According to a new report from Roskill, the dynamics of petroleum coke supply are changing. New coking capacity and the reducing quality of oil processed is adding to petroleum coke production levels. Consumption is still largely linked to competitive pricing levels, particularly for the bulk markets as a fuel where it competes with low value steam coal and shale gas.
Production increases in China and India
World petroleum coke production is growing. The latest report from Roskill details how the USA is still the world's largest producer, accounting for 40% of supply in 2011, but that production in China and India has grown and now accounts for nearly a quarter of global output. By 2016 Roskill forecasts that these two countries could contribute one third of world supply, which is expected to reach 170 million tonnes.
Anode grade shortages forecast
Seven major new coking plants are expected on line between 2012 and 2016. This is changing the focus of the industry from North America to Asia. Since the global economic recession, China has emerged as a new centre for petroleum coke production, with output of 24 million tonnes in 2011, up 10% over the previous year. However, these capacity expansions might not address the impending shortages of anode grade petroleum coke that are quantified in this latest Roskill report.
Trade swings east
Asian buyers, in particular, have taken advantage of cheaper freight rates and low petroleum coke prices to use petroleum coke as a cheaper source of fuel than coal. Buyers for power generation, cement and industrial uses bought US and Venezuelan petroleum coke, bidding whenever prices for delivery to Asia were competitive. The first half of 2012 and the whole of 2011 realized record exports of un calcined fuel grade petroleum coke from the USA, which was bolstered by overproduction in North America. Prior to 2008, nearly all the petroleum coke shipped from the US Gulf and Venezuela was shipped to buyers in the Atlantic Basin, mainly to cement companies.
Refiners still challenged
Market conditions for downstream oil refiners, the main petroleum coke producers, remain challenging. Although demand for refined products is improving from the depressed levels of 2009, the testing business environment for refiners is expected to continue until 2016. Roskill expects oil refining margins to remain weak as competition in the refining industry remains intense. Proposed carbon policy and other climate related regulations in many countries, as well as the continued growth in biofuel consumption, could have further negative impacts on the oil refining business.
Petroleum coke market drivers
Petroleum coke consumption is expected to rise in line with production levels as oil refiners are committed to make sure their by product finds a market. Petroleum coke is one of several low value solid by products of the oil refining industry and this is reflected in its pricing. Decisions about production levels are not made based on the markets for petroleum coke, as it is a waste product it is priced to move rather than store.
The total petroleum coke market is relatively small at 100 million tonnes per annum and worth some USD 5 to USD 6 billion. It is caught between the demands of five other giant industries oil refining, electricity generation, cement, steel and aluminium.
Oil refineries aim to produce higher sulphur petroleum coke, which then enables them to use the coking process to dispose of problem waste refinery streams. Crude steel and aluminium industries require higher purity, low sulphur, low metal cokes for the production of high quality electrodes. Fuel grade sponge and shot petroleum coke is used as an energy source in cement plants and electricity generation, and provide a useful alternative to coal for these energy users. This is as long as the delivered price on a per BTU (British thermal unit) basis is lower than coal.
Highest growth rates in electrode markets
Fuel grade high sulphur petroleum coke is the largest market, accounting for over 75million tonnes per annum. Between 2011 and 2016, Roskill forecasts that this market will grow by 4%py. The highest growth rates will be seen for anode grade coke used in aluminium and other smelters, with an average annual growth rate of 6% over the same time period. Overall, Roskill forecasts that the petroleum coke market will increase by 4%py until 2016, slightly lower than the 6%py growth rate seen between 2006 and 2011.
Source - Roskill
(www.coalguru.com)
