Petcoke exports - “Not a huge concern for China”

This was the view of a leading Chinese academic, Wang Tao, when I interviewed him about the new “inti-petcoke” law in China.

Mr Wang, from the Carnegie-Tsinghua Centre for Global Policy was talking about the potential impact on the international aluminium community, if China were to stop or reduce exports of low sulphur petcoke.

Mr Wang has been an outspoken advocate for controlling and limiting the use of petroleum coke in China. In June he published a paper on the subject, which we covered in this blog - see here.

In a free ranging interview that ran for about an hour and a half, Mr Wang told me

• Sinopec and other petcoke producers have a choice not to buy heavy sour crude oils. They may complain that they can’t stop producing high sulphur petcoke because of the crude oil properties, but they don’t have to buy the cheapest crude oil.
• Sinopec has known about the new law for months and will likely try to maximise an advantage from the law, especially in terms of a ban on the import of high sulphur crude oil. At a minimum they will not penalise themselves, when it comes to their Classification Table.
• Sinopec’s classification table will become the de facto standard until a proper national standard can be drafted and published. Mr Wang expects the new Sinopec Classification Table will include all petcokes that Sinopec makes - hence they can move to ensure they don’t penalise themselves. (Editor’s note: The new Classification Table, which we expected to see by the end of October, has been approved by the National Energy Authority, but has not yet been released.)
• For these reasons, Sinopec should not enjoy any exemption or delay to the enforcement of the new law. I pointed out to Mr Wang that Sinopec has 9 oil refineries that produce high sulphur petcoke. He agreed but explained that all of them have CFB boilers, but the boilers aren’t big enough to consume the volume of coke produced. It’s Sinopec’s problem, they need to fix it.
• I asked Mr Wang why the new law didn’t mention exports of high sulphur petcoke. He said that with the sale of the material banned, exports logically can’t happen. Besides, it’s less of an issue for China.
• Mr Wang explained that the process of rolling out new laws in China was very complex, and it is common for a law to be enacted, but for the policing of the law to lag by some years. It is his understanding that the MEP has notes aside specific funds in its budget to address high sulphur petcoke production or burning.

Low sulphur petcoke and aluminium

• By itself, low sulphur petcoke is not at issue for Mr Wang, however the use of high sulphur petcoke in anodes is. It was his view that China’s aluminium smelters need to switch away from the cheaper product, and go back to using low sulphur petcoke.
• Mr Wang said that in his view the best place to capture and control sulphur was at the calcining and anode stage. Mr Wang said that the MEP had told him that many Chinese aluminium smelters did not have the necessary scrubbing equipment.
• China is making too much aluminium now, he said, so if a few smelters close because they don’t have scrubbers or can’t afford low sulphur petcoke, then that’s a good thing.
• But the government and the banks won’t allow too many smelters to close, because it would cause too much pain and loss of jobs for China.
• I asked Mr Wang, if there’s not enough low sulphur petcoke available in the domestic market, won’t that lead to exports being cut? He agreed, saying that this is one of the scenarios. “Why would China sell its scarce low sulphur petcoke to foreigners and shut its own capacity? Common people would lose their jobs, and local economies would suffer.”
• I pointed out to Mr Wang that if China did not export its low sulphur petcoke, then common people in other countries would lose their jobs. “That’s not a huge concern for China” was his reply.

In summary, high sulphur petcoke imports will likely die, while domestic HS petcoke would gradually reduce. For low sulphur petcoke, the key questions remain - to what extent will China’s aluminium smelters switch to low sulphur petcoke, and to what extent will that switch impact exports of low sulphur petcoke? Although Mr Wang had no special inside knowledge on this, it’s clear that there is a body of opinion that the switch needs to happen.