Petroleum Coke - Economics in Cement Kilns

Petroleum coke economics in cement kilns to 2016
Kerry Satterthwaite
23 May 2013
Disclaimer
The statements in this presentation represent the considered views of Roskill Information Services Ltd. It includes certain statements that may be deemed "forward-looking statements. All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Roskill Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions. While Roskill Information Services Ltd. has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.
Table of contents
Cement fuel market Role of petroleum coke Petroleum coke is a by-product and priced to MOVE Delivered petroleum coke price must be less than delivered coal price on a per GJ basis How much less? -> delivered prices comparison
Where are the cement customers? Where are their petroleum coke suppliers?
Future economics and conclusions
Quantifying the cement fuel market
Quantifying the cement fuel market

2012: Cement production 3,700 Mt
Assumptions:
Energy consumption Energy demand in 2012: 300Mt of coal equivalent % that is alternative (not coal or petroleum coke): Still <5% overall worldwide but could reach 12% by 2016 (see, for example, Lafarges landfill mining efforts in China or HeidelbergCements Sustainability Ambitions) 750-900 kcal/kg clinker
Cement sales by leading producers
Company Anhui Conch Holcim Lafarge Heidelberg Cement Cemex Italcementi Buzzi Unicem Taiheiyo Eurocement Grasim (Aditya Birla Group)
Total production capacity (Mtpy) 209.0 217.5 217.0 122.0 94.8 2 74.0 41.6 38.9 3 39.2 4 51.8
Total cement sales (Mtpy) 187.0 148.0 141.1 89.0 65.8 2 51.1 27.3 14.6 2 30.0 2 40.0
1
Source: Company presentations of 2012 results Note s: 1 Cement and clinker sales are combined for Anhui Conch. The company plans to increase cement production capacity to 231.5Mtpy during 2013 2 Roskill estimates based on company reports 3 Eurocement plans to increase total production capacity to 45.4Mtpy by 2017 4 Grasim plans to increase total production capacity to 62Mtpy by 2014
Source: Gypsum Global Industry Markets and Outlook, 11th edition, 2013, Roskill
Recent quotes from cement producers on fuel

Anhui Conch: A volatile construction industry, FUEL COSTS and the risks of further government regulation constitute our greatest risks to 2017
Lafarge: While we take a number of steps designed to manage energy and FUEL COST RISK, these measures may not be fully effective in protecting us from this risk
Holcim In our industry, companies that procure more efficiently in 2013 will have a cost, and therefore a competitive, advantage
Roskill observation: Cement is one of very few energy-intensive materials that saw its prices FALL over the period 2007-2012 despite a rising cost base of between 5% and 25% over the same period
The role of petroleum coke
Typical fuel breakdown for a major cement producer in 2013
Biomass 2% Alternative fuels 10%
Natural gas 5%
Shale/lignite 5% Heavy fuel 1%
Coal 57%
Petroleum coke 20%
Source: Roskill based on 2012 annual results for selected major cement producers
Advantages and disadvantages of petroleum coke versus thermal coal
Disadvantages
Advantages
Petroleum coke is relatively difficult to burn and has to be blended with coal Petroleum coke can be hard to grind High sulphur content can present SOx challenges
Price Price Price
Can have a high metal content
10
Petroleum coke trade flow pre 2009
11
Petroleum coke trade flow 2012 to 2016
12
Fuel grade petroleum coke trade flow has changed oceans
Source: Global Trade Atlas
13
China also now the main prop of the Asian market for thermal coal
Source: Xinhuas China Economic Information Service
14
Baltic Dry Index of Ocean Freight Costs
15% Africa
32% Europe 99% USA
2% Asia
40% Other
15
Delivered prices: petroleum coke price as a % of thermal coal price
Source: Petroleum Coke Global Industry Markets & Outlook, 2012, Roskill
16
Price of fuel grade petroleum coke imports into Asia (US$/t)
Source: Petroleum Coke Global Industry Markets & Outlook, 2012, Roskill
17
Carbon footprint
Petroleum coke is a waste by-product It is produced as part of oil refineries quest to maximize refinery profitability This is important when considering relative impacts of the use of petroleum coke versus use of fossil fuels in power generation Coal, oil and natural gas are discretionary extracted fuels and every GJ extracted has a carbon footprint associated with that discretionary use Petroleum coke, a by-product of the production of transportation fuels, is produced as the demand for transportation fuels, the crude feed slate and the refinery design dictates
Future economics and conclusions
Predictions to 2016
Cement production will continue to grow in all regions outside Europe, with pricing gains everywhere Cheap energy sources are required to fuel this growth Petroleum coking capacity (fuel grade) worldwide will increase by 4%py to 2016. Roskill expects fuel grade petroleum coke production to total 143Mt by 2016. 30Mt of this will end up in cement kilns America to Asia is by far the largest trade flow for petroleum coke Low international shipping freight rates are facilitating this globalisation Fuel grade petroleum coke will always be priced to move so delivered prices will continue to be positioned lower than delivered coal prices on a per GJ basis
Petroleum coke Global Industry Markets & Outlook 6th edition, 2012
Get accurate answers from independent experts
Gypsum & anhydrite Global Industry Markets & Outlook 11th edition, 2013
Contact Kerry Satterthwaite kerry@roskill.co.uk
Thank you very much for your attention Any questions?

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Petroleum coke economics in cement kilns to 2016

Quantifying the cement fuel market

Quantifying the cement fuel market

Cement sales by leading producers

Recent quotes from cement producers on fuel

The role of petroleum coke

Typical fuel breakdown for a major cement producer in 2013

Biomass 2% Alternative fuels 10%

Shale/lignite 5% Heavy fuel 1%

Petroleum coke 20%

Advantages and disadvantages of petroleum coke versus thermal coal

Price Price Price

Can have a high metal content

Petroleum coke trade flow pre 2009

Petroleum coke trade flow 2012 to 2016

Fuel grade petroleum coke trade flow has changed oceans

Source: Global Trade Atlas

Source: Xinhuas China Economic Information Service

Baltic Dry Index of Ocean Freight Costs

Delivered prices: petroleum coke price as a % of thermal coal price

Price of fuel grade petroleum coke imports into Asia (US$/t)

Future economics and conclusions

Thank you very much for your attention Any questions?

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