As domestic power shortage emerged in East China during the past two months, the local government began to ration power supplies to energy-intensive industries. However, the power blackouts have not greatly impacted on domestic demand for green petroleum coke (GPC), C1 found.
GPC demand remains stable from the major downstream consumers like domestic aluminum, iron and steel sectors, which does not see impacts from the electricity shortage.
The aluminum sector is the largest GPC consumer. Demand from the sector takes up 64% of China's GPC consumption. China yielded 17.8-mil mt of silicon in 2010, up 20% year-on-year. GPC demand from the sector totaled 12-mil-mt in the year, 3-mil-mt higher than 2009.
Run rate in domestic aluminum plants maintained at as high as over 90% during the past two months. This is because most aluminum plants are based in Shandong and Central China's Henan rather than the power-shortage-hit East China.
Some industry sources estimate May run rate in domestic iron and steel plants will keep stable. For example, two of China's iron and steel giants, BaoSteel and NingboSteel will keep their May output flat with April at 1.42-mil mt and 0.25-mil mt respectively, according to statistics by Steelease, the leading integrated service provider in China's steel market
In the long run, domestic power shortfall will not cast significant negative impacts on the aforementioned sectors and hence their demand for GPC. A steel industry source cares little for the power shortfall, citing that domestic steel sector saw little output loss during last year's power-rationing periods. With most downstream industries remaining in stable operation, GPC demand will keep generally stable.
However, the silicon sector, forced to cut operation, does show lower demand for green petroleum coke (GPC). But as consumption from the silicon sector takes up only small shares in domestic total GPC output, GPC consumption loss is minor, C1 found. For example, domestic silicon output totaled 84,000mt in March. 59,000mt of high-sulfur GPC were demanded to produce them, which accounted for merely 11% of domestic high-sulfur GPC total output.
According to a research into the operation rate of China's 118 silicon plants by Shanghai Metals Market (SMM), the leading integrated service provider in China's non-ferrous metal market, run rate averaged 44% in April, down 4 percentage points on month. If the electricity shortfall becomes more serious, operation rate may further decline to around 35%, which means, GPC demand from the sector will further slide, according to a silicon market analyst.
As for fuel-grade GPC, although surging domestic coal prices kept spurring up fuel costs of coal-fired generators during the past eight weeks, GPC still has not shown economic advantage over coal as a burning substitute, C1 found.
Currently, mainstream trading prices of homemade high-sulfur GPC are at Yuan 1,575/mt and those of imported fuel-grade cargoes at Yuan 1,150-1,180/mt. In theory, GPC prices must drop below Yuan 1,155/mt to be an equal substitute for coal. GPC prices must go below Yuan 908/mt to be a profitable substitute for coals, according to C1's calculation.
