FUD factor and calcined coke

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.

Calcined coke supply hiccups – part 2

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.


Japan crisis hits needle coke supplies

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.


Oxbow improves PCIC holdings

Oxbow  Swiss Holdings GmBh, a related enterprise of Oxbow Carbon & Minerals, has purchased an additional 40% of the PCIC calciner in Kuwait.

Oxbow have taken the share that was owned by Al Mat Investment Company, of Kuwait.

The calciner has a rated capacity of about 350,000t, though it has been operating well below that in recent times.

My information might be out of date, but I show Oxbow as previously holding about 11% of PCIC.    This purchase will greatly enhance their ability to service their many calcining customers.   Rain CII also held some shares in the PCIC cacliner at one stage, though I believe they are no longer involved.

Alcoa to enter into JV calcining plant

Alcoa has announced it has signed a letter of intent with Weifang Lianxing Carbon in Shandong province for a joint venture in calcined coke production. Lianxing produces about 300,000T of calcined coke per year, drawing most of its green coke from local independent refineries.

The plan is apparently for Alcoa take to take control of the sales of the calcined coke from the existing plant, as well as from future expansions. Alcoa purchases mainly from USA based producers, but takes a strategic slice from China. The announcement does not name specific destinations for the coke, but presumably Australia would be high on the list.

We understand that until recently, Lianxing’s sales were mostly to the domestic market, with some export sales to India, Japan and Korea. That has changed due to the cut backs in domestic aluminium production, which have been particularly severe in Shandong province. Lianxing has recently idled part of its production, leaving just enough capacity to meet export sales.

Lianxing is not associated with either of the major green coke suppliers (Sinopec and CNPC), which is why they purchase from local refineries. That means a higher degree of variability in crude and coke properties, which is bad news for smelters. As well, the cost of calcined coke is not in the calcining, but in the green coke itself, which is outside the control of either of the JV partners. It will be interesting to see how this project unfolds.

Since this project is of strategic importance and interest to our clients/subscribers, we will continue to monitor and report developments as they occur.