Monthly Archives: August 2008
Green coke
The market began to turn down last week, especially for high sulphur cokes. Zhenhai, China’s largest producer of high sulphur coke, dropped their market price by RMB80, while Gaoqiao dropped their price by RMB50. Even low sulphur cokes began to be affected by the turndown, though many list prices are yet to reflect the actual trade prices. Dagang decreased from 3900yuan/ton to 3100yuan/ton, a decrease of 800yuan/ton. Jinzhou and Jinxi petrochemical both went down another 600Yuan/ton, a total decrease of 900yuan/ton each in two weeks. High inventory levels are being blamed for the price reduction.
Calcined coke
The price of low sulphur calcined coke fell 300-500yuan/ton. However, moderate sulphur coke remains stable at RMB3,400 to 3,600.
Anode
The domestic price is continuing relatively stable, with prices remaining in the RMB4,500 to 4,800 range.
The July figures for aluminium production have now been released. Last month saw 1.168 million tonnes produced, compared to 1.172m in June. While this appears small, when averaged by day, it shows a drop from 39.1 tonnes per day down to 37.7t - a drop of 3.7%. And one must remember that the cuts were not announced until mid way through the month. Given the normal cycle for taking pots off line, one should not expect to see any serious drop until August. If we consider that only the last third of July was impacted, then the drop appears to be more like 10%.
So although this is a small drop in real terms, it is still significant when the timing is taken into account.
Generally speaking, the coke market began to show downward trends last week. The whole market is depressed and inactive, laregly as a result of either the Olympics or the restrictions due to them.
The price of low sulphur (below 0.8%S) coke kept stable, despite Daqing refinery closing for overhaul. Green coke for smelters from northeast China dropped RMB300/ton as a result of the production cutbacks in smelters in Henan and Shanxi provinces. The price of high sulphur coke was continuing to go down, and was 2100-2015yuan/ton in Guangzhou and Maoming regions. High sulphur coke prices have decreased more than 10% comparing to the middle of July. It was reported that there are around 160,000 ton high sulphur cokes stocked in Ri zhao and Nanjing port. It is selling slowly at 1800 Yuan/ton. The price is sure to fall further.
Some suppliers kept the list price stable; however, the actual trading price was going down. It means the list price will go down soon.
Demand and Supply analysis.
l The decline in domestic demand.
l Environmental governance, poor transport, power shortage and the tightening of fiscal policy during current period causes some carbon producers to reduce production.
l The excessive price rises in previous periods resulted in reduced demand.
l Reducing aluminium production
l Demand from the silicon industry is falling. Silicon is a seasonal product and will be off-season in October.
1. Supply
l Some imported cokes stock in port, resulting in the inventory level rising.
l Some local refineries reduced production due to power shortage
It is expected that the price of coke will continue to go down in next few weeks.
Imported coke information
² It was reported that one cargo around 25,000 ton imported from USA arrived in Zhenjiang, Jiangsu province on 26 July. Sulphur content is around 2% and ash <0.2, volatiles 15%.
² It is expected that another cargo around 30,000t (S <2.0%, ash < 0.5% and volatile 10%) will arrive China east region at the end of August.
Downstream Product:
Aluminium Fluoride:
The trade price of aluminium fluoride (dry method) was 9800yuan/ton, and wet method was 9400yuan/ton. It is evident AlF3 is oversupplied in the China domestic market, but there is no report of reducing production from producers. The quotation for export was 10600yuan/ton.
Alumina
After the 2nd price reduction of Chinaclo alumina at the beginning of August, alumina prices kept stable last week. The total price of Chinaclo alumina fell almost 24% this year. It seems the price decreased due to reducing aluminium production. However, the real reason could be over-expanded capacity. The alumina market is in severe oversupplied status. Although the selling price is close to the production cost, the price may be considered to go down further.
Anode
The domestic price is continuing to keep stable. Due to the Olympic Games, some plants reduced production.
Calcined coke
The price of low and high sulphur coke went down slightly last week. However, moderate sulphur coke keeps stable.
In an announcement posted on Friday, the Chinese Government has announced new export tax increases on a range of goods, including coking coal and coke. Petroleum coke has not been included in this announcement, but the market maintains that Chalco’s proposal (which we reported last week, see below) will be rolled out some time before the end of the year.
Coking coal exports were taxed at 5%, but this has gone to 10% effective August 20. Coke is now taxed at 40%, up from 25%, also effective the same day. One of the other products which was caught in the new edict was aluminium alloy, which cops a 15% tax.
These moves are all part of the government’s attempts to control the energy supply situation. Energy supply is not keeping up with demand, and a number of blackouts have already occurred around the country this summer (though not in Beijing, unsurprisingly).
Meanwhile, exporters of green and calcined petroleum coke should not take too much joy from the recent announcement. The indications are that the government has chosen to put the energy controls into place in a step-by-step approach. Local analysts are predicting that pet coke will incur a tax penalty sometime before the end of this year, and possibly as soon as in the next few weeks. The tip is for a 15% tax on pet coke, which apparently was the number submitted by Chalco in their submission to the Government.
In a new blow to foreign buyers of Chinese coke, the domestic market is rife with rumours of a new export tax on pet coke. The story goes that Chinalco has proposed to the Government that petroleum coke exports should bear an export tax (exact amount unclear), the argument being that China needs to limit its exports of energy products.
It is said that the real reason for Chinalco’s show of nationalistic concern is that they are reeling from the rocketing price increases that we have all seen these last 12 - 18 months. One way to take the pressure off the price is to weaken demand from foreign sources, making more available for the domestic market and thereby shifting the supply-demand equation.
Given the huge shortages of coal, the previous actions by the government on exports of aluminium and other energy-intensive products, don’t be surprised to see the Government accept Chinalco’s suggestion. We will keep you posted as more news comes to hand.
Also, an update on the previous post regarding the export rebate for anodes. Previously we reported that the rebate was still available for those exporters who presented their contracts for registration with the authorities. The contracts had to be dated pre August 1, 2008 with fulfillment prior to December 31, 2008. Now it has been confirmed that only those contracts with fixed prices are eligible for the rebate. While this makes logical sense, it also reduces the number of actual contracts which can be registered.
The rules applying to exemptions relating to the recent scrapping of the export rebate have now been published. Contracts written prior to August 1 remain eligible for the rebate. To remain elegible, the supplier/exporter must register the contract with the authorities prior to August 15. The contract must be filled before th eend of this year. Shipments in 2009 will not be eligible for the rebate even if th econtract has been registered.
The export rebates available for manufacturers of anodes and cathodes has reportedly been scrapped. Effective August 1st, the 13% rebate will be removed. This is as a result of China’s crackdown on high energy-consuming, polluting products and those which consume scarce resources.
Industry insiders had espected the rebate to survive until 2009. But with the recent shortages of coal in many provinces, and the consequential brown-outs and black-outs occurring, it is no surprise that carbon products came under the microscope.
Given the high cost of raw materials, expect this rebate to be factored back into pricing to its full effect. It was not uncommon for manufacturers to use the rebate as their effective profit margin.
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