Influence of Asian Metals & Materials Demand on Pet Coke Dynamics
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Importance of Cement & Aluminum
Calcined Petcoke End-uses 150% 100%
World Petcoke Production 33%
25%
50%
•
75%
aluminum drive around
0% Aluminum
Together, cement and
65% of global petcoke
Others
demand Fuel Grade
•
Calcined Coke
Fuel Grade Petcoke End-uses
67%
However, both these
industries are suffering from overcapacity
150%
currently
100% 40%
50% 60% 0% Cement
Others
Asia Rising ! Strategic Shift in Supply & Demand of Petcoke
World Aluminum Production
52%
48%
Asia RoW
By 2015 Supply
Demand
By 2015 Supply
Demand
World Cement Production 17%
7-10%
60%
15%
33% Asia RoW
67%
•
The demand growth both in North America and Asia is expected to be driven by calcined petcoke used in aluminum industry
Asia has emerged as the global hub of both cement and aluminum manufacturing, which makes it the most important demand center for petcoke
•
Going forward petcoke dynamics would be dictated by the demand patterns in Asia, as it gains significance both in supply and demand of petcoke
Petcoke – Coal Duel in Cement
Global Petcoke Market
Global Coal Market
8 Billion MT
120 Million MT
Prevailing oversupply in the global coal market, is a serious impediment to petcoke demand improvement from cement industry in Asia World Coal Demand
Coal Supply Glut
Overproduction in Indonesia
• Asian cement plants have a high dependence on coal
34% Asia RoW
US Shale gas revolution
66%
• Global oversupply and declining coal prices provide little incentive to cement plants to import petcoke
Coal Prices have fallen to USD 90/MT levels, making them cost competitive with petcoke
Lower Price
Advantages of Petcoke over coal
But… Higher sulphur content
Petcoke emits 5 to 10% more CO2 than coal on a per unit energy basis
Petcoke – Coal Duel in Cement : From an Indian Standpoint
Declining global coal prices has reduced the difference in procurement cost between Coal India and imports from Indonesia to just around 15% for Indian cement companies. The difference was around 30-40% in 2012.
15% Sourcing from Indonesia
•
The spread between domestic and imported coal is expected to further decrease to around 12-13% due
Sourcing from Coal India
INR 1259 + Freight
INR 1720
to declining global coal prices
•
Despite shortage of coal from Coal India, cement companies can easily import slightly more expensive coal from Indonesia
Total Landed Cost (per MT) •
The high production levels and lower production cost of coal in Indonesia is expected to keep price of
Indonesian Coal Production Cost
1 2
Indian Coal Production Cost
Indonesian coal below the $100/MT levels, in the short term
Asian Overcapacity !
Cement
Factors resisting demand
China (2012)
India (2012) 400
3 2 1
25 60
300
0.5 0.8
MMT
Billion MT
4
2.2
200 100
0
240
0
Excess Capacity Expected by 2015
Excess Capacity
Sustainability initiatives by Chinese government to reduce CO2 emissions
Record low utilization rates in Asian aluminum & cement sectors
Production and capacity cuts globally in aluminum
Production
Aluminum China (2012)
10
India (2012)
35 8
30 20
7
15 10
17
MMT
MMT
25
2
6 6 4 2
5 0
Excess Capacity Expected by 2015
3.5
2.7
0
Excess Capacity
Overproduction to continue in China
Lack of substitutes for calcined petcoke
Production
Factors supporting demand
Other Metals which Affect Petcoke - Steel End-uses of Calcined Petcoke (2012)
Global Petcoke Production (2012)
16% Fuel Grade Calcined Coke
67%
Aluminum
9%
33%
Steel (EAF) 75%
Others
Key Petcoke Demand Drivers in Asia
• Shift in Asian Steel Production
1
Basic Oxygen Furnace
Electric Arc Furnace
demand is lower than 5% •
Petcoke Demand
High
However, as Asian steel production shifts to using electric arc furnaces, the demand for petcoke from steel is expected to significantly increase
2 Seasonal Graphite Mining Trends in China November to March
Currently the contribution of steel to overall petcoke
•
Also, petcoke is used as a substitute to amorphous graphite in the steel industry. Thus, during the winter season in China when most graphite mines are shut, petcoke is
Medium
generally preferred by steel makers within and outside
Low
Months
China.
Asian Petcoke Demand Outlook Long Term
Short Term Decreasing EU petcoke demand
Expected stagnation in Aluminum and Cement demand
•
Demand Prospects
Coal supply glut
Low per capita cement & aluminum consumption
Increase in Asian fuel grade petcoke supply
Strategic shift from west to east in petcoke industry
Declining EU demand and rising Asian supply would lead
•
to increased availability of petcoke in the global market •
•
Acute overcapacities in the Asian cement and aluminum
Demand Prospects
Anticipated demand from steel industry
CO2 emission reduction norms by Asian nations
Low per capita cement & aluminum consumption in Asia, would drive long term production growth of both materials
•
Pricing of petcoke is gaining increased transparency
industries would prevent any dramatic rise in petcoke
through new indices such as Platts and through shift of
demand
production from west to east
Competitive coal pricing coupled with global supply glut
•
makes coal attractive to Asian cement companies in the short term
Stringent CO2 emission norms are expected to resist demand for petcoke in the long term
Impact High
Medium
Low
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