It’s easy, though, to forget how new is aluminum relative to other industrial metals, which have been mined for centuries. There may be an element of hyperbole in that comment.īut the authors of the report are adamant that availability of petcoke is a ticking time bomb for the aluminum industry and one that sits at the heart of every potline of every smelter.Ī raw material shortage limiting aluminum production has never been seen before and may seem fantastic even now, given the entire industry’s focus is currently on producing less not more metal. “This looming shortage of petcoke is as important to the aluminum industry as the discovery of the Hall-Heroult process”, according to Cascade’s Stuart Ehrenreich, referring to the break-through technology that allowed the commercialization of aluminum production in the nineteenth century. Unlike bauxite and power supply, aluminum producers have little say over how much suitable coke is produced by oil refiners, who are first and foremost in the business of producing oil and other higher-value petrochemical products.Ĭoke is the unlikely Achilles heel of the world’s aluminum producers and, if the study is to be believed, one that could force profound changes on the entire aluminum supply chain. With the next major producer, the U.S., also characterized by a long-term shift to shale oils and a long-term decline in anode-grade coke, any change to China’s supply will simply accelerate the time-line of chronic shortage. Indeed, they will themselves struggle to source sufficient supply for their own operations. If it does, Chinese smelters will have no choice other than to switch to low-sulphur petcoke, in effect killing off supply to the rest of the world. ![]() The concern for AZ China is that Beijing will adopt what is the recognized industry standard of three percent sulfur as the cut-off point. Indeed, the law calls for a new national standard. There is no definition of “unqualified” yet. In essence the rapid build-out of Chinese smelter capacity has seen “a race to the bottom of the quality spectrum” in terms of petcoke.Ī race to the bottom that has just attracted the attention of the Chinese authorities.Ī new law was signed earlier this month prohibiting the import, sale or burning of “unqualified” petcoke. Its smelters are also using some 4.0-4.5 million tonnes of higher-sulphur coke, “fuel coke”, allowing the country to remain a net exporter of the good stuff to the tune of around 2.0 million tonnes. There is no easy cost point at which the supply chain can react, unlike most other metals, where mining is the response valve.īut might that all change in a couple of years time? Might the aluminum production sector, currently swamped with excess output, face its own supply chain challenge? Which is why the aluminum sector has a long, long history of over-producing during times of demand and price weakness. Electricity, the second most important input for making aluminum, acts as a brake on industry’s responsiveness to low prices because so many smelters have locked themselves into long-term supply contracts. Smelters, meanwhile, are capital intensive to build and costly to shut down. Chinese smelters have wasted no time simply switching sources, particularly to Malaysia, a country with virtually no bauxite sector until one was needed. That abundance of supply has been proven by Indonesia’s ban on exports of bauxite to China. Widespread allegations that some of these are “fake semis” have added extra heat to already simmering trade tensions.Īluminum’s problems have a lot to do with the metal’s production process.īauxite, the key metallic input, is a commonly occurring mineral and one that can be easily scooped out of the ground without the need for “hard rock” mining. But not enough, particularly in China, which is exporting its surplus to the rest of the world in the form of semi-fabricated products. There have been plenty of smelter closures and curtailments. ![]() London Metal Exchange metal for three-month delivery is currently trading just above $1,600 per tonne, a level which is simply not sustainable for many higher-cost producers. An employee operates a truck at a foundry shop of the Rusal Khakassia aluminium smelter outside the town of Sayanogorsk, Russia, September 3, 2015.
0 Comments
Leave a Reply. |