Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

Market overview Key prices

Petroleum coke spot market $/t
Coke prices leap on tight supply, growing interest
Four-week
Petroleum coke prices advanced sharply on the week, amid a HGI Price ±
average
supply squeeze in the US Gulf and sparks of interest from Asia- Atlantic basin
Pacific buyers. fob US Gulf coast 4.5% sulphur 40 84.50 +1.00 82.88
A large number of refineries on the US Gulf coast are fob US Gulf coast 6.5% sulphur 40 70.00 +2.00 66.88
fob Venezuela 4.5% sulphur 70 84.50 +1.00 82.88
undergoing maintenance in the first quarter of this year, and
cfr Turkey 4.5% sulphur 70 106.00 +1.00 104.88
some market participants anticipate this could reduce coke Sulphur adjustment
availability in the quarter by as much as 1mn t. US Gulf coast, per 0.1% 0.72 -0.06 0.80
Refiners are said to be sold out of spot supply until at least Pacific basin
fob US west coast <2.0% sulphur 45 131.00 +7.00 125.75
April. Some may even have difficulty meeting all of their term
fob US west coast 3.0% sulphur 45 100.00 +2.00 98.25
commitments. fob US west coast 4.5% sulphur 45 86.00 +4.00 84.00
Most cement makers insist that demand is still fairly weak, cfr China <2.0% sulphur 45 156.00 +2.00 153.50
with only a few inquiries here and there from Latin America cfr China 3.0% sulphur 45 139.00 +2.00 136.50
cfr China 6.5% sulphur 40 110.00 +3.00 105.75
and perhaps a more substantial increase in interest from cfr India 6.5% sulphur 40 107.00 +2.00 105.00
China. But with so few spot cargoes available, these buyers cfr WC India 8.5% sulphur 70 97.50 +2.50 94.63
said they would need to pay at least $70/t for 6.5pc sulphur on
Petroleum coke calculated prices $/t
an fob US Gulf basis to obtain anything beyond what they have Four-week
HGI Price ±
already locked in on term contracts. average

Atlantic basin
Indian buyers start to test the waters del ARA 4.5% sulphur 40 104.50 +1.00 103.38
del ARA 6.5% sulphur 40 90.00 +2.00 87.38
Indian buyers are also now keen to source high-sulphur coke
del Brazil 4.5% sulphur 40 103.75 +1.00 102.00
promptly, even as that market is awaiting two major events del Brazil 6.5% sulphur 40 89.25 +2.00 86.00
tomorrow — a Supreme Court hearing on coke and the release del Turkey 6.5% sulphur 40 91.00 +2.00 88.88
Pacific basin
del Japan 3.0% sulphur 45 119.00 +2.00 116.81
del Japan 4.5% sulphur 45 105.00 +4.00 102.56
6.5% sulphur coke: cfr India vs China $/t
del China 4.5% sulphur 40 120.25 +1.50 120.31
del India 4.5% sulphur 40 120.25 +1.00 120.69
cfr China 6.5% cfr India 8.5% cfr India 6.5%
Prices calculated by adding relevant fob petroleum coke price to freight rate.
120
Coke freight rates $/t
110 Four-week
31 Jan ±
average

100 Supramax
USGC to ARA 20.00 0.00 20.50
--
Venezuela to ARA 19.00 0.00 19.31
90
USGC to Turkey 21.00 0.00 22.00
USGC to Brazil 19.25 0.00 19.13
80 USGC to China 35.75 +0.50 37.44
USGC to EC India 35.75 0.00 37.81
70 EC Saudi Arabia to WC India 10.75 0.00 11.25
4 Jan 17 19 Apr 17 19 Jul 17 25 Oct 17 31 Jan 18 Panamax
USWC to Japan 19.00 0.00 18.56

Copyright © 2018 Argus Media group

Energy Argus Petroleum Coke Issue 18-5  |  Wednesday 31 January 2018

of the annual fiscal year government budget. Monthly indexes

Buyers have largely refrained from making fresh purchases
Fuel-grade coke calendar month indexes: Jan $/t
from either the US or Saudi Arabia ahead of these two events,
HGI Low High Avg
which they hope provide sufficient clarity to make sourcing
decisions without fear of running afoul of new regulations. The fob US Gulf coast
court could extend trading and import limitations nationwide 4.5% sulphur 40 80.00 84.50 82.30
and the budget could include new consumption taxes. 6.5% sulphur 40 63.00 70.00 66.10
It is thought that the 1 February hearing will mainly focus fob Venezuela
on pollution control norms such as sulphur-dioxide emissions 4.5% sulphur 70 80.00 84.50 82.30
limits, which should not have much impact on cement makers cfr Turkey

since sulphur is captured in a cement kiln. But most buyers 4.5% sulphur 70 103.00 106.00 104.50

have been reluctant to book cargoes in the run-up to the hear- fob US west coast

ing in case further restrictions are unexpectedly announced. <2.0% sulphur 45 124.00 131.00 125.60

Uncertainty has reigned for more than two months as a 3.0% sulphur 45 97.50 100.00 98.10

string of court decisions and associated responses from the 4.5% sulphur 45 81.50 86.50 84.50

central government changed the regulatory landscape on an cfr India

almost weekly basis. 6.5% sulphur 40 100.00 107.00 104.00

But there were indications this week that buyers may be 8.5% sulphur, WC 70 92.00 97.50 94.10

running out of patience. They also may be trying to book cfr China
<2.0% sulphur 45 151.00 156.00 153.00
supply before the hearing to get ahead of their peers, who
3.0% sulphur 45 134.00 139.00 136.00
could come out in force next week if no new restrictions are
6.5% sulphur 40 100.00 110.00 104.60
announced. Several cement makers have been absent from the
market for weeks and likely need fresh cargoes now. Calculated coke indexes: Jan $/t
Demand may further increase in the event that tomorrow’s HGI Low High Avg
hearing clarifies lime kilns are also exempted from restrictions
Delivered NWE-ARA
4.5% sulphur 40 100.75 104.50 102.85
6.5% sulphur 40 83.75 90.00 86.65
Coke-to-coal calorific comparisons
Delivered Brazil
Coal 4.5% coke 6.5% coke 8.5% coke
4.5% sulphur 40 98.25 103.75 101.25
del ARA $/mnBtu 3.73 3.39 2.92 - 6.5% sulphur 40 81.25 89.25 85.05
% of coal - 91.00 78.00 -
Delivered Turkey
del India $/mnBtu 4.28 - 3.47 3.17
6.5% sulphur 40 85.50 91.00 88.20
% of coal - - 81.00 74.00
Delivered India
del Turkey $/mnBtu 4.17 3.44 2.96 -
% of coal - 83.00 71.00 - 4.5% sulphur 40 119.00 123.00 120.35
fob USGC $/mnBtu 2.52 2.74 2.27 - Delivered China
% of coal - 109.00 90.00 - 4.5% sulphur 40 118.50 122.50 119.95
Delivered Japan
Coal-implied forward curves $/t
3.0% sulphur 45 115.50 119.00 116.65
2Q18 3Q18 4Q18 1Q19 2019 2020 2021
4.5% sulphur 45 99.50 105.00 103.05
fob USGC 4.5% petroleum coke
Prices calculated by adding relevant fob petroleum coke price to freight rate.
84.50 82.41 81.15 81.57 82.83
fob USGC 6.5% petroleum coke Anode-grade coke monthly indexes: Dec $/t
70.00 68.27 67.23 67.57 68.61
Low High Mid
del ARA 4.5% petroleum coke
104.50 99.51 99.22 98.88 94.52 90.33 89.19 cif US Gulf green, 0.8% sulphur 355.00 415.00 385.00
del ARA 6.5% petroleum coke
cif US Gulf green, 2% sulphur 265.00 315.00 290.00
90.00 85.70 85.46 85.16 81.41 77.80 76.81
cif US Gulf green, 3% sulphur 175.00 205.00 190.00
cfr India 6.5% petroleum coke
107.00 103.82 102.54 101.16 97.01 93.63 92.75 fob US Gulf calcined, 3% sulphur 405.00 475.00 440.00

Copyright © 2018 Argus Media group Page 2 of 18

Energy Argus Petroleum Coke Issue 18-5  |  Wednesday 31 January 2018

Monthly petroleum coke price snapshot $/t

Northwest Europe Turkey

US Gulf coast del 4.5% sulphur 102.85 cfr 4.5% sulphur 104.50
fob 4.5% sulphur 82.30 del 6.5% sulphur 86.65 del 6.5% sulphur 88.20
fob 6.5% sulphur 66.10

US west coast
Venezuela Japan
fob <2.0% sulphur 125.60
fob 4.5% sulphur 82.30 del 3.0% sulphur 116.65
fob 3.0% sulphur 98.10
del 4.5% sulphur 103.05
fob 4.5% sulphur 84.50

China
Brazil India cfr <2.0% sulphur 153.00
del 4.5% sulphur 101.25 del 4.5% sulphur 120.35 cfr 3.0% sulphur 136.00
del 6.5% sulphur 85.05 cfr 6.5% sulphur 104.00 del 4.5% sulphur 119.95
cfr 8.5% sulphur 94.10 cfr 6.5% sulphur 104.60

in the three northern states surrounding the capital. Such a
measure would increase competition for the cement makers.
February-loading cargoes of US coke with 6.5pc sulphur
content were being offered at around $109/t cfr. While many
deemed this too expensive, a trader did receive bids around
$107/t cfr.
Another factor is that there is increased competition for
cargoes from the Chinese market, both for US 6.5pc sulphur
coke and Saudi Arabian 8.5pc sulphur coke. A Chinese buyer
purchased Saudi Arabian coke at $101/t cfr this week, much
above last week’s assessment in the Indian 8.5pc sulphur mar-
ket of $95/t.
Prices for Saudi-origin 8.5pc sulphur coke rose by $2.50/t
on the week to $97.50/t, as demand from China may divert
tonnage away from India. Cfr India prices for 6.5pc sulphur
coke advanced by $2/t on the week to $107/t.
Chinese prices advance with firm cement demand
Tight thermal coal supply and growing interest from cement
plants in China is driving greater appetite for all qualities of
fuel-grade coke there, balancing out any remaining weak de-
mand from the Indian market.
Heavy snowfall in most parts of northern and eastern
China has tightened thermal coal supply into larger population
centres, pushing coal prices higher. This in turn has provided
support for petroleum coke as a substitute fuel for many
industrial users.
Domestic trading prices for stockpiled 6.5pc sulphur coke
rose to around Yn960/t on a spot basis this week, equal to
around $121/t cfr.
A stronger yuan against the dollar has also given Chinese
traders greater buying power in the seaborne market. The
yuan has gained nearly 3pc in value since the start of the year.
Offers for US 6.5pc sulphur coke are around $115/t cfr
China, while bids in the market have risen to about $105/t cfr.
Traders with term contracted Saudi coke volumes are expect-
ing to offer this product as high as $105/t cfr.
Demand for lower sulphur coke is also firming, with prices
for 3pc sulphur coke rising by $2/t on a cfr basis to $139/t and
$100/t on an fob US west coast basis. A 4.5pc sulphur cargo
was heard sold in the mid-$120s/t cfr and mid-$80s/t fob.
A US west coast refinery today sold a 2pc sulphur cargo for
March loading at more than $130/t fob, and offers for this qual-
ity coke in China are expected to be more than $160/t.
The cfr China assessment for this grade rose by $2/t to
$156/t.
Stockpiled coke of an equivalent grade is pricing around
Yn1,350/t, or around $173/t on a cfr basis.

Copyright © 2018 Argus Media group Page 3 of 18

Energy Argus Petroleum Coke
Steel feedstocks: Low vol vs PCI $/t
low-vol fob Australia PCI cfr N China
300
250
200 --
150
100
2 Aug 17 21 Sep 17 2 Nov 17 20 Dec 17 31 Jan 18
News
Middle East fuel-grade coke demand on the rise
Petroleum coke demand in the Middle East and North Africa
(MENA) is on the rise as cement makers widely adopt the fuel
in their kilns.
Egypt is the largest cement producer, and its cement
sector is the major solid fuel consumer in the MENA region.
All but four of the country’s 24 cement plants already have
switched to solid fuel from gas or mazut, and these plants
are in the process of changing over this year, chairman of the
Egyptian Cement Association, Medhat Stefanos, told partici-
pants at the Argus Middle East Petroleum Coke Conference in
Abu Dhabi last week.
The country consumes around 6mn t/yr of coal and coke
for its cement sector. With the entire fleet moving to solid
fuel, and some 18mn t/yr of new capacity sanctioned, demand
could rise to around 8mn t/yr.
The member states of the Gulf Co-operation Council (GCC),
which includes Oman and the UAE, are also providing support
for petroleum coke consumption. Cement demand in the UAE
is forecast at 10.2mn t in 2018, 10pc higher than in 2016, while
Omani demand looks to remain stable over the same period at
around 8.8mn t, according to Oman Cement senior production
manager Hilal Al-Dhamri.
The region favours the high calorific value in coke as well
as the ability to create various blends with coal and alterna-
tive fuels such as granulated tyres.
Coke also requires less air for combustion than coal, and
the higher temperature flame created improves heat transfer
Copyright © 2018 Argus Media group Page 4 of 18
Issue 18-5  |  Wednesday 31 January 2018
USGC coke: 4.5% premium to 6.5% $/t
4.5% premium to 6.5%
25
20
15 --
10
5
5 Jul 17 23 Aug 17 11 Oct 17 6 Dec 17 31 Jan 18
throughout the kiln.
While drawbacks include higher content of toxic metals,
such as nickel, and a reduction in grinding capacity for any
blend fuels, the low cost of coke still makes it a desirable op-
tion for cement makers.
Meanwhile, there is growing supply of fuel-grade coke
in the region. Oman state-owned refiner Orpic began coke
production in August and shipped its first cargo out of Sohar in
September, headed to India.
Orpic produces around 500,000-600,000t of mid-sulphur
petroleum coke from Sohar, with another 800,000t planned for
2020 when the Duqm refinery starts up.
Shipments out of Sohar have been restricted to below
35,000t thus far, as trader Oman Trading International (OTI)
expands its logistical ability, but the company said larger
vessels such as supramaxes will be loaded soon, opening up
Omani supply to wider buying markets.
OTI views the MENA region as a growing coke consumer in
2018, forecasting an import total of 8.6mn t compared with
7.1mn t in 2017, according to general manager of dry bulk trad-
ing at Oman Trading International, Pulak Tyagi.
The region provides a natural outlet for Omani coke
because of its proximity and a preference for mid-sulphur
coke among most cement buyers in the region. Newer cement
plants transitioning to solid fuel from natural gas prefer lower
sulphur coke, as it presents fewer issues during combustion.
But while there is scope for increased petroleum coke use,
there are challenges facing cement makers in the region.
Energy Argus Petroleum Coke Issue 18-5  |  Wednesday 31 January 2018

del ARA coke percent of coal % fob USGC coke percent of coal %

ARA 4.5% coke % of coal ARA 6.5% coke % of coal fob USGC 4.5% coke % of coal
110 fob USGC 6.5% coke % of coal
140
100
120
90
100
80 -- --
80
70

60 60

50 40
4 Jan 17 17 May 17 20 Sep 17 31 Jan 18 4 Jan 17 17 May 17 20 Sep 17 31 Jan 18

del India coke percent of coal % del Turkey coke percent of coal %

cfr India 6.5% coke % of coal cfr Turkey 4.5% coke % of coal
cfr India 8.5% coke % of coal cfr Turkey 6.5% coke % of coal
110 100

100 90

90 80
-- --
80 70

70 60

60 50
4 Jan 17 17 May 17 20 Sep 17 31 Jan 18 4 Jan 17 17 May 17 20 Sep 17 31 Jan 18

Egypt still requires greater port capacity to receive and
discharge vessels more rapidly and at lower cost to the buyer.
And the weakness in the Egyptian pound, which suffered a
devaluation in 2016, adds to costs for buyers.
Coal and coke are still competitive against domestic gas at
the moment, with delivered Egypt prices of $100/t equivalent
to about $4.30/mn Btu, or roughly half the cost of natural gas
on an energy basis.
But if either fuel or logistics costs continue to swell, the
advantage will erode.
Another potential threat to coke demand is the growing
availability of alternative fuels like tyres and other waste prod-
ucts. If coke prices continue to rise, alternative fuels could
soon overtake coke and coal as the primary fuel for cement
makers, according to Stefanos.
Gunvor mulls expansion at Rotterdam refinery
Trading company Gunvor is considering expanding a delayed
coking unit (DCU) at its 80,000 b/d Europoort refinery in the
Netherlands.
The local authority ruled in early November that Gunvor
does not need to carry out an environmental impact assess-
ment for the permit required to expand a DCU. Gunvor had
contacted the authority for a decision in August.
“Gunvor is currently studying several options for how
best to respond to the [International Maritime Organization’s
(IMO) 2020 deadline for a 0.5pc sulphur cap on bunker fuels]
decision. We have not made any decision yet,” said a Gunvor
spokesman.
But sources said two 30.5 ft diameter coke drums are al-
ready ordered for this project, which would be capable of pro-

Copyright © 2018 Argus Media group Page 5 of 18

Energy Argus Petroleum Coke Issue 18-5  |  Wednesday 31 January 2018

US Gulf and midcontinent coker yields $/t Aluminium premiums $/t

US Gulf coker yield US midcontinent coker yield US midwest Japan Europe, duty paid
400 350.0

300.0
350
250.0

200.0
300 --
150.0

100.0
250
50.0

200 0.0
28 Oct 16 31 Mar 17 25 Aug 17 26 Jan 18 9 Nov 16 12 Apr 17 6 Sep 17 31 Jan 18

LME aluminium prices $/t LME aluminium warehouse stocks mn t

cash 3 month 1.4

2,300
1.3

2,200
1.3

1.2
2,100 -- --
1.1
2,000
1.1

1,900 1.1
30 Oct 17 28 Nov 17 29 Dec 17 30 Jan 18 08 Sep 17 25 Oct 17 11 Dec 17 30 Jan 18

ducing about 2,000t/d of petroleum coke, or roughly 700,000t/
yr at maximum capacity.
Gunvor is not the only refiner in Europe focusing on invest-
ment in residue upgrading, as the IMO’s 2020 deadline fast
approaches.
Croatia’s Ina, Poland’s Grupa Lotos, Serbia’s NIS and Exxon-
Mobil, at its Antwerp plant, are all investing in DCUs.
Others are taking a different approach: Shell plans a new
hydrogen electrolysis plant at its 140,000 b/d Wesseling refin-
ery along with a solvent deasphalting (SDA) unit, while Total
and Finland’s Neste have recently started up SDAs.
Refiners are looking to minimise output of high-sulphur
fuel oil in case the price falls once the IMO’s sulphur cap is in
place.
Gunvor’s Europoort refinery does not have a hydrocracker
or catalytic cracker. Nor does its 115,000 b/d facility in Ant-
werp, Belgium. Gunvor regularly exports high-sulphur vacuum
gasoil — a cracker feedstock — from northwest Europe to the
US.
India’s MRPL considers raising coke production
Indian state-controlled refiner Mangalore Refinery and Pet-
rochemicals (MRPL) is awaiting more clarity on the Indian regu-
latory environment for petroleum coke before implementing
plans to ramp up production to its full potential of 3mn t/yr.
The refinery has been increasing coke output since com-
missioning its coker in April 2014, and it is now producing
3,000t/d, or 1mn t/yr, of petroleum coke.
The refinery has the potential to produce three times
that. But the refiner is awaiting more regulatory clarity before

Copyright © 2018 Argus Media group Page 6 of 18

Energy Argus Petroleum Coke
taking measures to increase output. Uncertainty surrounding
possible nationwide restrictions on trading and imports and
stricter national emissions standards have slowed spot trading
of petroleum coke in India in recent months.
There could be some additional clarity tomorrow, with
India’s Supreme Court meeting again to review guidelines for
petroleum coke use and imports across the country. Some
think there could be a final decision that will end the uncer-
tainty that has disrupted markets since the court instituted a
regional ban and suggested a number of nationwide changes in
the fall. But others think that the hearing may only raise new
questions.
So far, the government has only implemented strict regula-
tions on the fuel in the area around the capital Delhi, which
has been suffering an air pollution crisis. The court extended
a longstanding ban on all coke consumption in Delhi to three
surrounding northern states — Haryana, Uttar Pradesh and
Rajasthan — starting on 1 November 2017.
Following a review, cement producers were later exempted
from the ban, but with the stipulation that the government
institute regulations on trading and stockpiles. Those rules
were announced on 19 January, establishing policies to track
petroleum coke stockpiles and reduce the involvement of small
local traders, leaving resales to authorized agents appointed
by refiners.
MRPL’s facility is located in southwestern India, far from
the three states subject to the restrictions. But there has been
widespread speculation that the court or the central govern-
ment could extend similar rules across the country.
MRPL has been concerned about tighter restrictions on the
fuel for some time. An executive of the state-owned refiner
told reporters in July 2016 that it was evaluating a potential
petroleum coke gasification project as a back-up plan out of
concern that the government could place significant environ-
mental restrictions on coke consumption.
The refiner has focused on selling its product in the domes-
tic market, mainly to cement makers in the south of India in
particular. The refiner looks at US petroleum coke pricing as a
reference to determine its pricing, according to the company.
Argus today assessed the cfr India prices for 6.5pc sulphur
coke from the US at $106/t and cfr India 8.5pc sulphur coke at
$97.50/t.
MRPL’s petroleum coke quality is around 7pc sulphur or
more, with calorific value in the range of 7,500-8,000 kcal/kg.
India’s petroleum coke consumption fell for a second
consecutive month in December, dropping by 1.4pc to 1.88mn
Copyright © 2018 Argus Media group Page 7 of 18
Issue 18-5  |  Wednesday 31 January 2018
t from 1.91mn t in November, according to oil ministry data.
Consumption totalled 19.6mn t in April-December, the first
nine months of India's financial year, with domestic coke mak-
ing up over 7mn t.
MRPL’s coker resumed coke production in September after
one of its two heaters was damaged during a restart attempt
in August last year. It shut its crude unit as well as a hydro-
treater and a hydrocracker for maintenance at that time.
Colombia’s petroleum coke exports climb by 25pc
Colombia’s petroleum coke exports increased by almost a
quarter in 2017 as the country’s Reficar refinery operated a
coker for its first full year.
State-controlled Ecopetrol’s 165,000 b/d Cartagena refin-
ery, known as Reficar, exported 655,000t of coke last year, up
from 526,000t, the company said.
Although it is a significant annual increase, it suggests the
rate of shipments was roughly flat compared with 2016, as the
country only began exporting in April of that year. The refin-
ery’s coker started operating in February 2016.
Reficar produced 705,000t of coke, which means the refin-
ery ended the year with 50,000t stockpiled.
Reficar hit an all-time record production of 80,000t in
December as the refinery processed 150,000 b/d of crude, a
person familiar with operations said.
If it continued running at this rate, it would produce nearly
1mn t/yr of coke. But Reficar expects 2018 volumes to be close
to 2017 levels because it is uncertain whether it can load that
much crude regularly, the source said.
China was the main destination last year, buying slightly
more than 60pc of the country’s coke. China was also the main
buyer in 2016.
According to a shipping agency, Reficar shipped 339,300t to
China during the January-October period, accounting for 77pc
of total coke shipments for the first 10 months. Some 54,800t
set sail to France, 10,000t to Japan and 36,500 to the US.
US trading firm Koch Carbon markets the product.
Japan’s petroleum coke imports rise in December
Japan’s petroleum coke imports rose by 6.7pc from a year
earlier to 399,700t in December.
The increase took total imports in 2017 to 4.7mn t, up by
2.5pc from 2016.
Imports from the US in December totalled 357,500t in De-
cember, a 1.4pc increase from a year earlier, finance ministry
data show. Canadian supplies nearly doubled to almost 22,000t
Energy Argus Petroleum Coke
from 11,000t over the same period.
The increases outstripped a 7.6pc fall in imports from
China to 10,200t. There were no deliveries from Taiwan in
December.
Coke import costs averaged $125.89/t on a delivered basis
in December, higher by 20.5pc from $104.49/t a year earlier.
The increase reflected higher import costs of crude and com-
peting steam coal over the period.
Battery anode makers fear China supply squeeze
China’s rising demand for natural flake graphite for use in
battery anodes could lead to supply bottlenecks in Japan and
South Korea, delegates to the Advanced Automotive Battery
Conference in Mainz, Germany, said.
China is the dominant miner of graphite. But it is expected
to switch from net exporter to net importer over the next few
years as its production of anodes rises, constraining supply to
anode operations in Japan and South Korea, Australia’s Syrah
Resources market analysis and economics manager Luke Mc-
Fadyen said. Environmental regulations in China also caused a
reduction of natural flake supply last year, he said.
Syrah — which mines graphite in Mozambique — estimates
75-80pc of natural flake graphite comes from China, and
said some of its customers in the wider Asia-Pacific fear a
crisis similar to that in the rare earths market in 2010, when
dominant producer China shut off supplies to the outside world
causing global prices to surge higher.
Synthetic graphite is becoming increasingly attractive as an
alternative to natural graphite, but costs to anode producers
remain up to one third higher, McFayden said. Synthetic graph-
ite requires needle petroleum coke, which is only produced
at a handful of refineries around the world. And this synthetic
graphite is in demand not only for batteries, but also graphite
electrodes for electric arc furnance steel production, which is
on the rise. Graphite electrode and needle coke prices have
increased exponentially over the past year.
New production of lithium metal that can be used as an
alternative or added substance might also come on line. But
this could take time, as production of lithium metal remains
far lower than carbonate or hydroxide. “We stopped produc-
ing lithium metal 10 years ago, but if batteries require it for
anodes then we may need to rethink this,” Chilean producer
SQM senior analyst Emilio Bunel said.
Lithium metal tends to be viewed as a possible cathode
material in solid-state rather than liquid electrolyte battery
technologies, limiting possibility for replacing graphite in these
Copyright © 2018 Argus Media group Page 8 of 18
Issue 18-5  |  Wednesday 31 January 2018
types of EV batteries.
But US-based producer FMC is researching anode tech-
nologies that utilise lithium metal powders to improve the
lifespan of batteries. “The lithium metal anode is the key to
success — in solid-state battery technologies at least — and we
are seeking to build commercial relationships centred around
this,” global commercial manager for new product develop-
ment Marina Yakovleva said.
Indian metal industry seeks lower import duties
The Indian metal industry expects the government to re-
duce import duties for key raw materials in its 2018-19 union
budget.
Industry representatives and associations have lobbied to
reduce import duties for key raw materials for the production
of metals like aluminium, copper and stainless steel. They
have also requested the government check imports of finished
goods to protect the domestic industry from cheap supply.
Industries hope the upcoming budget will reduce produc-
tion costs of metals and increase government infrastructure
spending to boost demand for metals and minerals. Finance
minister Arun Jaitley will publish the budget on 1 February.
The aluminium industry has urged the government to raise
import duties for aluminium scrap to 10pc from 2.5pc and
primary aluminium to 10pc from 7.5pc.
The industry wants the government to increase the export
duty on bauxite to 20pc from 15pc to protect resources. And it
wants the duty on key raw materials used for the manufactur-
ing of aluminium, such as alumina, reduced to zero from 5pc,
and aluminium fluoride and anodes cut to 2.5pc from 7.5pc.
Some smelters import anode-grade petroleum coke rather
than finished anodes, but the government has put petroleum
coke imports under fire, raising the duty to 10pc from 2.5pc.
This puts a heavier burden on smelters that were already
struggling with a shortage of calcined coke from China, their
typical supplier.
The market is closely watching for new tarriffs in tomor-
row’s budget, as well as a planned Supreme Court hearing to
discuss limits on petroleum coke consumption and nationwide
emissions limits, which could require some smelters and coke
calciners to install scrubbing equipment.
Alcoa sues Indiana city to expand coal mine
Alcoa has sued the city of Boonville, Indiana, over an ordi-
nance it says would prohibit the company from expanding its
Liberty coal mine.
Energy Argus Petroleum Coke
The aluminum maker filed suit in Warrick Superior Court on
26 January claiming the Boonville City Council cannot impose
restrictions on property outside of the city’s boundaries.
Alcoa estimates it will suffer more than $100mn in damages
as a result of the city council’s move in November to ban coal,
oil and natural gas mining within three miles (4.8km) of city
limits.
Alcoa wants to expand the Liberty mine to fuel the power
plant at its Warrick smelter, rolling mill and ingot plant. The
company is in the process of restarting three smelter lines at
the plant after idling it in March 2016 because of weak market
conditions.
Alcoa expects to finish the smelter restart next quarter,
but the Liberty mine’s ability to continue operations and meet
contracted shipments to the plant “have been and will con-
tinue to be impaired until the ordinance is declared unlawful
and invalid,” the company said in its lawsuit. All but a “small
area” of the property Alcoa wants to expand into is within the
zone Boonville is blocking.
The city’s mayor did not immediately return a request for
comment. He signed the ordinance into law on 29 November
after the city council approved it. At the time, the city said it
was seeking “to protect the public health, safety and welfare
of the community.”
Alcoa said its actual mining operations are more than
2,500ft from Boonville boundaries and are not near any resi-
dences. It claims that only the Indiana Department of Environ-
mental Management and Department of Natural Resources,
which approved Alcoa’s permit in December 2017, have the
authority to regulate water quality and approve mining plans.
The company also said the council exceeded its author-
ity because it essentially passed a zoning ordinance without
first putting its plans before the city planning commission for
approval.
The Liberty mine produced 1.4mn short tons (1.27mn t) of
coal in 2017, data from the US Mine Safety and Health Adminis-
tration show.
Norsk Hydro starts production at Karmoy pilot
Norwegian aluminium producer Norsk Hydro has started
production at its energy-efficient Karmoy technology pilot in
Norway to produce aluminium on an industrial scale.
The pilot has a production capacity of 75,000t/yr, with 48
cells operating at 12.3 kWh/kg and 12 cells operating at 11.5-
11.8 kWh/kg.
The Hydro-developed technology will use 15pc less energy
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Issue 18-5  |  Wednesday 31 January 2018
to produce aluminium than the world’s average smelter, the
company said.
The global average energy consumption for primary alu-
minium smelters in 2016 was 14.3kWh/kg, according to the
International Aluminium Institute.
Hydro can use a number of the physical technology ele-
ments at the pilot at its other primary aluminium facilities.
Karmoy has total primary aluminium capacity of 190,000t/
yr.
The majority of primary aluminium produced at Karmoy is
cast into extrusion ingot at the casthouse on site.
Hydro estimates total costs at 4.3bn Norwegian kroner
($558mn), with net project costs of NKr2.7bn and around
NKr1.6bn in support from US-based technology lending com-
pany Enova.
Refining margins increase at India's IOC
Refinery margins at Indian state-controlled refiner IOC rose
sharply during October-December, boosted by higher inventory
gains.
Gross refining margins (GRMs) rose by 61pc to $12.32/bl
from $7.67/bl a year earlier, according to preliminary estimates
by India’s oil ministry. This compares with $7.98/bl in the July-
September quarter. Margins were $5.12/bl above benchmark
Singapore margins.
IOC posted an inventory gain of 63bn rupees ($992mn) in
the latest quarter compared with Rs30.5bn a year earlier. This
compared with a Rs10.56bn inventory gain in the July-Septem-
ber quarter. Excluding inventory gains, margins were $7.42/bl
compared with $5.10/bl a year earlier.
Profit for IOC rose by 97pc to Rs78.8bn during the latest
quarter, while its revenues rose by 13.5pc to Rs1.32 trillion.
IOC’s crude throughput during October-December rose by
11.4pc from a year earlier to 1.45mn b/d because of higher
throughput at its 300,000 b/d Panipat refinery. Throughput
was 1.28mn b/d in the previous quarter.
IOC’s GRM exceeded those of private-sector rival Reli-
ance Industries, a rare occurrence. Reliance posted an 7.4pc
increase to $11.60/bl in the latest quarter from a year earlier.
The benchmark Singapore complex refining margin fell to
$7.20/bl for October-December from $8.30/bl in the previous
quarter, but was up by $6.70/bl on a year earlier.
India’s refinery throughput rises in December
India’s refinery throughput rose in December to the highest
level on record, supported by gains at state-controlled firms.
Energy Argus Petroleum Coke
Throughput last month was 5.23mn b/d, up by 3.3pc from
a year earlier and marginally higher than November. Refinery
runs exceeded state-set targets by 2.3pc and equalled the re-
cord set in October, according to preliminary oil ministry data.
A crude processing increase at state-controlled IOC’s
300,000 b/d Paradip refinery on the east coast, which started
ramping up run rates in 2016, helped boost overall rates.
Paradip processed around 307,000 b/d of crude last month, up
by 30pc from a year earlier.
Fellow state-run firm Bharat Petroleum also boosted
throughput at its 310,000 b/d refinery at Kochi on the west
coast by 20pc to 284,000 b/d. Kochi is now India’s biggest
state-controlled oil refinery after a 120,000 b/d expansion
programme. The expansion programme at Kochi included the
addition of a 120,000 b/d crude unit and a delayed coker,
which is already operational.
Average throughput in April-December, the first nine
months of India’s 2017-18 financial year, rose by 2.2pc from a
year earlier to 5mn b/d. Indian oil product rose by 6.4pc from
a year earlier last month and was up by 3.8pc in April- Decem-
ber.
Total throughput at IOC rose by 5.3pc from a year earlier to
1.42mn b/d last month, but trailed November’s 1.49mn b/d.
Private-sector refiner Reliance Industries’ throughput at
its 1.24mn b/d Jamnagar complex at on the west coast was
1.42mn b/d, flat from a year earlier and November.
Fellow private-sector firm Essar Oil processed almost
426,000 b/d last month, unchanged from a year earlier but up
from 415,000 b/d in November. The firm operates the 400,000
b/d Vadinar refinery on the west coast, which is now owned by
a Russian consortium led by state-run firm Rosneft.
India’s refining capacity totals 4.95mn b/d, but refiners
typically produce above their nameplate capacity. Work is
underway on two new projects — a 180,000 b/d refinery at
Barmer in Rajasthan and a 1.2mn b/d complex at Ratnagiri on
India’s west coast.
US Gulf coast refinery margins near 12-week high
Refining margins on the US Gulf coast rose to near a 12-week
high of $14.81/bl last week, as measured by the 3-2-1 Louisiana
Light Sweet (LLS) crack spread.
US Gulf coast margins saw their largest weekly gain since
late August, increasing by $2.457/bl. Margins rose on a 7.55¢/
USG increase in regional diesel prices and a late-week retreat
in crude prices that left LLS down by 62¢/bl.
The 3-2-1 Brent crack spread at the US Atlantic coast ended
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Issue 18-5  |  Wednesday 31 January 2018
the week higher at $12.8998/bl, compared with $12.4548/bl at
the end of the previous week’s trade session. The spread rose
to a high of $13.4096/bl mid-week, but pared gains thereafter.
The spread is now 35pc higher year-over-year.
The 3-2-1 West Texas Intermediate (WTI) crack spread
in the southern US midcontinent built on last week’s gains,
increasing by $1.12/bl to $13.78/bl in the latest week amid
a 3.29¢/USG increase in the February Nymex RBOB contract
price. Regional sub-octane gasoline and ultra-low sulphur
diesel prices were steady-to-firm while crude prices increased
by 94¢/bl.
The 3-2-1 Western Canadian Select (WCS) crack spread in
Chicago fell as Chicago CBOB prices dropped by $1.50/bl from
the prior week’s crack spread to $21.74/bl. The drop in refining
margins over the past week resulted from the combination of
higher crude prices and a seasonal drop in generic Chicago
CBOB prices as the market transitions to a higher RVP season.
The west coast crack spread, calculated using Alaskan
North Slope crude prices based on a 5-3-1-1 yield, closed at
$10.56/USG on 25 January, up by $2.54/USG on the week.
The spread has been steadily rising since the end of last year,
alongside firming Los Angeles CARBOB prices. Prompt CARBOB
prices in the state’s most liquid market gained 10¢/USG over
the last week.
But CARBOB inventories have risen to their highest level
in 19 years of state record keeping, according to the Califor-
nia Energy Commission. Stockpiles of the gasoline blendstock
increased by 7pc to 7.7mn bl, the largest volume since at least
1999.
Inventories of the fuel typically climb in January following
an end-of-year run up in refinery crude processing. But not
since 2008, in the midst of a state budget crisis and national
recession, had inventories exceeded 7.5mn bl.
Crude throughputs at California refineries fell by 12pc in
the week of 19 January from the previous week to 1.6mn b/d,
5pc lower than last year and 6pc lower than the five-year aver-
age for the week.
Kuwait’s refining projects face minor delays
Kuwait’s two refinery projects are facing slight delays.
The nearly $16bn clean fuels project (CFP), which will
integrate the 440,000 b/d Mina al-Ahmadi and 265,000 b/d
Mina Abdullah refineries and raise their combined capacity to
800,000 b/d through expansion of the latter, is likely to be de-
layed by 2-4 months. The 615,000 b/d al-Zour refinery is facing
delays of about 2-3 months.
Energy Argus Petroleum Coke
The CFP delay primarily relates to issues with the integra-
tion of units at Mina al-Ahmadi. Kuwait’s state-owned refiner
KNPC had expected to commission the first processing unit by
May and to complete the project by the end of 2018.
The CFP will maximise output of higher-value, lower-sul-
phur fuels, which will all conform to specifications meeting the
EU’s Euro-4 vehicle emissions at a minimum. Mina al-Ahmadi
will have a capacity of 346,000 b/d and Mina Abdullah 454,000
b/d on completion.
“[KPC is] making progress, we crossed 91pc. I think maybe
we will make an announcement in the next month,” said KPC
chief executive Nizar al-Adsani.
The CFP is a key part of Kuwait’s plans to boost its overall
refining capacity after the closure of the 200,000 b/d Shuaiba
refinery in April last year.
There is scope to get al-Zour back on track.
“We have recovered the plan, we are working on it, we are
following up with people and we think we can catch up,” ac-
cording to an executive at a KPC subsidiary.
The refinery — designed to process domestic heavy crude
— is under construction and is scheduled to come on stream in
late 2019.
The 3.69bn Kuwaiti dinar ($12.10bn) Al-Zour is an essential
component of Kuwait’s strategy to increase refining capacity
by 50pc to 1.415mn b/d by 2020.
“All these types of mega projects face delays,” the execu-
tive said.
The al-Zour refinery was first mooted 15 years ago, but
political wrangling held up a final decision on the project.
The refiner says it is confident al-Zour will be ready in time
to help it meet the global 0.5pc sulphur cap that is to be intro-
duced by the International Maritime Organization (IMO) in 2020.
KNPC’s deputy chief executive Mutlaq al-Azmi told the
Middle East Refining Tech Conference in Bahrain the refinery
will have the technical capability to switch from producing
high-value fuels to bunker grade fuel oil.
“The 430,000 b/d atmospheric residual desulphurisation
(ARDS) capacity will enable us to produce high-value fuels, as
well as fuel oil with sulphur content at or below 0.5pc. We will
use the units, such as the RFCC, to produce products, but if
we see that selling 0.5pc bunker grade fuel oil is economically
viable, then we will have the technical capability to switch to
produce bunker fuel, meeting the IMO requirements.”
The al-Zour refinery — planned for launch before the end
of 2019 — at full capacity will produce 215,000 b/d of 0.9pc
fuel oil.
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Issue 18-5  |  Wednesday 31 January 2018
Pertamina selects Oman’s OOG for refinery
Indonesian state-owned oil company Pertamina has selected
Oman’s Overseas Oil & Gas (OOG) to help build its 300,000 b/d
Bontang refinery in east Kalimantan.
Japan’s Cosmo Oil International will provide technical and
marketing support for the $10bn project.
The decision marks the culmination of a search for a part-
ner that began a year ago and attracted about 100 potential
suitors. Pertamina has sought partners to help fund two new
refineries and expand four existing plants as part of a down-
stream growth drive that aims to more than double crude-
processing capacity to 2.3mn b/d by 2025.
Pertamina originally planned to choose a Bontang part-
ner by the end of April last year. Many prospective partners
expressed interest, including Qatar’s sovereign wealth fund,
but OOG was one of only two bidders that committed to the
terms sought by Pertamina. The foreign partner is required to
fully fund the project while giving Pertamina a stake of more
than 10pc at no cost. It must also give the Indonesian company
rights to supply as much as 20pc of the refinery’s crude feed-
stock without making a commitment to buy any of the fuels
produced.
Oman’s government has pledged its full support to OOG to
provide funding and crude supply, Pertamina said, while OOG’s
strategic partnership with Cosmo was another selling point.
The Bontang refinery will produce primarily gasoline and
diesel, and is scheduled for completion in 2025, Pertamina
said. The companies will next sign a framework agreement
for their joint venture and will then begin a feasibility study
that is expected to be done in 2019. Initial engineering work is
scheduled for 2020.
The move to line up a partner to fully fund the Bontang
project provides Pertamina with financial relief at a time
when it is juggling its downstream expansion programme with
aggressive upstream growth goals. Saudi Arabia’s state-owned
Saudi Aramco last year agreed a $6bn joint venture with Per-
tamina to upgrade and expand the 348,000 b/d Cilacap refin-
ery in central Java. And Russia’s state-run Rosneft has joined
with Pertamina in a 45:55 joint venture to build the other new
refinery in the expansion programme, the 300,000 b/d Tuban
plant in East Java.
Ina plans FCC closure at Sisak refinery
Croatian oil company Ina has proposed shutting down the fluid
catalytic cracker (FCC) at its 44,000 b/d Sisak refinery to cut
losses at the plant.
Energy Argus Petroleum Coke
The refinery is at the centre of a dispute between Hun-
garian integrated oil firm Mol and the Croatian government
— holding interests of 49.1pc and 44.8pc in Ina, respectively.
Sisak made an operating loss of around 146mn kuna ($24mn)
in January-June.
Croatia’s “refinery capacity significantly exceeds the needs
of a small regional market, where demand has been falling for
years”, Ina says. Mol wants to shut Sisak and convert it into a
logistics hub, focusing instead on developing Ina’s 90,000 b/d
Rijeka refinery, where it has proposed building a 750,000 t/yr
delayed coker.
Ina is discussing “organisational changes” at Sisak with
the workers’ council, it says. These would include shutting
the 468,000 t/yr FCC and transporting semi-finished products
to Rijeka to “ensure better utilisation of conversion capacity
at both refineries”, Ina says. The proposal is in line with the
findings of a 2017 study by consultancy Deloitte, commissioned
by Ina, which said converting Sisak to a logistics hub by 2021
would be the most cost-effective solution for the refinery.
No date for the FCC shutdown has been given, but Ina
expects it to result in the loss of up to 40 jobs at Sisak in the
second half of this year. The refinery employs around 700
staff, processing domestic crude received by pipeline and
barge — operations are often suspended when local stocks run
out.
But Ina has attracted interest from Rosneft, which may
be willing to invest further in Sisak. “If Rosneft enters Ina’s
ownership structure, its facilities would be modernised, able
to deliver oil products to the market in a sustainable manner,”
Rosneft chief executive Igor Sechin said in October.
The Croatian government has sought advisers for a planned
buy-back of Mol’s Ina shareholding, which the Hungarian firm is
willing to sell for a “fair” price, according to Hungary’s prime
minister, Viktor Orban.
Ecuador promotes greenfield refinery contract
Ecuador is offering a contract to build, operate and transfer a
300,000 b/d deep conversion refinery, a long-delayed project
that the country’s new government is seeking to revive with
less ambitious features.
The greenfield project would be built in the Pacific coastal
province of Manabi.
Some 21 companies from the US, UK, China, South Korea,
Japan and Russia are interested in securing the contract and
were sending representatives on an official visit to Ecuador
today and yesterday, oil minister Carlos Perez says.
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Issue 18-5  |  Wednesday 31 January 2018
The planned refinery has been downsized to a $5bn plant
from an original $10bn-$12bn refining and petrochemical com-
plex proposed under the previous government, which has been
plagued by scandals involving hundreds of overpriced, defec-
tive or unfinished infrastructure initiatives.
New president Lenin Moreno, once an ally of former presi-
dent Rafael Correa, has pledged to wipe out corruption, much
of it centered at the top of the previous administration.
Five major oil and gas infrastructure projects are suspect-
ed of irregularities. The list comprises the earthmoving and
a water system construction contracts for the Pacific refinery
carried out by tainted Brazilian contractor Odebrecht.
According to Perez, Ecuador is now proposing to build a
deep conversion facility capable of producing Euro 5 clean
products, in addition to urea and sulphur. Construction could
take up to three years and the contractor will be allowed to
operate the refinery for at least 20 years.
The refinery was originally designed to process Venezuela’s
heavy crude. Under the initial joint venture structure, cre-
ated in 2008, state-owned PetroEcuador held a 51pc stake and
Venezuelan state-owned PdV 49pc.
PdV’s stake later shrank to just 15pc and “will continue
to dilute” because the company has been unable to make
its share of capital contributions, and Caracas has said it is
no longer interested in investing in the project, according to
Perez.
The government is proposing to redesign the project to
process a domestic mix of heavy crude from Ecuador’s Ish-
pingo-Tambococha-Tiputini (ITT) complex and medium grades
such as Napo and Oriente.
US weighs its options on Venezuela crisis
The US is considering taking additional steps to address
Venezuela’s rapidly accelerating humanitarian crisis and the
spillover effects the situation is having on its neighbors.
The Venezuela crisis is a top issue on the agenda for US
secretary of state Rex Tillerson’s one-week-long tour of Latin
America, which starts on 1 February.
Colombia is one of the stops, and Tillerson will offer
US support for that country’s efforts to address “the grow-
ing refugee population,” the State Department says. Bogota
estimates some 550,000 Venezuelans or longtime Colombian
residents in Venezuela have fled to Colombia over the past 2-3
years.
“We continue to prepare to provide humanitarian as-
sistance directly to the Venezuelan people to alleviate the
Energy Argus Petroleum Coke
suffering that they are enduring under [President Nicolas
Maduro’s] regime,” a senior US State Department official says.
Beyond the offer of humanitarian aid, Washington is likely
to stick to its policy of adding more Venezuelan officials to its
sanctions list and enforcing a prohibition on issuance of new
debt by Caracas and by state-owned PdV. But Washington says
all options — including more oil sector sanctions — remain on
the table.
“Our strategy on Venezuela has been extremely effective,”
the State Department official said. “The financial sanctions
forced Caracas to go into default on sovereign and PdV debt.
What we are seeing is a total economic collapse.”
US sanctions imposed on Venezuela in August 2017 con-
tributed to Venezuela’s slide into sovereign default and may
have scared US crude buyers away from Venezuela at a time
when oil production is falling. Production fell to 1.62mn b/d in
December, according to data communicated directly to Opec
by Venezuela’s energy ministry, nearly 400,000 b/d lower than
a year earlier.
US crude oil imports from Venezuela also have trended
lower since summer, when the US administration began to
craft its sanctions response to Caracas. US refiners at the time
strongly opposed an embargo on imports, as many still rely on
a fair amount of Venezuelan crude.
Weekly crude imports from Venezuela averaged 394,000
b/d in the first three weeks of January, down from an average
of 733,000 in the same period last year, according to estimates
by the US Energy Information Administration.
Maduro has consolidated power despite the US pressure
and is proceeding with plans to hold a presidential election on
30 April. The US has called the scheduled election illegitimate
and said it will not recognize its results.
Tillerson “plans to advocate for increased regional atten-
tion to the multiple crises in Venezuela,” the State Depart-
ment said.
South American governments already have been pressing
Washington for more action. The Lima group — comprising 13
Latin American countries and Canada — has condemned Cara-
cas’ decision to advance the presidential election.
The US should ask for an emergency session of the UN
Security Council and for an appointment of a UN special envoy
on Venezuela, US senators Bob Menendez (D-New Jersey) and
Marco Rubio (R-Florida) said. The senators, who represent
states with significant Venezuelan expatriate populations, also
asked the US Department of Justice to investigate alleged drug
trafficking by senior Venezuelan government officials.
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Issue 18-5  |  Wednesday 31 January 2018
The IMF projects the Venezuelan GDP to fall by another
15pc this year — a cumulative decline in real terms of about
50pc since 2013 — while inflation could soar to 13,000pc this
year.
The IMF is preparing to send a team to Colombia to discuss
ways to address the growing refugee flow, IMF western hemi-
sphere director Alejandro Werner said last week.
China’s thermal coal imports rise in 2017
China’s imports of thermal coal increased last year on stronger
demand from utilities. The rise came despite import limits
imposed from July.
Imports of thermal coal — including non-coking bitumi-
nous coal, sub-bituminous coal and lignite — rose by 10pc to
191.8mn t in 2017, customs data show.
Imports were up on the year each month in January-June,
before falling by 8pc in July and 1pc in August, after the
government restricted imports. Imports rose again in Septem-
ber and October, but fell by 20pc in November and by 14pc in
December.
Last year’s overall rise in thermal coal imports was largely
attributable to higher thermal power generation. China’s
thermal power output — largely based on coal — grew by
4.6pc to 4,611.5TWh in 2017, and the amount of coal used by
the power industry in the first 11 months of the year rose by
103mn t to 1.78bn t, according to data from industry associa-
tion CCTD.
The government banned terminals at 12 southern ports
from importing coal at from the start in July-December. It
then stepped up the restrictions, banning imports through the
Xinsha terminal at Guangzhou port in southern China’s Guang-
dong province from early September until the end of 2017.
The ban was later extended to Zhuhai port in Guangdong and
Fangchenggang port in neighbouring Guangxi province.
Peak winter demand for heating forced the government
to temporarily lift the restrictions from mid-December to
mid-February to allow customs clearance of vessels carrying
imported coal. But December imports still fell by 11pc on the
year, as the notice period was too short for utilities to book
seaborne cargoes for December delivery.
Imports of all types of coal were higher, with sub-bitumi-
nous coal deliveries exceeding deliveries of bituminous coal.
Sub-bituminous coal imports rose by 14pc to 29.4mn t, the
highest since 2013’s 39mn t. But imports fell in the last three
months of the year, with December’s proving to be 2017’s low-
est, at just 1.5mn t.
Energy Argus Petroleum Coke
Indonesian producers — shipping thermal coal, mostly sub-
bituminous and lignite — benefited most from China’s higher
imports. But Indonesian supply was hampered intermittently
by heavy rain. Drier weather resulted in a sharp increase in
deliveries in September, although a heavy monsoon began
disrupting mining and transport operations again from late
October.
Imports of bituminous coal rose by 3.3mn t to 79mn t last
year, the highest since 2014.
Imported bituminous coal maintained a price advantage
throughout 2017 — NAR 5,500 kcal/kg Australian coal’s dis-
count to domestic supply with a similar calorific value widened
to Yn87/t ($13.77/t) in late-March from Yn15/t in January. It
remained below Yn60/t until October, but started rising on
strong winter demand. The discount then narrowed before
widening again to nearly Yn100n/t in mid-December, coinciding
with the lifting of the import ban.
A shortage of domestic supply pushed up domestic prices
in January, which in turn increased demand for seaborne im-
ports. Earlier this month, CCTD said January imports would be
likely to reach 30mn t — the highest since January 2014, when
China received 30.8mn t.
The government has not indicated when it will re-impose
import restrictions, but market participants expect them to
resume after mid-February’s lunar new year holidays.
But the impact of renewed restrictions could be limited,
once the weather turns warmer in the spring.
NDRC seeks to ease worries over coal stocks
Measures have been taken to ensure that power plants have
sufficient coal stocks, China’s top economic planning agency
the NDRC said today amid warnings about weather-related
transport disruptions.
The NDRC’s reassurances were made at a press conference
organised by the State Council Information Office, attended by
China’s National Railway Administration (NRA) and other key
transport agencies, to provide information on logistics ahead
of the peak lunar new year travel period in the run-up to 15
February.
The NRA is making full use of the 10 days prior to the peak
travel period to focus on shipping coal to power plants, but
disruptions are inevitable given recent snow storms and cold
weather, it said.
Chinese power generation has increased by around 15pc
on the year since the start of 2018, according to the NDRC,
indicating firm demand for coal. But the NDRC, ministry of
Copyright © 2018 Argus Media group Page 14 of 18
Issue 18-5  |  Wednesday 31 January 2018
transport and NRA have all taken the necessary measures to
address falling supplies at power plants, they said.
Current coal stocks held by power plants are at an aver-
age of 15 days, which is within acceptable limits, according to
the NDRC. The NRA said it had prioritised efforts to provide
supplies to the 26 power stations with stockpiles amounting
to less than seven days’ coal burn. But many coal mines will
be closing early ahead of the holiday period and some power
plants have been scrambling to restock.
Four state-owned power plants — State Power Investment,
Datang, Huaneng and Huadian — made a joint complaint to
the NDRC on 22 January about tight coal supplies and lack of
rail capacity. The utilities said power outages were a possibil-
ity, with some generators already forced to shut down units
because of limited coal stocks — a result of railway restrictions
caused by rising freight rates.
The Harbin and Shenyang railway bureaus have each
increased coal freight rates by 10pc since 15 January. Coal
freight rates from the coal-producing district of Hailar in Inner
Mongolia to Changchun, the capital city of Jilin province, have
increased to 9,907.5 yuan ($1,575) for a 60t rail car, equivalent
to Yn165/t, according to China Railway — the parent company
of the country’s regional railway bureaus.
Argus assessed spot prices of domestic NAR 5,500 kcal/kg
coal at its highest level in more than five years.
China’s average daily power generation this winter has
reached around 19.13bn KWh and peaked at 20.1bn KWh, a
historical high, according to network operator State Grid. The
power load also rose in other provinces and municipalities in
eastern and central China.
A snowstorm in central China sent power loads to 29.07GW
for Hubei province on 7 January and to 31.3GW in Anhui prov-
ince on 8 January, while the power load in Shanghai munici-
pality on China’s east coast reached 25.63GW. All three were
record winter highs for those areas.
Inner Mongolia to further reduce coal capacity
Inner Mongolia, China’s biggest coal-producing region, plans to
phase out another 4.05mn t of coal production capacity this
year amid a continuing drive to close outdated coal mines.
Last year 16 coal mines in Inner Mongolia were closed and
production capacity in the province reduced by 8.1mn t, meet-
ing its target for the year. But overall coal production in Inner
Mongolia still increased by 7.6pc in 2017 from a year earlier to
878mn t.
Inner Mongolia will see a total of 54.14mn t of production
Energy Argus Petroleum Coke
capacity being phased out during 2017-20 to reach an esti-
mated 1.3bn t/yr of actual production capacity, as outlined
in China’s 13th five-year economic plan issued in December
2016.
The production cuts are a major part of a long-term energy
agenda, with Beijing pushing for more coal-to-gas conversion
projects and to modernise the industry to curb air pollution.
But this is proving difficult with snow storms sweeping across
east and central China at a time when infrastructure for gas-
fired heating has not been fully developed. Authorities have
urged for a more progressive implementation of the policy.
China exceeded its target to eliminate 150mn t/yr of
coal production capacity in 2017, national economic planning
agency the NDRC said at the end of October. The country’s
total coal production rose by 3pc from a year earlier to 3.54bn
t in 2017, the national bureau of statistics said.
China’s Hebei halts coal-to-gas projects
Northern China’s Hebei province is putting its ambitious coal-
to-gas conversion plans on hold for the next 2-3 years following
acute gas shortages, potentially supporting local coal demand.
Local authorities have taken an in-principle decision to
pause the plans. They will continue to work on unfinished pro-
jects carried over from 2017 but will not launch new conver-
sion projects, the Hebei provincial development and reform
commission said. It did not disclose any figures for the amount
of completed or unfinished projects.
The coal-to-gas policy mainly affects rural areas of the
province, where coal-fired boilers are supposed to be stead-
ily replaced with natural-gas fired boilers. The policy reversal
should ensure continued coal demand in these areas until at
least 2020.
Hebei authorities said they may consider new coal-to-gas
conversion projects only after new gas pipelines, including
from Russia, are operational in 2019 and 2020.
The change in policy comes despite China’s national energy
administration (NEA) earlier this month ordering local authori-
ties and utilities to continue making coal-to-gas conversion a
priority in large cities and surrounding districts in the north of
the country.
A gas shortage in Chinese provinces such as Hebei, Shan-
dong and Henan last month left households with insufficient
supplies for heating needs. China’s environmental protection
ministry subsequently allowed areas that had not finished
coal-to-gas conversion projects to use coal or other fuels for
heating.
Copyright © 2018 Argus Media group Page 15 of 18
Issue 18-5  |  Wednesday 31 January 2018
The Hebei provincial government admitted on 11 December
that their coal-to-gas conversion plans had been overambi-
tious. More than 2.31mn households were involved in the
plans, surpassing the initial target of 1.8mn households by
nearly 19pc. But this has helped send natural gas demand in
the province far above available supplies this winter.
The coal-to-gas conversions are part of the Northern
Region Winter Clean Energy Heating Plan 2017-21 released in
December. China has set a target for cleaner energy sources
to provide 70pc of winter residential heating in Beijing, Tianjin
and 26 other cities in Hebei, Shanxi, Henan and Shandong
provinces by 2021. Coal has been blamed for severe air pollu-
tion in many areas, including Hebei.
Temperatures across China averaged -2.2°C in December,
compared with an average of -0.3°C a year earlier, accord-
ing to the China Meteorological Administration. Many parts of
China were battered by snow storms and blizzards in recent
weeks.
The cold temperatures have boosted coal consumption.
Chinese coking coal imports up 18pc in 2017
China imported 69.9mn t of coking coal in 2017, up by 17.9pc
from a year earlier, as prices that stayed below $200/t fob
Australia for most of the year attracted more buyers.
December imports rose by 4.4pc from a year earlier to
6.12mn t, as supplies increased from all major exporters, par-
ticularly the US.
Australia remained the top supplier of coking coal to China
in December, with its shipments rising by 22pc from a year
earlier to 2.52mn t, customs data show. Australia exported
31mn t to China in 2017, ahead of 26.3mn t from Mongolia.
Persistent political tensions between the Chinese and Mon-
golian governments resulted in frequent cargo blockades and
weighed on supplies.
Mongolia shipped 2.35mn t of coking coal to China in
December, down by 24pc from a year earlier. Supplies from
Canada increased by 19pc over the same period to 348,950t.
The US emerged as a significant exporter to China last
year, sending a total of 2.82mn t of coking coal to the country.
The last time China imported significant amounts of coking
coal from the US was in 2014.
The increase in US and Canadian exports was partly the
result of a push by Chinese buyers for greater diversification.
Chinese steelmakers sought to reduce their dependence on
Australian supplies as prices became increasingly high and
volatile.
Energy Argus Petroleum Coke
Japan’s coking coal imports at 7-year high
Japanese coking coal imports climbed to a seven-year peak
in December as steel producers shifted cargoes ahead of the
January-March cyclone season in Australia, after a storm last
year triggered a supply crunch and price rally that cut deep
into profit margins.
Japan imported 7.52mn t of coking coal in December, up
by 21.4pc from the previous month. Imports in December were
also up by 16.1pc from 6.48mn t from the same month last
year, according to finance ministry data.
Total Japanese coking coal imports in 2017 were 71.86mn t,
down by 2.8pc from 73.96mn t last year. Met coke imports fell
by 48.8pc year-on-year to 1.15mn t.
Australia remained the largest coking coal exporter to Ja-
pan in December with 3.64mn t, up by 39.5pc from in Novem-
ber. Exports from Queensland’s Dalrymple Bay Coal Terminal
rebounded to 5.84mn t in December from a six-month low of
5.18mn t the previous month as port congestion and vessel
queues subsided.
“A lot of November loading dates for cargoes became
December laycan amid the high congestion,” a Japanese trader
said. “Imports were also high in December because Japanese
mills learned from Cyclone Debbie to build stocks before of the
new year.”
Japanese imports of Canadian coking coal rebounded by
28.7pc to 765,100t in December from the previous month.
December imports from the US fell by 19.8pc to 492,100t over
the same period.
Shipments from Russia in December rose by 69.9pc to
316,700t from the previous month, while imports from Colom-
bia climbed by 5.5pc to 261,400t. Volumes from Mozambique
fell by 6.9pc to 105,700t. Japan also imported 19,800t of cok-
ing coal from China.
Indonesia accounted for about 25pc of Japan’s coking coal
imports in November with 1.73mn t, but much of this is misla-
belled low-ash thermal coal that is used by steel producers at
their captive power plants.
TransCanada confident on Keystone XL route
Nebraska’s approval of an alternative route for the proposed
830,000 b/d Keystone XL crude pipeline will withstand legal
challenges, TransCanada said on 25 January.
“We are very comfortable with the legality and the techni-
cal underpinning of that decision,” chief executive Russ Girling
said at an investor conference in Whistler, British Columbia.
The Nebraska Public Service Commission in November
Copyright © 2018 Argus Media group Page 16 of 18
Issue 18-5 | Wednesday 31 January 2018
voted 3-2 to approve a Keystone XL route through the state,
but not TransCanada’s preferred 275-mile (443km) path. Rather
it approved “a mainline alternative route.”
Opponents to the project say that the environmental im-
pacts of the alternative route were not properly examined by
state and federal agencies.
Dozens of Nebraska landowners are contesting the state
decision and have filed a notice of appeal to the Nebraska
Court of Appeals. The court set some preliminary dates for
filings in the case.
The $8bn Keystone XL would transport crude from Alber-
ta’s oil sands to Steele City, Nebraska, which is already linked
by pipeline to Cushing, Oklahoma, and the southeast Texas
coast.
TransCanada said on 18 January that it has secured about
500,000 b/d of firm, 20-year commitments for Keystone XL
after a successful open season.
Girling said that strong shipper interest in the project has
been resilient even after 10 years of delay. The company is
committed to move the project forward with primary con-
struction starting in 2019, he said.
TransCanada first proposed Keystone XL in 2008 but it was
delayed repeatedly. The administration of US President Barack
Obama in 2015 blocked Keystone XL after years of review, cit-
ing environmental concerns.
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Energy Argus Petroleum Coke
The project was revived last year, receiving a cross-border
permit from President Donald Trump’s administration in March
2017.
Refinery operations update
US Gulf coast
„„ Shell notified a community alert system of increased flaring
at 12:17am ET today at its 340,000 b/d joint venture refinery
in Deer Park, Texas. Shell did not identify the units involved.
Planned maintenance was underway at the facility as of last
week. Shell operates the refinery in a joint venture with Mexi-
can state-owned oil company Pemex.
„„ Turnaround work on several unidentified units began last
week at Shell’s 225,000 b/d refinery in Norco, Louisiana.
„„ Valero shut an unidentified unit late last week at its
250,000 b/d refinery in St Charles, Louisiana, following a
sulphuric acid release. The US independent refiner reported
a 30 USG release of sulphuric acid from a line on 26 January,
according to a filing to federal hazardous materials monitors.
Alkylation units use sulphuric or hydrofluoric acid to produce
high-octane blendstocks called alkylate. Sulphuric acid can
also be used in refinery treatment processes, such as waste-
water.
„„ A sulphur recovery unit (SRU) upset at LyondellBasell’s
268,000 b/d refinery in Houston, Texas, led to 36 minutes of
increased flaring on 24 January, according to a filing to state
environmental monitors. The unit was returned to normal
operations, according to the filing.
US west coast
„„ A mechanical malfunction led to roughly 30 minutes of
increased flaring on 26 January at Shell’s 165,000 b/d refinery
in Martinez, California, according to a filing to state hazardous
materials monitors. Shell did not identify the unit involved.
„„ A process unit tripped off last week at Shell’s 147,000 b/d
Puget Sound refinery in Anacortes, Washington. The upset re-
sulted in approximately an hour of increased emissions on 23
January, according to a filing to regional air quality monitors.
Shell did not identify the unit involved.
Latin America
„„ Venezuelan state-owned PdV’s 635,000 b/d Amuay refinery
suspended crude processing operations last week following
several equipment breakdowns, and the company is not saying
when the crippled facility will restart. The refinery’s power
Copyright © 2018 Argus Media group Page 17 of 18
Issue 18-5  |  Wednesday 31 January 2018
generation plant is operational, but all processing units —
including the catalytic cracker that is undergoing planned re-
pairs — are off line, a PdV official at the refinery said. Amuay
and the nearby 305,000 b/d Cardon refinery comprise PdV’s
940,000 b/d CRP refining complex on the Paraguana penin-
sula, where over 72pc of the company’s local downstream
nameplate capacity of 1.3mn b/d is concentrated. Amuay has
five distillation units, of which only two — Units 1 and 5 —
were operational as of 19 January. But distillation Unit 5 suf-
fered an equipment breakdown on 20 January and distillation
Unit 1 broke down on 23 January, FUTPV oil union director
Ivan Freites said. The CRP’s refineries were operating at only
about a combined 13pc of design capacity in December 2017.
CRP’s operational capacity appeared to be rising this month,
reaching about 18pc of nameplate, or 170,000 b/d, before
Amuay refinery shut down.
„„ State-run Pemex will restart its 190,000 b/d Madero refin-
ery on Mexico’s Gulf coast closer to 19 February instead of
late January as first planned, sources close to operations said.
The company said in December that everything was set for a
late January restart after the plant was shut in August for an
extensive maintenance program. The restart was originally
scheduled for late December. Delays in the purchase and sup-
ply process for new equipment and machinery are the main
reason for the later start date, the source said. As Pemex is a
state-run company, many of the purchase and supply con-
tracts need to go through a public tender processes, which
adds transparency but takes longer. Also, specialized parts
and equipment needed to modernize refineries are not usually
in stock even with the manufacturer. Pemex did not respond
to a request for comment from Argus. The Madero refinery
has processed no crude since September and only processed
9,425 b/d of crude in August. During January 2017 the plant
processed up to 82,193 b/d. Madero had a 26pc utilization
rate from January through November, according to the latest
statistics from the ministry of energy (Sener).
Europe
„„ Repsol is taking a 35,000 b/d gasoil desulphuriser and a
combined heat and power (CHP) plant at its 240,000 b/d
Petronor refinery in Bilbao off line for maintenance. Petronor
did not give the expected duration of the turnaround but said
production would not be affected. The HD3 desulphuriser
processes the heavy gasoil produced by the refinery’s 2mn t/
yr delayed coking unit, which is ramped up when the refinery
processes heavier crudes such as Mexican Maya Blend and
Energy Argus Petroleum Coke Issue 18-5  |  Wednesday 31 January 2018

occasionally Canadian synthetic crudes. The CHP produces

power from by-products such as refinery gas and sells its
excess electricity production to Spain's power grid. Petroleum Coke Market Overview
„„ Spanish oil group Repsol is starting up units at its 120,000
Including the latest trade data, this study provides a country-level
b/d Coruna refinery that were affected by a power outage on
assessment of the global market and analysis of key countries that
29 January. Repsol did not say which units were affected by
will influence the outlook to 2020.
the power outage, which set off the refinery’s flares.
Email us at info@argusmedia.com for further information
Middle East
„„ Kuwait’s 440,000 b/d Mina al-Ahmadi refinery is undergo-
ing planned maintenance at its third crude distillation unit,
which has a 120,000 b/d capacity. The turnaround will likely
last for 30 days, although this could not be confirmed. As part
of a near $16bn clean fuels project (CFP), the Mina al-Ahmadi
refinery is being integrated with the 265,000 b/d Mina Abdul-
lah refinery. The goal is to raise their combined capacity to
800,000 b/d through the expansion of the latter and boost
output of higher quality fuels. Problems with the integration
of the Mina al-Ahmadi refinery mean that the CFP is facing a
delay of 2-4 months. Kuwait’s state-owned refiner KNPC had www.argusmedia.com/petcoke-study
expected to complete the venture by the end of 2018.

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