Influence of Asian Metals & Materials Demand on Pet Coke Dynamics

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INTELLIGENCE

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Reports

Cost Models, Price

Forecasts

SOURCE

Category

Dashboards, Best

Practices

China, India, SEA

Eastern Europe,

Western Europe,

N.A

Latin America,

Middle East, Africa

SUPPLY RISK

Supplier Risk

Assessments

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Management

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Social Responsibility

Endangered Species

Illegal Sourcing

GREEN

Environmental

Footprint

Importance of Cement & Aluminum

67%

33%

Fuel Grade

Calcined Coke

75%

25%

0%

50%

100%

150%

Aluminum Others

Calcined Petcoke End-uses

60%

40%

0%

50%

100%

150%

Cement Others

Fuel Grade Petcoke End-uses

World Petcoke Production

• Together, cement and

aluminum drive around

65% of global petcoke

demand

• However, both these

industries are suffering

from overcapacity

currently

Asia Rising !

• 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

48% 52%

World Aluminum Production

Asia

RoW

67%

33%

World Cement Production

Asia

RoW

Strategic Shift in Supply &

Demand of Petcoke

60%

By 2015

Demand Supply

By 2015

Demand Supply

17% 7-10% 15%

The demand growth both in North America and Asia is expected to be

driven by calcined petcoke used in aluminum industry

Petcoke – Coal Duel in Cement

120 Million MT 8 Billion MT

Global Coal Market

Global Petcoke Market

Prevailing oversupply in the global coal market, is a serious impediment to petcoke demand improvement

from cement industry in Asia

Coal

Supply

Glut

Overproduction in

Indonesia

US Shale gas

revolution

• Asian cement plants have a high

dependence on coal

• Global oversupply and declining coal prices

provide little incentive to cement plants to

import petcoke 66%

34%

World Coal Demand

Asia

RoW

Advantages

of Petcoke

over coal

Lower Price

Higher sulphur

content

Coal Prices have fallen to USD 90/MT levels, making them cost competitive

with petcoke

Petcoke emits 5 to 10% more CO2 than coal on a per unit energy basis

But…

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.

Total Landed Cost (per MT)

INR

1259 +

Freight INR

1720

Sourcing from

Coal India

Sourcing from

Indonesia

Indonesian

Coal

Production

Cost

Indian Coal

Production

Cost

1

2

15%

• The spread between domestic and imported coal is

expected to further decrease to around 12-13% due

to declining global coal prices

• Despite shortage of coal from Coal India, cement

companies can easily import slightly more

expensive coal from Indonesia

• The high production levels and lower production

cost of coal in Indonesia is expected to keep price of

Indonesian coal below the $100/MT levels, in the

short term

17

7

6

0

5

10

15

20

25

30

35

MM

T

2.7

3.5

2

0

2

4

6

8

10

MM

T

Asian Overcapacity !

Cement

Aluminum

Excess Capacity Expected

by 2015 Excess

Capacity

Production

2.2

0.8

0.5

0

1

2

3

4

Billio

n M

T

China (2012)

240

60 25

0

100

200

300

400

MM

T

India (2012)

China (2012) India (2012)

Overproduction

to continue in

China

Excess Capacity Expected

by 2015 Excess

Capacity

Production

Factors resisting demand

Factors supporting demand

Lack of

substitutes for

calcined petcoke

Production and

capacity cuts

globally in

aluminum

Record low

utilization rates in

Asian aluminum &

cement sectors

Sustainability

initiatives by

Chinese

government to

reduce CO2

emissions

Shift in Asian Steel Production

Other Metals which Affect Petcoke - Steel

67% 33%

Global Petcoke Production (2012)

Fuel Grade

Calcined Coke

Basic Oxygen

Furnace Electric Arc

Furnace

Key Petcoke Demand Drivers in Asia

• Currently the contribution of steel to overall petcoke

demand is lower than 5%

• However, as Asian steel production shifts to using electric

arc furnaces, the demand for petcoke from steel is expected

to significantly increase

• 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

generally preferred by steel makers within and outside

China.

1

Months

Pe

tco

ke

De

ma

nd

November

to March

Low

Medium

High

Seasonal Graphite Mining Trends in China 2

75%

9%

16%

End-uses of Calcined Petcoke (2012)

Aluminum

Steel (EAF)

Others

Asian Petcoke Demand Outlook

Short Term

Decreasing

EU petcoke

demand

Coal

supply

glut

Expected

stagnation

in Aluminum

and Cement

demand

Increase

in Asian

fuel grade

petcoke

supply

• 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

industries would prevent any dramatic rise in petcoke

demand

• Competitive coal pricing coupled with global supply glut

makes coal attractive to Asian cement companies in the

short term

Low Medium High

Impact

Long Term

Low per

capita

cement &

aluminum

consumption

Anticipated

demand

from steel

industry

Strategic

shift from

west to east

in petcoke

industry

CO2

emission

reduction

norms by

Asian

nations

Demand

Prospects Demand

Prospects

• Low per capita cement & aluminum consumption in Asia,

would drive long term production growth of both materials

• Pricing of petcoke is gaining increased transparency

through new indices such as Platts and through shift of

production from west to east

• Stringent CO2 emission norms are expected to resist

demand for petcoke in the long term

Thank You