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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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