Daily Archives: May 9, 2012

China reduces fuel prices – pet coke next?

Written by Paul Adkins

The Chinese Government yesterday announced a reduction in the ceiling price for gasoline and gas oil.   Petrol at the pump will now have a maximum price of about RMB 0.24 per litre lower.

This move is a result of the rule that China uses, where the maximum pump price is calculated using a 22-day moving average of crude oil prices.   The ceiling rose in February after fears of an Iran nuclear issue, but with crude oil prices now retreating, the formula triggered a change back down.

The thing is, many petrol stations had already adjusted their prices down, as competition and lower wholesale prices forced their hands.   So this announcement is not likely to change anything.

But it does signal that pet coke prices are likely to fall in the near term.   Subscribers to our  monthly Black China Report will see in the May edition (due out in a couple of days) that we expect green coke prices to reduce.

All shiny metals look alike…

Written by Paul Adkins

BHP Billiton has announced that it will merge its aluminium division with its stainless steel materials division, to form a new larger entity within the group.

According to the BHPB website, “… individually, Aluminium and Nickel are small divisions relative to the other businesses in BHP Billiton. The combination of these into a single business unit will provide appropriate scale within the BHP Billiton portfolio, as well as simplifying the functional structure of the business to assist in our efforts to make it a more efficient and competitive organisation.”

In some senses this is a backward move for the aluminium assets.   Smelters in Mozambique and South Africa now have to compete with nickel projects for capital, even before the RFA gets past the division heads and on to the corporate board of directors.   And two small divisions being merged still don’t make for a big enough voice, compared to the heavy weights in the BHPB portfolio.

It’s part of a general long-term shift in the aluminium industry.   We will be talking more about this in our upcoming “Cash Cost Curve” Report (due out very soon), but if you look at who were the big players in aluminium at the turn of this century, you would find (surprise, surprise) aluminium companies.   Alcoa, Rusal, Pechiney, Comalco, Chalco – all these companies were focused only on aluminium.   So when the boards of directors were planning capital strategies, it was about how to maximise shareholder returns in aluminium.

Now we have Resources companies like Rio Tinto and BHPB controlling portions of the industry, and aluminium companies like Chalco now branching away from the light metal.   Chalco is now active in coal, copper, and rare earths.   Rio Tinto assesses its aluminium interests in the light of its iron ore and coal and other materials, as does BHPB, and with the poor returns on aluminium in the 12 years since the turn of the century, it’s no surprise that these boards relegate aluminium into a second tier of assets.

Of the heavyweights, only Alcoa and to a lesser extent Hindalco/Novelis have made diversification decisions within the industry, and stayed true to their original purpose.

Watch for more on our CCC report very soon.


Tick Tock

Written by Paul Adkins

With less than two weeks until the conference, we’d like to remind everyone to keep an eye on the agenda as we’ll be updating it more frequently.

And if you’re not Chinese, check to make sure you have a China visa!

Also, if you’re booked for the conference but haven’t booked your hotel room, the discounted rate at the Shangri-la is only guaranteed until May 10th. If you’re not booked for the conference, what? It’s the China aluminium raw materials event of the year!

We are making final arrangements for Sunstone’s Anode Plant tour on Friday, May 25th, but there’s still time to sign up if interested. The delegate list is now available to all registered delegates and you can easily arrange meetings via the Messaging Tool on the conference website. Don’t forget to log on to see if you’ve got mail.