China's Petroleum Coke Output May Show an Inverted V Trend in the Next Five Years
Click:13    DateTime:May.24,2022

Zhang Xiaojie, Business Planning Department of Tianjin

Petrochemical

China’s petroleum coke capacity reached 140.35 million tons in 2021, up by 0.67% year on year, and the total output was 27.49 million tons. Regional independent refineries ranked first in terms of both capacity and output, and their output accounted for 43.98% of the domestic total. In 2021, China's apparent consumption of petroleum coke was 40.05 million tons, up by 6.8% year on year.

Supply

1. Capacity

The total capacity of 140.35 million tons in 2021 included Sinopec’s 47.95 million tons, PetroChina’s 19.2 million tons, CNOOC’s 8.6 million tons, and regional refineries’ 64.6 million tons. Major suppliers reported limited change in the capacity, while there were some changes in the capacity of regional refineries. To be specific, in Shandong, refineries such as Qingyuan Petrochemical, Qicheng Petrochemical, Fuyu Petrochemical and Hengyuan Petrochemical drove out of 2.4 million t/a delayed coking capacity in total; Jincheng Petrochemical's 2 million t/a delayed coking unit increased its capacity.

According to the distribution of petroleum coke capacities, Sinopec holds more Sinopec coking units than PetroChina and CNOOC, and the former’s capacity is also bigger than the latter two. Regional refineries grew fast, with their capacity and output exceeding Sinopec’s. Sinopec’s petroleum coke units,widely distributed in North China, Shandong, East China, South China, areas along the Yangtze River and Northwest China, are mainly producing 2#, 3# and high-sulfur petroleum coke. PetroChina's petroleum coke units are mainly settled in Northeast China, Northwest China and North China, and the core products in Northeast China are 1# petroleum coke.

Table 1 shows the capacity of China’s petroleum coke producers in 2021.

5-T1

2. Output

The domestic output of petroleum coke was 27.488 million tons in 2021, with a year-on-year increase of 293 000 tons or 1.1%. Figure 1 compares China's petroleum coke production in 2020 with that in 2021. Figure 2 shows the output of petroleum coke by region in 2021.

31-1

Figure 1 China's petroleum coke production, 2020-2021


5-P2

Figure 2 Distribution of China’s petroleum coke output in 2021


Consumption

China's petroleum coke output was largely pegged at 27-28 million tons during 2017-2020. In 2017, the consumption of petroleum coke increased sharply, as the supply side reform policy drove up the profits in the downstream electrolytic aluminum and steel industries and hence the production of these downstream products.Accordingly, new coking capacities were put into production and the domestic petroleum coke output increased to over 27 million tons. In the meanwhile, the perk-up in domestic petroleum coke demand was directly attributed to a sharp increase in the import volume in 2018. This, combined with the sharply increased domestic output, led to an oversupply of petroleum coke in China.The downstream demand weakened in the second half of 2018. The weakness extended into 2019, and hence the consumption of petroleum coke slowed down. As a result, both import and export volume decreased. In the first half of 2020, domestic petroleum coke supply decreased as producers trimmed and even halted production due to the outbreak of COVID-19; in the second half of the year, the export decreased sharply amid the pandemic, and the consumption of petroleum coke was mainly covered by domestic demand. In 2021, the electrolytic aluminum industry reported an increase in profits as a result of the continuous rise of aluminum prices. Thus, the demand for petroleum coke strengthened and the prices of petroleum coke reached new highs, which triggered an influx of import volume. Meanwhile, the export market was lukewarm. The total supply exceeded 40 million tons during the year, and the total consumption exceeded 38 million tons. Table 2 indicates the balance of China's petroleum coke production and demand from 2017 to 2021.

5-T2

Prebaked anode, fuel, silicon, carburizing agent, graphite electrode and negative electrode materials remained as the key derivatives in 2021. The domestic consumption of petroleum coke was about 40.05 million tons during the year, of which, the consumption of petroleum coke in the field of prebaked anode accounted for 57.77%; that in the fuel field took up 22.32%; that in the silicon carbide and silicon metal sectors accounted for 4.89%; that in the fields of calcined coke carburizer, graphitization, semi graphitization and negative insulation material accounted for 4.32%; that in the graphite electrode field accounted for 1.76%.

The supply of petroleum coke tightened in 2021, as the government implemented production restrictions as well as the control over both the quantity and intensity of energy consumption. Therefore, the import of petroleum coke increased significantly. The import volume of green coke hit 12.52 million tons, up by 2.46 million tons or 24% year on year, of which, the volume from the United States surged, accounting for 47% of the total import. The import volume of petroleum coke fluctuated upward from 2017 to 2021, and it exceeded 10 million tons in 2020, hitting a record high. From the second half of 2018 to 2019, the demand for petroleum coke weakened, leaving the domestic petroleum coke capacity oversupplied. This, coupled with the 25% additional import tariff imposed by the United States, resulted in a reduction in the import volume of petroleum coke. In March 2020, importers were allowed to apply for tariff exemption, which attracted a huge influx of lower-priced foreign fuel grade petroleum coke. The total import volume was on a rise during the year, despite the outbreak of COVID-19 hampered importing in the second half of 2020.

Downstream demand forecast of China's petroleum coke in the next 3-5 years

In recent years, the consumption of petroleum coke has been concentrated in the fields of prebaked anode and electrolytic aluminum, with that in the prebaked anode sector accounting for 57.74%. In 2021, electrolytic aluminum, metal silicon and silicon carbide producers were excited by the high profits in these sectors, but power blackouts kept a rein on the high energy consuming industries, so the demand for petroleum coke has been growing, but not in a full swing. 

The operating rates of calcined coke and prebaked anode plants were lower than expected in 2021, as the start-up and production resumption schedules were affected by the government’s implementation of production restrictions as well as the control over both the quantity and intensity of energy consumption. However, the demand for petroleum coke remained robust. In the next five years, new capacities of prebaked anode and electrolytic aluminum will be released. The operating rates of electrolytic aluminum plants will stay elevated as a result of robust transactions of the carbon for aluminum. Thus, the demand for petroleum coke may continue to increase.

The demand is expected to largely remain at around 38 million tons in the next five years. As for the largest downstream electrolytic aluminum market, the overall profits are considerable and the supply is tight, so it is expected that the demand for petroleum coke will be as high as 22.8 million tons in 2022, and then will stabilize. In the field of fuel, some glass plants show rigid demand for petroleum coke, and refineries’ CFB boilers will increase in line with the investment and construction of large oil refining projects. However, the demand from sectors replacing coal such as traditional power plants, will decrease year by year following the implementation of carbon peak policy. Metal silicon, negative electrode materials and graphite electrodes are in the loop of the government’s energy supportive policy for the future, so the consumption for petroleum coke is likely to increase. The consumption of graphitized carburizing agent - a by-product of negative electrode materials, is expected to increase in the future. There will be limited export room for calcined coke carburizer due to lukewarm demand from overseas, so the demand for petroleum coke will be stable.

Petroleum coke market outlook

In a nutshell, the output of petroleum coke - a by-product of coking units, is relatively passive, that is, it is mainly determined by the oil market.

According to the given information of changes, the new capacity plans and the risk of capacities being driven out of the market, the capacity of domestic delayed coking units will increase first and then decrease in the next five years. It is expected that the output of domestic petroleum coke will show an inverted V trend from 2022 to 2026, based on the data of domestic delayed coking capacity in the next five years and the factors affecting the output of petroleum coke such as low sulfur marine fuel oil.

With the sound development of downstream aluminum carbon market, the demand for petroleum coke from prebaked anode and terminal electrolytic aluminum producers may continue to increase. The consumption of petroleum coke in the fuel field will keep rising as refineries keep more coal for captive use due to the tight supply of the material. Demand from graphite electrode, metal silicon, negative electrode materials and carburizing agents will also continue to increase in line with robust end-user demand.

Influence of macroeconomy on petroleum coke-related industries

1. China released a white paper titled "Responding to Climate Change: China's Policies and Actions" on October 27, 2021, to document the country's strategy to actively respond to climate change.

The policy of achieving "carbon peaking and carbon neutralization" goals repeatedly mentioned in 2021 can not only boost the development of EAF steelmaking and anode materials, but also inhibit the demand from prebaked anode and fuel sectors. In the longer run, it will promote the demand for low-sulfur petroleum coke, but it will hamper the demand for medium and high sulfur petroleum coke.

     2. The National Development and Reform Commission issued the Action Plan for Strictly Constraining Energy Efficiency and Promoting Energy Conservation and Carbon Reduction in Key Industries of Metallurgy and Building Materials (2021-2025), which proposed to promote the optimization and adjustment of industrial structure. The Plan attached importance to the industrial layout, structural adjustment, energy conservation review, and the control over both the quantity and intensity of energy consumption. It suggested promoting the centralized development of electrolytic aluminum industry, improving the level of intensification and modernization, seeking benefit by scale and reducing the energy consumption of per unit product. It also put forward faster merger and reorganization of electrolytic aluminum industry.