Aluminium smelters are likely to face long-term higher costs for calcined petroleum coke (CPC) as structural shortages in green coke production look likely to endure.
Carbon is now making up more than 30pc of many smelters' costs, up from 12-16pc previously, catapulting it to the top of companies' budgeting concerns, AZ Global Consulting managing director Paul Adkins said at the AZ Global Aluminium virtual conference on 10 November.
Smelters "would like to see any drop in LME [aluminium prices] represented in the CPC price," Emirates Global Aluminium (EGA) senior manager of strategic supply Esam Marhoon said. "But in reality, that's not possible."
While CPC prices at $800-900/t "are not sustainable," smelters "understand very well that there's a reason behind those prices, and that's simply the green coke prices," Marhoon said.
"Is there a scenario where CPC prices go to $500/t? Of course, if green coke prices go to $300/t," he said. If a global recession hits all industries equally, including other consumers of high-quality coke such as lithium-ion batteries and steel, this scenario is feasible. "But as of now, we're accepting the possibility that prices of CPC are still going to be high in 2023."
Prices for green coke are remaining high in part because of a shift in the oil refining industry away from coking in favour of other forms of upgrading, such as hydrocracking. And China, a major producer of anode-grade green coke, is in a transitional period with more and more refining capacity transitioning to downstream chemicals rather than traditional oil products, AZ Global Consulting director of carbon and raw material June Wang said.
"If you're looking at petcoke from oil refineries, that's not going to be a market that's growing in the next few years. If anything, it's likely to be going the other way," as companies reduce investment in refinery capacity "given that most people are talking about finally reaching that peak oil demand," Thomson Reuters Asia commodities and energy columnist Clyde Russell said.
The oil market in general is shying away from new investment as there is a large amount of uncertainty surrounding future profitability, Silvercrest Asset Management economic advisor Patrick Chovanec said in a session on 8 November. "The financing is simply not there because of all this volatility."
For the time being, "it's not about security of supply, it's more about absorbing the price," Marhoon said. But if coking capacity continues to decline, especially as new coke demand markets like lithium-ion battery anodes continue to grow, finding alternatives to calcined coke is "something we'll have to look at very seriously 3-5 years from now."
"We know that the petcoke market is going to be extremely tight in the future," Marhoon said.
