Monthly Archives: August 2011
Kazakhstan’s only aluminium smelter, “KAS”, has announced that it is building a carbon plant, to provide anodes to the smelter.
The press release does not give any details, but given that NFC built the smelter using NEUI technology, it’s a safe bet that they are using the same combination for the carbon plant.
The smelter’s capacity is rated as 250,000t, and recently ramped up to 100%. The smelter came into operation about 2007, with phase 2 about 2010.
The press release mentions that raw materials for the carbon plant would come from local suppliers - oil refineries in the region where the smelter is located will provide the calcined petroleum coke, while the Temirtau metallurgical complex will provide coal tar pitch.
There had been talk of a second smelter being built in Kazakhstan, apparently by a consortium from the Middle East, but that talk seemed to die after the Global Economic Crisis.
Here is a report from AFP, which pretty much covers the story of the latest fire at PetroChina’s Dalian refinery. As more information comes in, we will post it here.
A major fire broke out Monday at a refinery in northeast China owned by state-owned oil giant PetroChina, the official Xinhua news agency reported, in the latest disaster to hit the country’s oil industry.
It took nearly 300 firefighters several hours to put out the blaze, which broke out when an oil storage facility caught light at at around 10:00 am (0200 GMT), Xinhua said, adding that no casualties had been reported.
The fire was the second to hit the refinery in the coastal city of Dalian in as many months and follows a series of other disasters involving China’s rapidly expanding oil industry, which has come under scrutiny over its safety standards.
In July 2010, two pipelines exploded at a PetroChina oil storage depot in Dalian, also triggering a devastating spill.
The government estimated about 1,500 tonnes of oil poured into the Yellow Sea after the fire, but environmental watchdog Greenpeace said up to 60 times that amount may have escaped.
And in January this year, more than 30 people were injured when an explosion ripped through a PetroChina oil refinery in neighbouring Fushun city.
A spokesman for the company who declined to be named confirmed that Monday’s blaze was at the same refinery that was hit by a fire in July, but refused to provide any more details.
The world’s second-largest economy is also grappling with a huge spill from oil platforms jointly owned by state-owned CNOOC and US oil giant ConocoPhillips that have polluted large parts of Bohai Bay off the east coast.
Dalian, a major Chinese port and transport hub, sits at the confluence of Bohai Bay and the Yellow Sea about 460 kilometres (290 miles) east of Beijing.
According to state press reports, the Dalian refinery, PetroChina?s largest, has three crude distillation units with total crude processing capacity of 410,000 barrels per day.
Telephone calls to the Dalian plant and to local authorities went unanswered.
It is said that when law suits are being fought, the battle is always on at least 2 fronts.
One is inside the courtroom, with evidence, rulings and so forth. The other front is the public war. This is where the battle for the audience is played out, and sometimes is more influential than the courtroom fight. The media battle is just as important as the legal one, and can be both a strong offence and a tough defence if you manage to win the battle for the public’s hearts and minds. Often the public domain is a good place to show one’s “cards”, thereby hopefully hinting to the opposite side that you have a really strong hand.
It seems Chenco, the technology company that is suing Do-Fluoride (DoFuFo or DFD), understands these principles. A couple of days ago, they issued a press release, refuting the counter claims made by DFD, and mounting some additional evidence of their own. The press release itself is rather long, but if you want to see it, contact us and we will send you a copy, or you can contact Chenco directly.
We will not go into the specifics of claim and counter claim, nor do we take sides. As a matter of fact, we checked again this morning to see if DFD had posted any new rebuttals on their website. They had not.
One suspects this battle could be fought on two entirely different strategies as well. Chinese companies approach legal matters with a very different mindset to those of foreigners. And Chinese companies don’t always see the value in a media war, especially if the case is a domestic one. It will be interesting to see how the strategies of the two sides evolve.
In a press release issued over the weekend, Chenco GmbH has announced that they are seeking Euro 23 million in damages from Do-Fluoride Chemicals, better known as DoFuDo or DFD.
According to the press release, DFD had licences to build 3 plants using Chenco technology, but has gone on to build another 12. The press release continues with a claim that the DFD-Chalco Joint Venture project is also being based on the illegal use of Chenco’s technology.
In an unusual but not surprising twist, the press release hints at the good relationship that DFD and Chenco had in the past. It quotes the Managing Director or Chenco, Dr Joszef Juhasz, as saying that “we are proud that DFD has become successful”, and later that “we do not wish to make it more difficult for DFD (to raise capital).
DFD for their part, have announced that they are launching a counter-claim. Unfortunately, their documents are in Chinese. Soon as we have a translation, we will present them here, in the interests of balanced reporting. But we can advise that DFD’s response will be that their new plants use technology which is not Chenco, but is a modified version, the original German design being inferior.
This is exactly the same argument that China’s bullet train manufacturers are using against German and Japanese technology companies, and the same that Chalco used against Pechiney/Alcan. It is also the same that HNFC used to use (I don’t hear them saying it any more) in regards to the licence for BUSS technology.
Chenco may or may not win where companies such as BUSS and many others failed, when it comes to China and technology - I am not making any predictions and we certainly are not taking sides, but I suspect Chenco has one distinct advantage, and that is that Chalco is involved via the Fushun JV. They will probably be asking questions of DFD, and of themselves. My understanding is that Chalco approached DFD with the JV idea, but one would think that the Chalco due diligence process included a check box on technology licences.
Interestingly, the press release makes no mention of the Chenco representative in China.
The August edition of AZ China’s monthly Black China Report is now out. If you are a subscriber, you should have an email in your inbox. If you have not received your secure link, contact AZ China.
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Those of you who attended our conference in Beijing last year will well remember Professor Yu Yongding. Professor Yu was our keynote speaker, and gave an excellent portrayal of the imbalances in China’s economy.
Professor Yu was in the headlines again this morning. In a John Garnaut article in today’s Fairfax newspapers, Professor Yu is quoted as saying,”In this next four or five years I cannot see any possibility of a really hard landing or inflation getting out of control. The reason is the strength of China’s fiscal position.”In the next 4 or 5 years, I cannot see any possibility of a really hard landing or inflation getting out of control.” You can see the full article here.
However, that is not to say that China’s economy is trouble-free. His point is simply that China’s fiscal position is far too strong. Instead, he points to more long-term issues, such as the fact that in the years since Hu Jintao and Wen Jiabao have been in charge, little if any economic reform, or political reform, has taken place.
In the absence of the adjustments needed, problems such as “sycophancy” and and cynicism have become entrenched in the system. Yu sees a crossover between bureaucrats and politicians, because bureaucrats now get measured on their allegiance to political factions, instead of being measured based on merit. Again, this situation comes about because the leadership group is failing to provide the very thing that is expected of them.
He sees little chance of any new initiative any time before Hu and Wen retire from their Communist Party positions in October next year, and their Government positions in March 2013.
In a sign that the end of summer is not far away (phew), Chinese coal prices have been slipping over the last week or so.
Coal with calorific value of 5,500 kcal/kg dropped to RMB829 on Thursday, or about US$129.
Power stations are now holding back their coal purchases, hoping to improve the operating margin on electricity production.
Those of you who purchased our White Paper on China’s electricity shortages will know that the problem was entirely man-made. With electricity prices fixed, power stations were limited in their ability to operate at a profit in the face of rising coal prices. As a result, several cities and provinces suffered power cuts through the last couple of months.
Aluminium production was not greatly affected, although the July result was down 10% on June’s production level.
We maintain our prediction that 2012 and 2013 promise to be much worse than this summer, in terms of electricity shortages, as we explained in our White Paper.
Another new coker has entered the market this year. This time it is Shandong Huaxing Group’s plant, and is based in Dongying city. The coker has a charge capacity of about 1.6 million tonnes, and will produce grade 1B coke, making the coke very suitable for anodes. The coker is part of a new refinery, which will process local crudes.
Shandong Huaxing Group is a subsidiary of China National Chemical Corporation (China Chem). The new refinery and coker adds to that group’s portfolio, which already includes:
Lanxing Jinan Branch, with 1mil annual capacity coker
Shandong Changyi Petrochemical Co., Ltd., with 1.2mil annual capacity coker
Zhenghe Guangrao Petrochemical Co., Ltd., with 1 mil annual capacity coker
Qingdao Anbang Chemical Co., Ltd., without coker.
This company is not to be confused with SinoChem, the biggest chemicals company in China, but which has limited pet coke production capacity (about 1m tonne charge capacity).
Last month, Rizhao Landbridge Port brought its 1 million tonne coker into operation. And a third Shandong province coker should enter the market by the end of this year, when Dongfang Hualong starts up.
In a recent post, we spoke of the situation in Guangxi province, where the local government has called on aluminium smelters there to reduce electricity consumption by up to 50%.
In most other countries, if you get a decree like that from the government, chances are you would obey it. Not in China. We are hearing that, rather than reducing electricity consumption and therefore metal output, smelters are still running at full tilt, but have deployed teams to go negotiate with the government to find ways to avoid the decree.
The negotiating teams are offering to do such things as reduce auxiliary power consumption in other areas of the plant. It is not stated, but there is a fair bet that the back-up strategy is to delay and distract the government, hopefully long enough that something changes on the power supply front.
The smelters have good reason to try to find ways to maintain output. Shanghai aluminium is now selling at recent highs, pushing close to RMB19000 per tonne. There was even some talk about the price reaching as high as RMB20000.
The problem for the smelters is that there is no sign of immediate relief for power supplies. Rainfall is not on the radar, and anyway would need to be heavy enough to get significant increases in hydroelectricity. As well, the central Government has yet to fix the imbalance between coal prices and electricity prices. Without a clear margin from electricity sales, generation companies are in no hurry to buy more expensive coal. And Guangxi province is not big enough as a coal consumer to command “best market” prices for coal.
Market insiders are now calling for provinces such as Guangxi to start looking again at importing coal, though the importers were ahead of this and have already raised their prices.
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