Monthly Archives: July 2010
China, the world’s biggest polluter, may impose a cap on the country’s coal production by 2015 and enforce energy consumption targets to cut carbon emissions and reduce reliance on fossil fuels, according to a local Chinese newspaper.
“There must be a ceiling on coal output in the future, and energy needs can be met with new and renewable energy,” Wu Yin, a deputy director at the National Energy Administration, told the official China Energy News weekly newspaper in an interview.Wu didn’t specify any production targets.
China, the world’s biggest user and producer of coal, wants 15 percent of its energy mix to come from non-fossil fuel sources by 2020 to help meet emissions targets. By 2015, coal may meet 65 percent of the country’s energy needs compared with 70 percent currently, Wu said in the July 26 issue of the paper. “China needs a cap on both its energy consumption and carbon emissions to achieve sustainable development of its economy,” Jiang Kejun, head of energy and market analysis at the National Development and Reform Commission’s energy research institute, said by telephone today.
The country will cut output of carbon dioxide per unit of gross domestic product by between 40 percent and 45 percent by 2020 from 2005 levels, according to a statement by the State Council, or cabinet, in November last year. China may set targets for consumption of energy, including coal, for certain industries and regions, Wu told the newspaper, without giving details. About 80 percent of the country’s power plants are fueled by coal.
Shandong’s local independent refineries have long been the poor cousin in China’s oil refining and pet coke industries. However, this announcement is potentially good news for coke. CNOOC has already taken a position in Shandong, so if PetroChna does the same, then more local refineries will get more and better crude oil supplies, including those with cokers.
An official with Shandong Dongming Petrochemical, an independent oil refinery in China’s northern Shandong province, said Friday that PetroChina, China’s largest oil and gas producer, has agreed to provide crude oil supply to the company.
Dow Jones Newswires quoted an unnamed company official as saying that PetroChina Fuel Oil Co, a subsidiary of PetroChina, inked an agreement with Shandong Dongming Petrochemical on July 26 over the crude oil supply issue.
The official said this is only part of the cooperation between the two companies, adding that both sides also agreed to jointly build a crude oil pipeline to connect Rizhao port and Dongming City in Shandong.
Dongming Petrochemical is the largest independent oil refinery in Shandong province. CNPC, the parent company of PetroChina, signed Thursday a cooperative framework agreement with the government of Shandong province, east China, traditionally turf of its competitor Sinopec.
Shandong province agreed to continue supporting CNPC’s business in Shandong, which has long taken petroleum and chemical sector as a pillar industry. Jiang Jiemin, boss of CNPC, said Shandong province would be CNPC’s major target market and CNPC will provide more oil products and natural gas.
China’s independent oil refineries, which have a total refining capacity of 1.9 million barrels a day, usually feel difficult to get crude oil supply due to lack of upstream oil resources and restrictions of crude oil imports.
Shares in Chalco jumped this morning, after yesterday’s announcement of a tie up with Rio Tinto in the Simandou iron ore project in Guinea. The signing ceremony, held in the Great Hall of the People here in Beijing, has been well-reported by all the major media companies, so I won’t repeat the details here.
I would like to ask a couple of questions however.
Nowhere in any of the press that I have read has anyone reported the views of the Guinean Government about the deal. Sure, it has been said that the government may exercise its option to take up to 20% of the equity, but have they actually approved the entry by Chalco into the equity structure? it would be a great loss of face, after yesterday’s ceremony, if the Government turned around and said no.
Of course, this is unlikely. It has been said that the only reason Rio has taken Chalco as a partner is to help it with its negotiations with the Guinean Government. China has been quietly supporting and funding the government for some time, so this is probably payback time.
Second, what other reason could Rio possibly have for taking Chalco as a partner. Rio does not need expertise in building mine infrastructure and logistics - it has done the Pilbara for instance. Chalco has no experience in foreign iron ore mines, or large scale infrastructure projects. Perhaps Rio was hoping Chalco would have easy access to additional funds.
Third, why is everyone getting so excited? Sure, Chalco is getting a low price for a high equity position ($1.4bn for 45%), but payback is 5 years away, and the project will need up to another $6 billion in funding in order to get the ore to market. Anyone who has invested in mine projects knows that the money you stump up at first has to be topped up if you want to retain your equity value.
Finally, who owns the marketing rights to the ore? Hopefully Rio will retain the rights. Otherwise, they will be competing with themselves. In a supply-constrained world, it might not be a problem, but a long-term venture such as this needs protection built in for all scenarios, including the time when buyers control the price, not sellers.
This story comes from the New York Times, but as a resident of Beijing, I have to give 100% full endorsement to it. Having walked to work this morning in air that reeks and a sky that is the colour of old dish-wash water, I can vouch for the fact that things indeed seem to be getting worse. Cough, cough.
CHINA, the world’s biggest emitter of greenhouse gas, continues to suffer the downsides of unbridled economic growth, despite many new environmental initiatives.
The quality of air in Chinese cities is increasingly tainted by coal-burning power plants, grit from construction sites and exhaust fumes from millions of new cars on crowded roads, according to a government study issued this week.
Other new figures show a jump in industrial accidents and an epidemic of pollution in waterways.
The report’s most unexpected findings pointed to an increase in inhalable particulates in cities such as Beijing, where officials have struggled to improve air quality by shutting down noxious factories and tightening vehicle emissions standards.
Despite such efforts, including an ambitious program aimed at reducing the use of coal for home heating, the average concentration of particulates in the capital’s air violated the World Health Organisation’s standards more than 80 per cent of the time during the last quarter of 2008.
”China is still facing a grave situation in fighting pollution,” Tao Detian, a spokesman for the Ministry of Environmental Protection, told the official China Daily newspaper.
The ministry said the number of accidents fouling the air and water doubled during the first half of 2010, with an average of 10 each month.
The report also found that more than a quarter of the country’s rivers, lakes and streams were too contaminated to be used for drinking. Acid rain, it added, had become a problem in nearly 200 of the 440 cities it monitored.
In recent days, the state media have provided a grim sampling of the country’s environmental woes, including a pipeline explosion that dumped thousands of litres of oil into the Yellow Sea, reports of a copper mine whose toxic effluent killed tonnes of fish in Fujian province and revelations that dozens of children were poisoned by lead from illegal gold production in Yunnan province.
Two weeks ago state media reported on thousands of residents in the Guangxi Zhuang autonomous region who clashed with police as they protested against unregulated emissions from an aluminium plant.
Ma Jun, director of the Institute of Public and Environmental Affairs in Beijing, said many of the government’s efforts to curtail pollution had been offset by the number of construction projects that spit dust into the air and the surge in car ownership.
In Beijing, driving restrictions that removed a fifth of all private automobiles from the road each weekday have been offset by the addition of 250,000 new cars that hit the city streets in the first four months of 2010.
Many of the most polluting industries were forced to relocate far from the capital before the 2008 Olympics, but winds often carry their emissions hundreds of kilometres back.
”We’re at a stage of unprecedented industrialisation, but there have to be better ways to handle the problem,” Mr Ma said. ”Sometimes it’s painful to look at the data.”
Chalco today further signalled its shift away from primary aluminium, by signing an agreement with Rio Tinto for the Simandou Iron Ore Project in Guinea, Africa.
Many business journals are running today’s story about the deal which was inked today. Few if any of those journals seem to be watching Chalco’s gradual metamorphasis into a multi-metals company.
Chalco now seems more interested in copper and iron ore than aluminium, prompting the less-respectful side of me to suggest a new name that squeezes their other two metals in.
True, Chalco has new smelters in construction in far western China, but with metal selling below cost, power prices likely to rise, and no light at the end of the tunnel, perhaps it’s not surprising that they have been moving downstream, upstream and into entirely different streams.
PS - Chaliocco = China Aluminium Iron Ore and Copper Company
Beware the Chicken Littles who will likely come out in force in the coming days and weeks.
I suspect there will be several commentators and newspaper columnists who will wring their hands when they see the next batch of numbers coming out of China.
One source of their concern will be steel production figures for July. Some of the forecasts doing the rounds are dire indeed. Early estimates are for production levels to drop by as much as 30% in the space of a month.
Maybe that will be the result - we will know in about 3 weeks time when the National Bureau of Statistics releases its July number. More likely the low number is simply because, mid-month, not everybody has been asked what their production levels are!
We think a small drop is likely in July, both in aluminium and steel production. But even if the published numbers are much bigger, there are still some problems to understand before reacting. First, how accurate are the numbers? How does production compare to inventory of both raw materials and finished goods? Second, which is the cause and which is the effect? We are in a traditionally slow month. Beijing is trying to prevent overheating in certain sections of the real estate market. Beijing is quietly tweaking the economy to achieve its 11th 5-year plan targets. Based on these causes, is the effect justified? Probably not.
The Chinese have a long history of standing back. As soon as the price shows weakness, buyers stand back. They want to see how much further the price will go. China’s 1500 steel mills mostly act in herd mentality, so they will act in unison to reduce output in the face of slowing sales. Before you know it, you have a major over-reaction on your hands. that’s fertile ground for foreign-based economists and commentators to pronounce that China’s economy is slowing down.
Especially in Australia, where the country’s economy has been boosted by Chinese purchases of raw materials, and where there is an election due in a few weeks, politicans and pundits will be seeing a falling sky. But let’s see about that.
The article below is one of many on the same subject. The story has come from a Journal published in Chinese and released today. The basis of the story seems to be a draft plan for the non-ferrous industry for the next (12th) 5-year plan, which is due starting 2011.
However, the basics of this story don’t make a lot of sense yet (and some papers, including the China Daily got their facts wrong when quoting the Journal. My comments are based on the original article, not just the Reuters story). The article in the journal says that by 2015, China will have aluminium capacity of 20 million tonnes, with apparent consumption running at 24 million tonnes. Perhaps Oleg Deripaska wrote this plan for the Chinese - UC Rusal would stand to be able to import millions of tonnes of metal if this was to come about.
The article in the journal says that the government will achieve this by phasing out old, inefficient technology. But by our calculations, China already has around 27 - 28 million tonnes of latent capacity, if we include all the new projects that are currently being built. That means China has to retire 25% of all smelters! It’s a bold move, if it’s true, and clearly has profound implications for alumina, the rest of the primary aluminium industry around the world, energy, the environment, and of course carbon.
But before you rush off to buy shares in UC Rusal and other “winners” from this announcement, let’s see how real the story is. The 12th 5-year plan is not in effect yet, and there is no guarantee that this draft plan will be in it when it is promulgated. Oh and by the way, since when have some provinces and local officials listened to what Beijing wants?
China will aim to keep total annual output of 10 nonferrous metals below 41 million tonnes by 2015, the China Securities Journal said on Monday.
The metals include copper, aluminum, lead, zinc, nickel, tin, antimony, magnesium, titanium sponge, and hydrargyrum, the report quoted Shang Fushan, deputy head of the China Nonferrous Metals Industry Association, as saying at an industry conference.
China also plans to keep total copper smelting capacity below 7 million tonnes per annum, alumina below 41 million tonnes per annum, aluminium below 20 million tonnes per annum, lead below 5.5 million tonnes per annum and zinc below 6.7 million tonnes per annum, the report said.
The association also projected that apparent consumption for base metals would reach 43.8 million tonnes in 2015 including 8.3 million tonnes for copper, 24 million tonnes for aluminium, 5 million tonnes for lead and 6.5 million tonnes for zinc.
As the world’s largest metals consumer, China will try to concentrate 90 percent of the country’s total copper output among the top ten producers over the next five years.
The top 10 lead and zinc producers will also be encouraged to take up to 70 percent of total production.
China is also drafting regulations for rare metals production as part of a five-year state development plan in order to curb blind expansion of smelting capacities.
Naomi McSweeny, the scientist mentioned in the article we posted earlier this week, has kindly answered some of my dumb questions about the process and her breakthrough.
As I explained to Naomi, my knowledge of alumina is that arrives at smelters in big ships. But I will try to bring her answers in a way which helps readers get what it’s about.
Naomi tells me that sodium oxalate is one of the major impurities that must be removed in the process of refining bauxite into alumina. Her breakthrough is that she has not only invented an organic way of doing this, she has identified the particular bacterium that does the job.
At the moment it is removed by showering the part-processed material with more oxalate so that the impurities can be washed out. But then the sodium oxalate has to be stored, as it is not a nice chemical. Another way is to heat the material, but this is costly and adds to the CO2 equation.
I will let Naomi speak for herself. “Instead of the need to store the sodium oxalate (which usually happens in very expensive, confined concrete ponds), the addition of the biological process at this stage of the cycle removes the need to store and also the capital funding required to build these storage facilities.”
“Processes for the biological degradation of oxalate have been previously patented (you can Google them and find them). The difference between those studies and this one is that no one has really defined the microbial populations that are responsible for the degradation. Everyone has taken a very “engineering” point of view - in that they have this idea, they implement it, it works at pilot-scale and so they start a full-scale process without really knowing the biology of the system and in some cases the science know-how and availability of techniques good enough to characterise the bacteria were just not available.”
“This research has not only defined the microbial ecology of the process, but isolated the key oxalate-degrading bacteria. And that is what the media release and the Fresh Science award were about. The description and characterisation of the novel bugs that I have isolated will mean that the process can be replicated at other sites around the world, especially refineries which have low-grade ore associated with high concentrations of humic and fulvic materials like here in Western Australia.”
From her email, I understand that it does not change the equation when it comes to the ratio of bauxite to alumina, nor of the amount of red mud produced, but it does lower the capital and operating cost of making alumina, as well as reduce the environmental impact of alumina refining.
No wonder she has won awards for her research. Naomi tells me she is a PhD student. Looks like that’s in the bag.
Anyone interested in contacting Naomi, she has posted her email address in our comments section.
This article is from Reuters. This is as we have been suggesting for a while - that Chalco is keen to diversify away from primary aluminium. They recently received approval to vary their company registration with the Beijing authorities as well.
Aluminum Corp of China Ltd, China’s biggest aluminium maker, and Europe’s Sapa AB said on Wednesday they have agreed to form a joint venture to serve China’s rolling stock market.
The two companies had signed a memorandum of understanding, and aimed to finalise plans for construction of a facility in southern China by the fourth quarter, Sapa, the world’s largest aluminium extrusion company, said in a statement.
They said the venture would be a 50-50 endeavour, but did not disclose financial details.
The joint venture’s aluminium extrusion and fabrication facility would include the latest technology for press and fabrication capabilities, according to the two sides.
Products could be launched by as early as the first quarter of 2011 using existing subsidiaries, Sapa added.
“The Chinese rolling stock industry has seen a very strong development both in terms of volume and technology,” said the companies. “The joint venture will be able to meet current needs as well as serving the rapidly increasing technical demands of the rolling stock industry.”
The following article is from the China Daily a couple of days ago. While the article doesn’t mention coking or even heavy oils, I suppose it’s a safe assumption that coke output rose as a result of the extra throughput. Those of you who know more about oil refining than I do (and I don’t know much) might have a better opinion. Meantime, we will work on understanding the supply side of the coke business more. Sinopec is China’s largest coke producer.
China Petroleum and Chemical Corp (Sinopec), the nation’s largest oil refiner, said Tuesday that it processed 101.45 million tons of crude oil in the first half of 2010, up 16.74 percent year-on-year due to strong growth of the Chinese economy.
The company, also a leading oil producer, said in a preliminary report that its natural gas output rose strongly by 40.73 percent from the same period last year to 200.56 billion cubic meters despite crude oil output only rising 0.05 percent to 149.19 million barrels.
Sinopec saw diesel output rise by 13.33 percent to 36.72 million tons in the first half from a year earlier, while kerosene was up 29.96 percent, the company said.
Strong domestic economic growth in the first half had contributed to the increases in its rising output.
China’s gross domestic product (GDP) grew 11.1 percent year-on-year in the first half, according to the National Bureau of Statistics.
Gasoline output rose by 4.59 percent year-on-year in the first half,said the company.
Ethylene went up by 41.34 percent, synthetic resins by 28.51 percent, synthetic fibers by 7.47 percent and synthetic rubbers by 18.58 percent.
Domestic sales of refined oil products rose sharply by 18.09 percent year-on-year to 68.15 million tons in the first half.
Sinopec reported its net profit in the first quarter rose 39.93 percent year-on-year to 15.785 billion yuan ($2.3 billion).
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