Monthly Archives: February 2012
Further to our post about Rusal stopping the purchase of green coke from China (see here), a press release has now come out, with more details about their future plans.
Rusal has signed a 5-year agreement with Gazprom NEFT, the Russian natural gas and oil conglomerate. Under the agreement, which came into force at the start of this year, the coke will be supplied from the Omsk Refinery, the largest of Gazprom Neft’s refining assets. Under the contract, RUSAL will receive up to one million tonnes of petroleum coke over the life of the contract.
According to the press release, Gazprom Neft plans to upgrade the Omsk Refinery’s coke production facilities. The company is considering options to improve coke production efficiency of the existing coke plant and build new production units.
The press release did not mention pricing formulas, nor did it talk about any plans to add calcining capacity.
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Sinopec today announced another price rise for their various grades of green petroleum coke.
Anode grade coke from refineries in Shandong province have risen to RMB1830-1880 per tonne, a rise of RMB60. From the Yangtze river refineries, the price is now RMB1730-1850, while mid-high sulphur prices also rose by RMB50. Fuel grade coke price remains unchanged.
This is the third time Sinopec has raised prices since the end of the Chinese New Year holiday. At first we thought the prices may not stick, and that the transaction price would be rebated back to the then-current levels. But local independent refineries took advantage of the rise, and moved their prices up in unison.
CNPC has not moved this time, but their prices tend to be a little higher than Sinopec, so they have more time to consider their reaction.
While this may be encouraging for those looking for signs that China’s economy is on the way back up, I think that’s still a bit early to call. We understand the price rises are in response to refineries closing for turnaround. While the announcement of a further easing in banks’ Reserve requirements this week is good news, it is too early to expect to see outcomes from that decision just yet.
Another petcoke calcination plant will be joining China’s fleet of calciners.
This one will be constructed and operated by Daqing Gaoxin, perhaps better known for their trading activities in green coke, calcined coke and coal tar pitch. The calciner will be built in Cangzhou, Hebei Province, a small industrial town very close to Tianjin. That also puts it in close proximity to Dagang calciner as well as quite a number of oil refineries. Daqing aoxin also plans to make use of the nearby deep sea port to bring green coke up from south China. Guo Yunfei, General Manager of Daqing Gaoxin, told me that he hopes to make use of the domestic coal shipping industry. “Many ships taking coal from north China come back empty, so we should be able to get excellent freight rates.”
The calciner will be built in 2 stages, and when finished will have 600,000t capacity. Early engineering work has commenced, and construction will begin in June. Daqing Gaoxin hope the calciner operating by the second quarter of 2013. As with many calciners in China, the technology will be “home-grown”, but using vertical shafts as the basis.
By my count, that makes 4 calciners under construction in China, along with Sinoway Carbon in Weifang (280,000t potentially growing to over 1 million), ZCGG, and Sunstone.
And most seem to intend to build anode plants in conjunction with their new CPC plant.
Unconfirmed reports are coming through that UC Rusal is to cease buying green petroleum coke from China. No details yet, so the rest of this post is speculation. And we speculate that perhaps they are planning to switch to buying more calcined coke and anodes. Rusal already buys some CPC from China, and owns two cathode plants here as well.
If this is true, it would be part of a general trend in the aluminium industry to re-think coke strategy. Following the efforts of Alcoa to establish a JV in a calciner in 2009, there have been several other companies seeking to do something a little different here in China. Late last year, Mubadala signed a JV agreement with ZCGG, who in turn have a partnership with Mitsubishi. Vedanta has been active in the China market, even to the point of telling Weifang Lianxing that they would be a long-term buyer of CPC from that company. Other Chinese companies are being courted by or have already joined with foreign partners for brownfield and even greenfield projects.
All this activity suggests that these aluminium companies are taking the same view as we do here at AZ China - that China is likely to continue to grow in importance as a supplier of coke to the smelter industry. As the companies rush (at snail’s pace in some cases) to join with Chinese partners, those who come to the “feasting table” last may find that there’s nowhere for them to sit and no more coke share to go around. Those not already in a long-term strong relationship with Chinese suppliers are likely to find themselves locked into either the traditional suppliers in the USA, India, or perhaps hang out for additional capacity in the Middle East. Not that calcining or anode producing capacity is ever the key issue - supply of anode quality green coke is. (With an additional wish list of qualities such as reliability, consistency, stable pricing and trust in one’s partners.)
We were contacted by Reuters to comment on when China will start controlling capacity to alleviate worldwide price pressure. Our view is local level political pressure coupled with a government that wants to remain self-sufficient will keep high-cost plants running. In addition, aluminium prices may be low but they are not low enough to cause widespread shutdowns. As we have mentioned before, the vast majority of smelters in China are running at 16,500 yuan per tonne or below. There are even some smelters operating at 12,000 yuan per tonne and below, and the new capacity coming into the market in 2012 is all expected to be in this quartile.
The entire article can be viewed here.
Alcoa yesterday announced that it is reviewing the viability of its smelter at Point Henry. The review is expected to be completed by June, but with the smelter already losing money, and with a strong Aussie Dollar and the prospect of a carbon tax, the likelihood is that the smelter’s days are numbered.
While it makes sense from a macro economic point of view (cut your high cost assets, invest in lower cost assets elsewhere), it has all sorts of repercussions on all sorts of levels.
Point Henry employs around 600 people (it used to have as many as 1,000) and is the biggest employer in the local city Geelong. Geelong was once a major industrial centre, with International Harvester (tractors), Pilkington Glass, Ford Motor Company, Shell Refinery and a host of smaller factories. In those days, the Point Henry smelter was considered as a mid-sized employer. But the effects of manufacturing’s shift to low cost countries, plus some bad financial crashes to local Building Societies, devastated the city. Unemployment skyrocketed, and it took the Government investing in new R&D centres in the area to stop the economic slide. The loss of 600 jobs in Geelong will be catastrophic.
It will also have some folks inside the State Government scratching their heads. The Victorian Government has been providing power to the Alcoa smelters at a discounted price. Point Henry’s power comes from a combination of a small power station in nearby Anglesea, plus from the big power stations on the other side of Victoria. But those power stations run on brown coal, generally considered to be the poorest and most polluting form of thermal coal.
The folks in State Government are therefore probably wondering how a reduction in demand might be used to fullest advantage - if any advantage can be found. Reduced brown coal burning is good for the atmosphere, and reduces the Government’s exposure to green interest groups and carbon tax pressure, but it also reduces Government income. And since smelters provide a useful base load for power stations, the daily peaks and falls of consumption may rise correspondingly.
But of more political concern, the loss of 600 jobs (plus as many as 10 times more in support industries) is likely to equate to the loss of at least 2 seats in Parliament. And they are probably also wondering whether this announcement, and the June timetable, is designed to put pressure on the Government to find ways to further support the smelter. I wonder who will call who first - is the Government waiting for Alcoa to pick up the phone? It’s going to be an interesting discussion on tactics.
Finally, on a personal note, the closure of Point Henry is sad news for me too. I spent almost 14 years in that place. I joined back in the days when Alcoa sent the employees they didn’t want in their US smelters to Australia, to get them out of the way. I remember one guy who walked around the rolling mill with his “nigger knife” quote unquote. Disgusting man. Another, perhaps less disgusting but equally unsuitable, was the Plant Manager, Jack Lang. He was in charge when the plant suffered about 3 months of rolling wildcat strikes, where we staff members were forced to work the day in the office, and the night in the potrooms.
But there were some others who came out from the USA who were genuine gentlemen. I remember P Clarence Ames in the carbon plant, went by his second name because “Who wants to be called Philo?”
But there were plenty of locals who added colour and life to the plant. Rob Helmore, Ken Mansfield, Jock Irvine, Hugh Aspley, Hans Ykema, Phil Robinson, Bob Jennings, Theo Koenings, Mary Donaldson, the Willing twins, and countless others left their mark on my outlook on life in their own ways. I have so many memories, so many fun times, so many dark times (I had a brief stint as the photographer at the worst industrial accidents there), and so much aluminium in my blood as a result of my time there. It will be sad to see the old stamping ground go.
Word filtering though to us in AZ China has it that the Chinese have made another breakthrough in cathode technology.
We understand that Qingxin Carbon, the cathode plant in Ningxia province right by the former Alcan smelter, has been able to develop a block which breaks new size records. the new block, which is now being installed in Chalco’s 600KA plant in Liancheng, has dimensions of 720*560*3990. This makes the blocks 20mm wider and 30mm higher than the blocks presently used at that smelter.
Going higher should in normal circumstances increase the life of the block. There is more carbon between the liquid metal and the collector bar in the bottom of the block. Whether that happens for Chalco Liancheng is a matter of conjecture, since the smelter is only 12 months old.
Going wider is something else. We aren’t quite sure yet what the targeted gain is. I consulted with a friend of mine who forgotten more about cathodes than I will ever know. He tells me there are several possible gains to be had.
- one less block in the lining,
- just increasing the length of the pot with all other changes being increased proportionally (probably the most likely)
- thinner joints (there is a technology where they basically butt the blocks together with a thin layer of glue in the joint)
- reduce the width of the large joint along the headwall of the pot.
Either way, it’s an interesting move from a strategic viewpoint. Qingxin was already the only cathode plant in China that could make blocks to the old size. With Chalco accepting this new size into their 600KA line (and probably working closely with Qingxin on dimensions and specifications), the chances for other cathode plants to crack the 500KA and 600KA market just became a lot harder.
We are now just over a month away from the annual TMS event. This year it will be held at the Disney complex in Orlando Florida. I hope the technical people who sit in the conference rooms listening to papers find this choice of venue to be better than we commercial people do. it’s a terrible location, with little kids in swimming costumes running in and around the lobbies where we are trying to meet with our clients. Plus, the nearest restaurants are a good 20 minutes away, and taxis are non-existant.
Nevertheless, it will be good to catch up with all the regulars again, and to meet some new people. If you are going to be in Orlando, and you would like to meet with us, please send an email to charissa.trahms@az-china.com.
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