Black China Blog

Thursday lunchtime, SeaTac airport.   We had our last meeting of the TMS 2010 program this morning.   Yet another 7am start, followed by an hour wait for a 9am that didn’t show.

All in all, we did pretty well as far as SNAFUs, stuff ups, double bookings, no-shows and so on were concerned.   A couple of wrong hotels, which required a quick sprint to the correct hotel   Fortunately this year’s hotels weren’t too far apart.   And the traipse from the Westin to the Sheraton allowed us to say a quick hello to the many others doing the same rounds in reverse direction.    Onl two no-shows, with one apology (due to illness).

TMS is good because it gives a chance to meet old friends, and make new friends.   It is always good to say hi to Mike Tillman for instance.    I reckon Howie and Karen and Frank win the award for the people I have seen most often at TMS.   I made new friends from Brazil this year, including Guilherme, Anderson and Marcus.     Although I did not have a scheduled session with them, the Simonsens are always at TMS.   (And every year, Jorgen says he will slowing down in the coming year.)

And so we all pack up and head to the airport.   Time to collect thoughts, compare opinions, and prepare the contact reports.

Which leaves just one thing to say…. See you in San Diego.

Sunday lunch time, and 3 meetings later. At least it isn’t raining this morning, so the traipse from the Westin to The Sheraton is not so difficult.

Two interesting messages this morning. Coker incentives are too low, thanks in part to the Obama Administration’s mooted rules regarding the refinery industry. The problem is structural and therefore not temporary.  As a consequence, all eyes are turning to China.

The problem is, Chinese eyes are turning to the US. Coke is short and over-priced in China right now, and every Chinese trader we have spoken to so far is looking for US coke to import. A classic case of mis-matched markets.

Message to the folks back at AZ. Let’s start tracking a new metric, and call it “China Export Incentive”.

Today only 10% of China’s coke is exported. In an economy growing at 8% – 10%, it won’t take much for the relatively small amounts of export coke to be consumed domestically. The only real reason for the Chinese to maintain an export market is if there is sufficient sustained profitability to make it worthwhile.
Domestically, anode grade green coke is selling at US$240 a tonne EXW. To export this coke, there is another $40 – $50 costs for transport to the port, paperwork, cost of LC and so on. Exporters need to be able to get a price of at least $280, otherwise there is always the risk that the domestic market will be too attractive. For us on the other side of the transaction, while a spot deal might be okay from time to time, anyone that wants to do business on a sustained basis needs to build that “incentive cost” into their pricing.

AZ China will start monitoring that metric, starting next month. (This is not a sales/marketing plug…. no really, I mean it.  Hey, why is my nose growing longer?)

This is even more important for CPC. While the local costs are the same (or a dollar or so more for covered storage at the port), the base cost for CPC inside China is sitting at US$280 at the moment.   Now we are talking about a base cost of $320 plus. Since AG coke supply is not growing fast enough, and the aluminium industry in China is growing too fast, the true incentive to calcine to international quality standards, and to export, is much higher. As are the risks. But this is increasingly looking like a “fact of life”.

Apart from coke, the other big question doing the rounds today was, who was that woman with Holger?

The answer is Yasmin.   Not only is she sporting a new hair style since TMS San Francisco,   she has shaken off a few kilos.  

20 to be precise.    She looks great!    Mike Stewart is also looking a little hairier than the last time I saw hi,, having gained a goatee.

Holger on the other hand, has not changed a bit.

Yasmin tells us she lost 46lbs.

That is the cry from around the lobby of the Westin Hotel. People we have been speaking to are complaining that there just doesn’t seem to be any coke available in the US market at the moment.

Price rises are not helping. One person told me that the price is set to fall, while another thought it would go up further.

The words “force majeure” also did the rounds of the lobby this morning.

Saturday 3.45 and already the day has been full of opportunities to meet new people and say G’Day to old freinds. A little bit more strage is to be having meetings with people who live in China. We had lunch with Guo Yunfei and Angela Chen from daqing Gaoxin, and briefly met Carol Bee from Black Energy, LiuTao and Henry Jiang from Sinoway,and Jiang Hongyan and Ruan Weizhong fromPetroChina, all old friends from China. New faces (for me) include Dan Lane, nader Allasad, Isa Alansari, and Akam Madanat.
Old friends included Mammy Mannweiler, Mike Stewart, Yasmin Brown, Warren Mockler, Jagmohan Chhabra, Mohan Haldankar, Tony Botelho… if I wasn’t falling asleep from the jet lag, I a sure I would remember more.