Energy-argus-petroleum-coke.pdf

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

Market overview

Key prices

Coke prices leap on tight supply, growing interest Petroleum coke prices advanced sharply on the week, amid a supply squeeze in the US Gulf and sparks of interest from AsiaPacific buyers. A large number of refineries on the US Gulf coast are undergoing maintenance in the first quarter of this year, and some market participants anticipate this could reduce coke availability in the quarter by as much as 1mn t. Refiners are said to be sold out of spot supply until at least April. Some may even have difficulty meeting all of their term commitments. Most cement makers insist that demand is still fairly weak, with only a few inquiries here and there from Latin America and perhaps a more substantial increase in interest from China. But with so few spot cargoes available, these buyers said they would need to pay at least $70/t for 6.5pc sulphur on an fob US Gulf basis to obtain anything beyond what they have already locked in on term contracts. Indian buyers start to test the waters Indian buyers are also now keen to source high-sulphur coke promptly, even as that market is awaiting two major events tomorrow — a Supreme Court hearing on coke and the release

$/t

6.5% sulphur coke: cfr India vs China 120

cfr China 6.5%

cfr India 8.5%

cfr India 6.5%

$/t

Petroleum coke spot market

Atlantic basin fob US Gulf coast 4.5% sulphur fob US Gulf coast 6.5% sulphur fob Venezuela 4.5% sulphur cfr Turkey 4.5% sulphur Sulphur adjustment US Gulf coast, per 0.1% Pacific basin fob US west coast <2.0% sulphur fob US west coast 3.0% sulphur fob US west coast 4.5% sulphur cfr China <2.0% sulphur cfr China 3.0% sulphur cfr China 6.5% sulphur cfr India 6.5% sulphur cfr WC India 8.5% sulphur

HGI

Price

±

Four-week average

40 40 70 70

84.50 70.00 84.50 106.00

+1.00 +2.00 +1.00 +1.00

82.88 66.88 82.88 104.88

0.72

-0.06

0.80

131.00 100.00 86.00 156.00 139.00 110.00 107.00 97.50

+7.00 +2.00 +4.00 +2.00 +2.00 +3.00 +2.00 +2.50

125.75 98.25 84.00 153.50 136.50 105.75 105.00 94.63

45 45 45 45 45 40 40 70

$/t

Petroleum coke calculated prices

Atlantic basin del ARA 4.5% sulphur del ARA 6.5% sulphur del Brazil 4.5% sulphur del Brazil 6.5% sulphur del Turkey 6.5% sulphur Pacific basin del Japan 3.0% sulphur del Japan 4.5% sulphur del China 4.5% sulphur del India 4.5% sulphur

HGI

Price

±

Four-week average

40 40 40 40 40

104.50 90.00 103.75 89.25 91.00

+1.00 +2.00 +1.00 +2.00 +2.00

103.38 87.38 102.00 86.00 88.88

45 45 40 40

119.00 105.00 120.25 120.25

+2.00 +4.00 +1.50 +1.00

116.81 102.56 120.31 120.69

Prices calculated by adding relevant fob petroleum coke price to freight rate.

$/t

Coke freight rates 110 100

--

90 80 70 4 Jan 17

19 Apr 17

19 Jul 17

Copyright © 2018 Argus Media group

25 Oct 17

31 Jan 18

Supramax USGC to ARA Venezuela to ARA USGC to Turkey USGC to Brazil USGC to China USGC to EC India EC Saudi Arabia to WC India Panamax USWC to Japan

31 Jan

±

Four-week average

20.00 19.00 21.00 19.25 35.75 35.75 10.75

0.00 0.00 0.00 0.00 +0.50 0.00 0.00

20.50 19.31 22.00 19.13 37.44 37.81 11.25

19.00

0.00

18.56

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

of the annual fiscal year government budget. Buyers have largely refrained from making fresh purchases from either the US or Saudi Arabia ahead of these two events, which they hope provide sufficient clarity to make sourcing decisions without fear of running afoul of new regulations. The court could extend trading and import limitations nationwide and the budget could include new consumption taxes. It is thought that the 1 February hearing will mainly focus on pollution control norms such as sulphur-dioxide emissions limits, which should not have much impact on cement makers since sulphur is captured in a cement kiln. But most buyers have been reluctant to book cargoes in the run-up to the hearing in case further restrictions are unexpectedly announced. Uncertainty has reigned for more than two months as a string of court decisions and associated responses from the central government changed the regulatory landscape on an almost weekly basis. But there were indications this week that buyers may be running out of patience. They also may be trying to book supply before the hearing to get ahead of their peers, who could come out in force next week if no new restrictions are announced. Several cement makers have been absent from the market for weeks and likely need fresh cargoes now. Demand may further increase in the event that tomorrow’s hearing clarifies lime kilns are also exempted from restrictions

Coke-to-coal calorific comparisons del ARA del India del Turkey fob USGC

Coal

4.5% coke

6.5% coke

8.5% coke

$/mnBtu

3.73

3.39

2.92

-

% of coal

-

91.00

78.00

-

$/mnBtu

4.28

-

3.47

3.17

% of coal

-

-

81.00

74.00

HGI

Low

High

Avg

4.5% sulphur

40

80.00

84.50

82.30

6.5% sulphur

40

63.00

70.00

66.10

70

80.00

84.50

82.30

70

103.00

106.00

104.50

<2.0% sulphur

45

124.00

131.00

125.60

3.0% sulphur

45

97.50

100.00

98.10

4.5% sulphur

45

81.50

86.50

84.50

6.5% sulphur

40

100.00

107.00

104.00

8.5% sulphur, WC

70

92.00

97.50

94.10

fob US Gulf coast

fob Venezuela 4.5% sulphur cfr Turkey 4.5% sulphur fob US west coast

cfr India

cfr China <2.0% sulphur

45

151.00

156.00

153.00

3.0% sulphur

45

134.00

139.00

136.00

6.5% sulphur

40

100.00

110.00

104.60

HGI

Low

High

Avg

4.5% sulphur

40

100.75

104.50

102.85

6.5% sulphur

40

83.75

90.00

86.65

4.5% sulphur

40

98.25

103.75

101.25

6.5% sulphur

40

81.25

89.25

85.05

40

85.50

91.00

88.20

40

119.00

123.00

120.35

40

118.50

122.50

119.95

3.0% sulphur

45

115.50

119.00

116.65

4.5% sulphur

45

99.50

105.00

103.05

Delivered NWE-ARA

Delivered Brazil

Delivered Turkey 6.5% sulphur Delivered India

4.17

3.44

2.96

-

-

83.00

71.00

-

4.5% sulphur

$/mnBtu

2.52

2.74

2.27

-

Delivered China

% of coal

-

109.00

90.00

-

4.5% sulphur

3Q18

4Q18

fob USGC 4.5% petroleum coke 84.50 82.41 81.15 fob USGC 6.5% petroleum coke 70.00 68.27 67.23 del ARA 4.5% petroleum coke 104.50 99.51 99.22 del ARA 6.5% petroleum coke 90.00 85.70 85.46 cfr India 6.5% petroleum coke 107.00 103.82 102.54

1Q19

98.88

2019

2020

81.57

82.83

67.57

68.61

94.52

90.33

2021

Delivered Japan

Prices calculated by adding relevant fob petroleum coke price to freight rate.

$/t

Anode-grade coke monthly indexes: Dec Low 89.19

85.16

81.41

77.80

76.81

101.16

97.01

93.63

92.75

Copyright © 2018 Argus Media group

$/t

Calculated coke indexes: Jan

$/mnBtu

$/t

$/t

Fuel-grade coke calendar month indexes: Jan

% of coal

Coal-implied forward curves 2Q18

Monthly indexes

High

Mid

cif US Gulf green, 0.8% sulphur

355.00

415.00

385.00

cif US Gulf green, 2% sulphur

265.00

315.00

290.00

cif US Gulf green, 3% sulphur

175.00

205.00

190.00

fob US Gulf calcined, 3% sulphur

405.00

475.00

440.00

Page 2 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

$/t

Monthly petroleum coke price snapshot Northwest Europe US Gulf coast fob 4.5% sulphur

82.30

fob 6.5% sulphur

66.10

US west coast fob <2.0% sulphur

125.60

fob 3.0% sulphur

98.10

fob 4.5% sulphur

84.50

Turkey

del 4.5% sulphur

102.85

cfr 4.5% sulphur

104.50

del 6.5% sulphur

86.65

del 6.5% sulphur

88.20

Japan

Venezuela fob 4.5% sulphur

82.30

del 3.0% sulphur

116.65

del 4.5% sulphur

103.05

China India

Brazil

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 market 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 demand from the Indian market. Heavy snowfall in most parts of northern and eastern China has tightened thermal coal supply into larger population

Copyright © 2018 Argus Media group

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 expecting 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 quality 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.

Page 3 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

$/t

Steel feedstocks: Low vol vs PCI 300

low-vol fob Australia

PCI cfr N China

25

250

4.5% premium to 6.5%

20

--

200 150 100 2 Aug 17

$/t

USGC coke: 4.5% premium to 6.5%

--

15 10

21 Sep 17

2 Nov 17

20 Dec 17

31 Jan 18

5 5 Jul 17

23 Aug 17

11 Oct 17

6 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 participants 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 alternative 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

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 option 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 trading 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.

Page 4 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

del ARA coke percent of coal

110

ARA 4.5% coke % of coal

%

fob USGC coke percent of coal

ARA 6.5% coke % of coal 140

%

fob USGC 4.5% coke % of coal fob USGC 6.5% coke % of coal

100 120

90

100

--

80 70

80

60

60

50 4 Jan 17

17 May 17

20 Sep 17

31 Jan 18

del India coke percent of coal

110

%

cfr India 6.5% coke % of coal cfr India 8.5% coke % of coal

40 4 Jan 17

20 Sep 17

31 Jan 18

%

cfr Turkey 4.5% coke % of coal cfr Turkey 6.5% coke % of coal

90

90

--

80

80

70

70

60

60 4 Jan 17

17 May 17

del Turkey coke percent of coal

100

100

--

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 products. If coke prices continue to rise, alternative fuels could soon overtake coke and coal as the primary fuel for cement makers, according to Stefanos.

Copyright © 2018 Argus Media group

50 4 Jan 17

--

17 May 17

20 Sep 17

31 Jan 18

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 assessment 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 already ordered for this project, which would be capable of pro-

Page 5 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

US Gulf and midcontinent coker yields

400

US Gulf coker yield

$/t

Aluminium premiums

US midcontinent coker yield 350.0

US midwest

$/t Japan

Europe, duty paid

300.0 350

250.0 200.0

300

--

150.0 100.0

250

50.0 200 28 Oct 16

31 Mar 17

25 Aug 17

LME aluminium prices

2,300

cash

0.0 9 Nov 16

26 Jan 18

$/t

12 Apr 17

6 Sep 17

LME aluminium warehouse stocks

3 month

31 Jan 18

mn t

1.4 1.3

2,200

1.3 1.2

--

2,100

--

1.1 2,000 1,900 30 Oct 17

1.1

28 Nov 17

29 Dec 17

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 investment in residue upgrading, as the IMO’s 2020 deadline fast approaches. Croatia’s Ina, Poland’s Grupa Lotos, Serbia’s NIS and ExxonMobil, 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 refinery 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

Copyright © 2018 Argus Media group

1.1 08 Sep 17

30 Jan 18

25 Oct 17

11 Dec 17

30 Jan 18

or catalytic cracker. Nor does its 115,000 b/d facility in Antwerp, 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 Petrochemicals (MRPL) is awaiting more clarity on the Indian regulatory 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 commissioning 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

Page 6 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

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 uncertainty 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 regulations 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 government 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 environmental restrictions on coke consumption. The refiner has focused on selling its product in the domestic 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

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 making 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 hydrotreater 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 refinery, 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 refinery’s coker started operating in February 2016. Reficar produced 705,000t of coke, which means the refinery 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 December, a 1.4pc increase from a year earlier, finance ministry data show. Canadian supplies nearly doubled to almost 22,000t

Page 7 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

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 competing steam coal over the period.

types of EV batteries. But US-based producer FMC is researching anode technologies 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 development Marina Yakovleva said.

Battery anode makers fear China supply squeeze

Indian metal industry seeks lower import duties

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 McFadyen 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 graphite 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 producing 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

The Indian metal industry expects the government to reduce 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 production 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 manufacturing 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 tomorrow’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.

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Alcoa sues Indiana city to expand coal mine Alcoa has sued the city of Boonville, Indiana, over an ordinance it says would prohibit the company from expanding its Liberty coal mine.

Page 8 of 18

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

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 continue 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 residences. It claims that only the Indiana Department of Environmental 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 authority 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 Administration 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 11.511.8 kWh/kg. The Hydro-developed technology will use 15pc less energy

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to produce aluminium than the world’s average smelter, the company said. The global average energy consumption for primary aluminium smelters in 2016 was 14.3kWh/kg, according to the International Aluminium Institute. Hydro can use a number of the physical technology elements 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 company 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 JulySeptember 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-September 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 Reliance 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.

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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 record 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- December. 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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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 California 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 average 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 delayed by 2-4 months. The 615,000 b/d al-Zour refinery is facing delays of about 2-3 months.

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The CFP delay primarily relates to issues with the integration 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-sulphur 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,” according 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 executive 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 introduced 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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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 partner 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 downstream growth drive that aims to more than double crudeprocessing capacity to 2.3mn b/d by 2025. Pertamina originally planned to choose a Bontang partner 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 feedstock 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 Pertamina to upgrade and expand the 348,000 b/d Cilacap refinery 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.

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The refinery is at the centre of a dispute between Hungarian 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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The planned refinery has been downsized to a $5bn plant from an original $10bn-$12bn refining and petrochemical complex proposed under the previous government, which has been plagued by scandals involving hundreds of overpriced, defective or unfinished infrastructure initiatives. New president Lenin Moreno, once an ally of former president 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 suspected 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, created 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 Ishpingo-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 growing 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 assistance directly to the Venezuelan people to alleviate the

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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 contributed 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 attention to the multiple crises in Venezuela,” the State Department said. South American governments already have been pressing Washington for more action. The Lima group — comprising 13 Latin American countries and Canada — has condemned Caracas’ 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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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 hemisphere 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 bituminous 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 September 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 association 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 Guangdong 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-bituminous 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 lowest, at just 1.5mn t.

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Indonesian producers — shipping thermal coal, mostly subbituminous 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 discount 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 imports. 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

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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 average 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 possibility, 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 province on 8 January, while the power load in Shanghai municipality 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, meeting 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

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capacity being phased out during 2017-20 to reach an estimated 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 gasfired 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 coalto-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 projects carried over from 2017 but will not launch new conversion 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 steadily 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 authorities 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, Shandong 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.

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The Hebei provincial government admitted on 11 December that their coal-to-gas conversion plans had been overambitious. 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 pollution 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, according 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, particularly 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 Mongolian 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.

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Energy Argus Petroleum Coke

Issue 18-5

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 Japan in December with 3.64mn t, up by 39.5pc from in November. 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 Colombia climbed by 5.5pc to 261,400t. Volumes from Mozambique fell by 6.9pc to 105,700t. Japan also imported 19,800t of coking 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 mislabelled low-ash thermal coal that is used by steel producers at their captive power plants.

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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 impacts 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 Alberta’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 construction 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, citing environmental concerns.

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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 technical underpinning of that decision,” chief executive Russ Girling said at an investor conference in Whistler, British Columbia. The Nebraska Public Service Commission in November

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Consulting Events

Energy Argus Petroleum Coke

Issue 18-5  |  Wednesday 31 January 2018

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 Mexican 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 wastewater. „„ 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 resulted 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

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generation plant is operational, but all processing units — including the catalytic cracker that is undergoing planned repairs — 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 peninsula, 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 suffered 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 refinery 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 supply 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 contracts 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

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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. „„ Spanish oil group Repsol is starting up units at its 120,000 b/d Coruna refinery that were affected by a power outage on 29 January. Repsol did not say which units were affected by the power outage, which set off the refinery’s flares.

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Middle East „„ Kuwait’s 440,000 b/d Mina al-Ahmadi refinery is undergoing 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 Abdullah 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 expected to complete the venture by the end of 2018.

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