High Temperature Coal Tar Will Face Worse Loss in Second Half of 2022
Click:0    DateTime:Sep.27,2022

By Bian Xiaosong, SCI99.COM

Chinese high temperature coal tar has been in high demand and short supply for a long time. Though without much workload and profitability, in the first half of 2022, high temperature coal tar still ran at a high price, while in the second half, the supply will become worse, especially deep-processing industry. With high cost difficult to decrease, the industry competition will upgrade.

Cost increasing for all products

From the industry chain (Table 1), the price of high temperature coal tar surged, of which anode carbon block, coal tar and anthracene oil ranked the top three. Most investigated products grew by more than 40%, except for carbon black less than 20%. Despite the severe short supply of coal tar, domestic region was resilient in the first half of 2022. And affected by coking profits, declining start-up and increasing capacity of deep processing products, the short supply of coal tar brought about rising market price, and in the first half of 2022 the price soared to a higher height. 

6-T1

Profits of industry chain decreased

From the comparison of industry chain (Table 2), as the high cost led by low demand can’t be cut, the overall profits decreased in the first half of 2022 in the fields of domestic coal tar, deep processing of high temperature coal tar and carbon black. And profits of carbon black industry plunged, which lied in the increasing raw material cost. Meanwhile, since the increase of product price couldn’t keep pace with that of material, downstream tire market tended to be languished, and industry profits decreased. And profits of coking industry also gradually declined, major coal tar market profits maintained in the general level, but the price of coking coal increased dramatically, so cost pass-through became more difficult. Though byproduct market of coal tar operated well, but with small market share, it didn’t have enough market back-up. Deep processing industry of high temperature coal tar has been in the red, with raw material price running at a high level, and deep processing products facing much pressure, above all the uncompetitive industry caused by overproduction is still obvious. With profits dropping sharply, the industries of coke and carbon black used output-reduction to deal with it, which led to the start-up decrease. However, the start-up operation rate itself of deep processing industry is low, profits reducing slightly, so it didn’t have any big change.

6-T2

Capacity growth of coal tar and deep-processing industry is inconsistent

In the first half of 2022, coking capacity gradually declined domestically (Pic 1). New replacement capacity steadily increased (Pic 2), which is higher than backward production capacity for two years. And within the next 1 to 2 years, the capacity will increase slightly. According to statistics, in the first half of 2022, the capacity by Chinese coking device was 23 415 000 t/a, the backward production capacity was 7 560 000 t/a, so the net growth was 15 855 000 t/a, which amounted to the capacity of high temperature coal tar 634 200 t/a. Though the capacity grew, start-up of coking still dropped. The overall supply of coal tar fell slightly (Table 3). But main downstream deep-processing industry of coal tar whose capacity reached 26 510 000 t/a. Although industry overproduction is obvious, but in recent 2 years the industry has developed quickly. The imbalance between supply and demand still hold down the development of downstream deep-processing industry.

6-P1

Pic 1 Statistics of new and backward coking production capacity from 2018  to the    first half of 2022

6-P2

Pic 2 Statistics of new deep processing capacity of coal tar from 2021 to the             first half of 2022

6-T3

Supply still tends to be tight

Due to the difficulty in eliminating downstream backward production capacity and ongoing production increase, the supply shortage of Chinese high temperature coal tar became severe. In the first half of 2022, the output of domestic high temperature coal tar was 8 472 800 tons, and the consumption of downstream market was 8 525 600 tons. The supply and demand face acute conflicts (Pic3). Coking capacity increased, but the start-up dropped. And with profits loss, coking enterprises still volunteered to reduce production, which resulted in an output decrease of byproduct high temperature coal tar. But the capacity in downstream industries continued to increase and so did the competitiveness of raw material for new company. In the second half of 2022, the shortage supply of high temperature coal tar will be more critical.

6-P3

Pic 3 Supply and demand data comparison of high temperature coal tar from 2018      to the first half of 2022

In the first half of 2022, the domestic market of high temperature coal tar ran well, but an imbalance of supply and demand led to a tight market. Supply fell short of demand in downstream market, which led to the enterprises willing to invest in the market. Although the terminal market ran not so well and major deep-processing industry of high temperature coal tar didn’t make much profit, enterprises purchased actively to satisfy normal production. In the first half of 2022, the market price of high temperature coal tar kept increasing (Pic 4).

6-P4

Pic 4 Statistics of monthly average price of high temperature coal tar in the              first half of 2022

Deep processing industry is expected to face worse loss in the second half of year

In the second half of 2022, new coking capacity is expected to reach 43 885 000 t/a, backward production capacity 39 940 000 t/a, and the net increase 3 945 000 t/a. The coking capacity will maintain a small increase in the second half. Affected by profits loss, coking enterprises will significantly limit production in the second half. Therefore, the output of high temperature coal tar is challenging to increase and so is the tight supply. September and October are traditionally seasons of mass consumption, plus storage for national holiday, the output of high temperature coal tar is likely to increase, but with the imbalance of supply and demand, its market price tends to be challenging to drop but easy to increase. The overall situation will stay good.

    In the second half, new capacity of deep-processing coal tar is expected to achieve 750 000 t/a, and capacity base will keep increasing. Therefore, raw material will be more competitive, which can result in ongoing tight supply and rising price of high temperature coal tar. But with languished market of carbon black, electrolytic aluminum and phthalic anhydride, deep-processing industry will be more competitive and normally operate with low start-up and profitability. However, the raw material’s price still has tendency to increase, and the deep processing loss of high temperature coal tar will be worse in the second half.