Anode-grade petroleum coke prices are at historic highs, and coke supply appears likely to remain tight as the new year progresses, even though the China market has come down rapidly in the fourth quarter.
US Gulf calcined petroleum coke (CPC) prices are holding well above previous record highs, with 3pc sulphur CPC at $550/dry metric tonne (dmt) for November 2021, compared with $455/dmt in May 2018, the previous record high in Argus assessments going back to 2013. The northwest Europe 1.5pc sulphur CPC price was also more than $100/dmt over its previous high, at $625/dmt compared with $510/dmt in May 2018.
Chinese calcined coke prices in November were $165/dmt above their previous peak, but have already begun to tip sharply lower on winter industrial output restrictions and a steep rise in smelters' costs, after the government deregulated power prices for energy intensive industries. Argus assessed the fob China 3pc sulphur CPC price at a midpoint of $670/dmt in November, down from $745/dmt in October, with domestic prices heard to have now fallen well into the $500s/dmt.
While the Chinese market is typically a bellwether for the rest of the global market, fundamentals outside of China appear fairly firm. The London Metal Exchange (LME) aluminium price hovered between $2,600-2,700/t for most of December, rising to around $2,800/t toward the end of the month. This is a sharp drop from nearly $3,200/t in mid-October, but it is still the highest since early 2011. But US Gulf CPC prices in November were 21pc of the average LME price, one percentage point down from their highest in Argus records, at nearly 22pc in March 2018. This suggests there could be some pressure on coke if aluminium remains near current levels.
Ex-China aluminium capacity risingA number of smelters are ramping up aluminium capacity they have kept idle for years, some of which has been down for more than a decade.
US-based producer Alcoa is restarting joint venture capacity in Australia and Brazil. US-based Century Aluminum is restarting capacity in South Carolina, and UK-Australian company Rio Tinto is bringing back capacity at the Kitimat aluminium smelter in British Columbia. India's Vedanta is expanding its capacity by about 900,000t/yr within the next year or two. Calciner Rain Carbon has projected total restarts and expansions to result in an additional 700,000t/yr of aluminium capacity in the Americas and 1mn t/yr in the Middle East and Asia.
On the other hand, higher power and natural gas prices in Europe are beginning to pressure aluminium production capacity. Alcoa on 29 December reached an agreement with its workers for a two-year curtailment of its 228,000t/yr San Ciprian smelter amid the record-high energy prices, committing to restart the facility in January 2024. The Alro smelter in Romania also announced in late December that it will curtail three of its five electrolysis lines because of "the exceptional situation on the energy and gas markets". A handful of other small smelters in eastern Europe were also heard to be curtailing production because of the high operating costs.
Atlantic basin CPC capacity limitedEven without factoring in steep calcining reductions in China during the first quarter, CPC capacity remains fairly limited.
A number of US Gulf calciners were hobbled by Hurricane Ida in late August, which also hastened the permanent closure of key GPC production at Phillips 66's 250,000 b/d Alliance refinery.
Most European calcining capacity is operated by refiners, which are struggling with weaker fuel demand. Austrian refiner OMV said it will keep one of its calciners down for most of next year, and at least one other refiner was heard to be weighing a calciner shutdown in the face of high environmental compliance costs. Yet another may reduce its anode-grade CPC capacity in favour of needle coke, which is poised for a surge in demand over the coming years with rising production of lithium-ion batteries for electric vehicles.
Some of the only new calcining capacity is in the Middle East, where Sanvira Industries has started up production at the 320,000t/yr first phase of its Sohar calciner in Oman, with a second 250,000t/yr phase scheduled for the second quarter of next year. There is also spare capacity in India, but regulatory limits on GPC imports are so far stalling expansions.
Higher GPC output from Russia starting early in the new year may also limit some of the feedstock tightness, although tensions with the US could result in energy-sector sanctions, disrupting some of this trade flow.
While CPC and GPC prices may not remain at current record highs, market fundamentals suggest they will remain fairly well supported as the new year unfolds.
By Lauren Masterson
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Argus Media Limited published this content on 05 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 January 2022 18:17:02 UTC.
