Review and Outlook for Coal tar and pitch

Since the Chinese New Year break, the spot price of aluminum has jumped to RMB14,000/t. Positive macro-economic performance and signals of limited supply overseas are pushing the future market up and gave a strong support to spot market. The recent concerns about cuts to capacity because of environmental restrictions have contributed.

As aluminum production grows, demand for the raw materials that go into the pot is also increasing sharply, including coke, coal tar, pitch, CPC and anode. Prices for commodities such as coal tar and coal tar pitch are rising strongly, but not just because of increasing demand.

All these industries - anodes, CPC, pitch etc - went through a tough period of environmental inspections in 2016, and that is continuing now in 2017. Coal, as a major energy source but also the major source of pollution, has been replaced to a small extent by natural gas in recent years in order to ensure good air quality, but the results were poor. Through this winter that we are just exiting, days of heavy fog and haze increased. In order to ease such serious condition, the Ministry of Environmental Protection has been forcing polluting enterprises to shut down. Entering into 2017, the MEP issued a new draft policy to improve environmental conditions surrounding Beijing and Tianjin. For coal tar and pitch, the major producing regions are in Hebei, Shanxi and Shandong provinces, provinces which are also the focus of the new ruling from the MEP. It has virtually cemented into place our outlook for coal tar and pitch. The operating rates of coal tar and pitch plants will be at a low level over a long term period, and that will put big pressure on prices.

If you are a subscriber to AZ China’s Weekly Carbon Monitor, you can monitor that coal tar price with our 8-week moving average. The next chart of coal tar and pitch average price should give you a clear image to imagine what happened in past months.

All carbon products have the general problem of being dirty industries, but for coal tar products, the individual problem is the basis in the steel industry. Efforts to reduce over-capacity in steel have killed lots of small coal-coking processing factories by now, which directly tightened coal tar output. As for carbon black, as the major aspect demand of coal tar, the industry boost is absorbing much more resources and finally pushed up coal price constantly. This year, carbon black industry will eliminate 200kt but add 600kt new capacity. It means coal tar will end up more in carbon black but less will go into the other products that can come out of a pitch plant.

Overall, there are many indications that the operating rate of coal tar industry will remain at a low level, and coal tar and pitch market prices will climb constantly, especially going into next winter.

Your best choice is to keep in touch with us at AZ China, to keep across what’s going on in the industries that so few people watch, but which can have a devastating impact on the cost of making aluminum - or could even stop a smelter.

We acknowledge and thank Rutgers for the use of the feature image, which is from their website.