant. But this is China..
Given that the calciner has an operating capacity of about 40,000 tonnes of CPC per month, it will cost the market about 25,000t of supply. It is not likely to cause a spike in prices on its own, though it could flow through indirectly, as anode producers use alternative cokes. It also comes at a time when those 7 Nanjing plants are facing closure.
But that’s not all.
In 2013, The Asia Youth Games will be held in Nanjing. And in 2014, the Junior Olympics will be held in Nanjing, with both events scheduled for the August timeframe. All calciners in the vicinity will be ordered to close for the duration, and for probably up to a month beforehand.
The good thing is that the companies have plenty of notice. One can only hope that they provide their clients with the same amount of notice. It is difficult enough to schedule ships to deliver cokes just when silos are empty, so there is no excuse for the calcining companies not to have inventory ready for delivery despite production hiccups.
Some news emerging from the Nanjing area this morning should cause some concern for buyers of calcined coke. There’s a separate bit of news that I will put in a second post shortly.
The Nanjing Environment Protection Agency has issued a directive calling on 7 calcination plants in the area to close. The 7 plants are:
1. Nanjing Bianmin Carbon Products Factory
2. Nanjing Saida Carbon Products Factory
3. Nanjing Aixin Carbon Products Factory
4. Nanjing Zhaisai Carbon Products Factory
5. Nanjing Guangming Carbon
6. Nanjing Derong Carbon Product Co., Ltd.
7. Nanjing Sheshan Carbon production Co., Ltd.
Under the announcement, the 7 plants are required to close by the end of July. Together they account for 28,000t per month of calcined coke, and consume about 36,000t of green coke.
The two biggest calciners in the area are not listed. ZCP and ZCGG (now called Surun) seem to have escaped this order.
However, it is worth remembering how things work in China. The local EPA has no teeth to enforce their ruling. They will rely on their political masters in Nanjing to see to it that the directive is carried out. Most likely, the 7 plants in question will simply apply to the local government for an exemption from the edict. That, or they will simply ignore it, though that might have longer-term implications for their relations with the local government.
We will monitor the 7 plants to see if they continue operating past the end of this month.
But a second directive will certainly apply, and most likely will include ZCP and ZCGG/Surun. Check the next post.
Green pet coke has enjoyed a nice little fall in prices the last several weeks, but the big question is, where are the prices heading?
In the case of fuel grade coke, the answer is simple. It has a natural floor in thermal coal prices. Allowing for the different heating values in the two, fuel grade coke is likely to go no lower than about RMB1200, compared to thermal coal at about RMB950. Any lower price will see a switch to the cheaper fuel, which will soon lift its price back up off the floor. However, we think that thermal coal will see a lift in price, especially in Q4, taking fuel coke with it.
For anode grade and high purity cokes, the picture is a little more cloudy. We have been on the downward slope for several weeks, but will that slope prove to be in the shape of an inverted J, with a long slow rise off the bottom, or will it be more like a V, with a steep rebound?
China’s oil refineries continue to pump out large quantities of coke, largely as a result of their protracted diesel runs. To date this year, Chinese pet coke production is running 20% above that of 2010. Meantime, speculators imported large quantities of green coke, taking advantage of the lower prices in the USA and elsewhere.
Looking forward, demand signals are hard to find. The Chinese aluminium industry will certainly contribute some increased demand. We expect to see 1.5 million tonnes of new capacity enter the market in the coming 3 months. But that is not enough to soak up all the coke. Export levels have risen, as the big producers seek to reduce inventory. One thing you don’t want in China, with increasing interest rates and capital getting harder to obtain, is lots of cash tied up in inventory.
But the same is also true for their domestic markets. Calcining plants, anode producers and aluminium smelters are all resorting to a Chinese version of “Just in Time” purchasing, running inward stock levels down.
Possibly the only bright spot on the horizon, in terms of market stimuli, is that the Chinese economy is close to its soft landing point, if the chatter from Zhongnanhai is anything to go by. Last week, Premier Wen Jiabao declared the war on inflation largely won. Money supply has tightened, asset bubbles are less likely, and there is still a need to bring the economy in at a growth rate of at least 8%. These factors may well combine to see the Government ease up on the brake pedal, and maybe even touch the accelerator again, though ever so lightly. Don’t be surprised if by the end of Q3 the Chinese economy is starting to rebound.
That would stimulate some markets, though it would do little for green coke prices, especially anode grade. While a growing economy will need more aluminium (and other key building materials), it isn’t that easy to turn on additional aluminium capacity.
So we don’t think that coke prices will follow a W curve. Prices are well below the giddy heights of a few years ago, and things would have to change considerably before prices got back on the roller coaster. Those of you who remember 2007/2008/2009 prices will be relieved to know that!
We did a sweep of market opinions and discovered that the market players foresaw an X pattern. Why an X pattern? Because they had no clue.
We will update our outlook on green coke prices, and therefore calcined coke and anode prices, in our next Black China Report, due out in a couple of weeks.
Shipments of calcined needle coke from Japan to China have been interrupted by the recent earthquake and tsunami, according to reports inside China.
With many of Japans ports closed or running at less than full capacity, March shipments have been delayed a month, though at this stage it is hard to say whether that delay will get worse.
China imported 86,000t of needle coke from Japan last year, according to the Customs data.
Reports are circulating this week that the Government has decided to lift the import tariff on calcined needle coke to 3%, from its current 1%.
Pitch coke tariffs will also rise to 3%, according to the reports.
The tariff on other categories of calcined coke, as well as for petcoke, will remain at 3%.
The changes are set to commence January 1st. The tariffs had been set to 1% to encourage imports.