Petcoke and its role within the aluminium industry

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Petcoke and its role within the aluminium
industry
McCloskey 6th Petcoke Conference May 2008
Calvin Graham Consultant CRU Analysis E-mail
calvin.graham_at_crugroup.com Tel [phone]
2280
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CRU is the worlds leading independent provider
of consultancy, business analysis and conferences
focusing on the mining, metals, power, cables,
fertilizers and industrial chemicals sectors.

• Founded in the late 1960s
• Privately owned to ensure its independence
• Located in London, Beijing, Santiago, Sydney, Rio
  de Janeiro and key centres in the United States
• Employs more than 200 experts

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The Aluminium Business Unit

• A team of 20 analysts, metallurgists, chemists
  and economists
• A multi-cultural team in the UK and abroad
• Undertake research, analysis, client and site
  visits, innovation
• Strength in depth to allow in-depth knowledge in
  areas such as power, carbon products and semis
  markets
• A recognition and emphasis on China, hence our
  office in Beijing
• 2008 aluminium conference in Chongqing, China Sep
  21-24.

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Structure of Presentation

• Aluminium market outlook
• Petcoke consumption by the aluminium industry
• Anode-grade petcoke production forecast
• Quality and pricing implications for smelters
• Conclusions

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Aluminium price performance
LME 3M aluminium price (May 06 Jun 08)
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Forecast rising operating costs lead to
continued strong aluminium prices

• Highlights
• Reduction in expected market surplus and
  escalating costs from a weaker US dollar and
  higher oil prices lead to 2008 price rise
• -Market balance in 2008 cut to 660,000 tonnes on
  output disruptions
• Strengthening yuan and higher Chinese power
  prices lead to 2009 price increase, surplus in H1
  2009 all in China
• Continued high prices forecast 2010-2012 on
  higher costs expectation and tighter S/D balance
• Risks Global recession leads to fall in demand
  and lower LME prices
• Yuan appreciates more than our base
  case, leads to higher prices

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Calcinable green coke consumption forecast
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Calcinable green coke consumption forecast for
the aluminium industry
Growth during 2007-2012
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World anode grade production has kept up with
smelter consumption rates in recent years
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This will change over the next few years as the
production of new low sulphur cokes stalls
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The rapid rise of CPC costs in the last year
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The rise and fall of Chinese green coke exports
during 2005-2008
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Chinese production of high quality cokes will not
keep up with the rate of aluminium expansion
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Low sulphur levels are not the only concern when
judging quality vs. marginal material
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Prices in China have diverged with some smelters
forced to take lower grade materials
US/t FOB
2008
2007
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Options for the aluminium industry are fairly
limited

1. Continue to pay higher prices until highest cost
   smelters close
2. Use lower grade material either higher metal
   content or higher sulphur levels
3. Some new smelter projects in the Middle East may
   set up joint coke/calciner projects
4. Blend lower and higher grade materials together
5. Develop new smelting technology eg. sulphur
   scrubbers or inert anodes

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Inert Anodes are on the horizon, although still a
few years away

1. Ceramic Metal Oxides Physical properties are a
   problem, as are chemical reactions with the
   electrolyte
2. Metal-Based Anodes such as Fe-Ni-Cu alloys,
   corrosion and contamination issues
3. Cermets ceramic/metal mix to take advantage of
   each set of properties, NiFe2O4 NiO Cu is
   most tested

• Researched being made by
• Moltech
• Alcoa
• NAT
• Argonne National Lab
• Noranda
• UC RusAl
• Chalco
• Rio Tinto Alcan
• Hydro
• etc

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Acceptance of lower grade cokes will bring down
the price of coke in China
Calcined coke prices peaking at just over 700/t
Base case assumes an average rise in acceptable
sulphur level from 2.5 to 3.3
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Conclusions

• We see strong growth in the primary aluminium
  market 17.4m tpy of new capacity between 2007
  and 2012.
• In the west, 3.2m tpy of new anode grade green
  coke demand
• The only new major sources of coke for the
  aluminium industry will be Brazil and China
• Quality will decrease and prices for high quality
  will continue to escalate at smelters continuing
  to demand tight specifications
• Higher quality material will continue to carry a
  premium, but average prices will stabilise and
  plateau

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Thank you for your attention.

• We publish a bimonthly overview of the latest
  developments in the anode grade carbon market
  including regional pricing and short term market
  assessments. Also available on-line at our
  www.crumonitor.com website.
• The 5-Year Carbon study Published each November
  with a half-yearly update (through a conference
  call) covering the global carbon market and is a
  key tool for well-informed decision making. This
  year we continue to build on our findings about
  the carbon situation in China, especially
  concerning future availability of anode grade
  green petroleum coke.

Your contact at CRU
Primary Aluminium Raw Materials Calvin
Graham Consultant CRU Analysis 31 Mt
Pleasant London, WC1X 0AD UK 44 (20) 7903
2212 calvin.graham_at_crugroup.com