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Analysis of Chinese carbon industry Tian Kai, General Manager of Shandong Qianhao Carbon Co., Ltd. May 2016 Cell phone: 13953319393 Telephone: 0533-8517333 Fax: 0533-8520081 E-mail: 67754166@qq.com World Aluminum Raw Materials Summit 2016 ——————————————————————————————————————————————————————————————————————————————
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World Aluminum Raw Materials Summit 2016 ———————————————————————————————————————————————————————————————————————————— Introduction: The year 2016 is the first year of China’s13th Five-Year Plan and also a critical period for China to deepen economic reform. Faced with continuous economic reforms, especially economic structural reforms which focus on reducing overcapacity, destocking, deleveraging, reducing costs and shoring up weak growth areas, the electrolytic aluminum industry is bound to reduce excess capacity and operation costs, which will exacerbate the competition among enterprises. We are going to analyze the status quo of Chinese carbon industry, forecast its development trend, exchange information and views, and discuss countermeasures to strive for mutual development and shared prosperity.
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World Aluminum Raw Materials Summit 2016 ———————————————————————————————————————————————————————————————————————————— Content 1. Analysis of Chinese electrolytic aluminum market in 2015 2. Analysis of the status quo and development trend of Chinese carbon industry 3. Exports of Chinese prebaked anode 4. Difficulties and future of carbon industry
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World Aluminum Raw Materials Summit 2016 ———————————————————————————————————————————————————————————————————————————— 1. Analysis of Chinese electrolytic aluminum market in 2015 The Chinese electrolytic aluminum industry continued to develop in 2015. Aluminum output increased by 10.6% YOY to approximately 31.11 million tons during the year and the total running capacity of electrolytic aluminum enterprises was around 37.2 million tons by the end of 2015, showing that the Chinese electrolytic aluminum industry maintained an upward trend. Although some enterprises have stopped or reduced production in recent years, the total output continues to rise and hovers around high levels. The main reason is that the new capacity which has been put into production in West China is far more than the backward capacity which has been slashed, causing the market to remain oversupplied. Judging from the current market situation, the electrolytic aluminum output in China will continue to rise marginally in 2016.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— The above chart shows that the total electrolytic aluminum output in China was on the rise over the past ten years, with the exception of 2009 when the total output fell back slightly due to the financial crisis in 2008. Chinese electrolytic aluminum output during 2005-2015
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7th World Aluminum Raw Materials Summit 2016 ———————————————————————————————————————————————————————————————————————————— Chinese electrolytic aluminum output by province in 2015 (Unit: 10,000t) ProvinceDesign capacityOutput in 2015Output in 2014Up/Down (YOY) Shandong84471158122% Xinjiang81361945735% Inner Mongolia35431825425% Henan393286327-12% Gansu30026023411% Qinghai288218237-8% Yunnan1581301226% Ningxia255120137-12% Shanxi1077388-17% Guizhou126685620% Shaanxi766163-3% Chongqing7454533% Sichuan924966-26% Guangxi104453722% Hunan332733-17% Others14774688% Total41643113281311%
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World Aluminum Raw Materials Summit 2016 ———————————————————————————————————————————————————————————————————————————— With a design capacity of 8.44 million tons per year, Shandong province produced around 7.11 million tons of electrolytic aluminum in 2015, recording an increase of 22% YOY. In 2015, the output of the province, which accounted for 22% of the national output, ranked first in China. With a design capacity of 8.13 million tons per year, Xinjiang witnessed an output of around 6.19 million tons during the year, representing a rise of 35% YOY and making up 20% of the total output in China. As around 1-2 million tons of new capacity will be released during 2016, the Chinese electrolytic aluminum output is expected to continue to rise slightly in 2016. According to statistics released by relevant professionals, around 3.57 million tons of new electrolytic aluminum capacity was put into production in 2015, down by roughly 500,000t from 2014, and about 660,000t of new capacity is expected to come on stream in 2016. The running capacity of Chinese electrolytic aluminum enterprises was around 37.20 million tons by the end of 2015 with capacity utilization rate reaching 79.6%, which belonged to the normal range. Shandong, Xinjiang, Henan and Inner Mongolia have become major producing regions with an annual output of 8.06 million tons, 5.86 million tons, 3.26 million tons and 2.60 million tons respectively in 2015. The combined output of these regions accounted for about 63% of the national output in 2015.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— New electrolytic aluminum capacity in China to be put into production in 2016 Company Design capacity Running capacity Capacity to be released Capacity expected to be released in 2016 East Hope240120 Undetermined Xinjiang Tianshan Aluminum Co., Ltd. 16012020 Xinjiang Jiarun Resources Holdings Co., Ltd. 905199 Xinfa Group210110 Undetermined Inner Mongolia Jinlian Aluminum Co., Ltd. 18060100Undetermined Qinyi Group1050100Undetermined Guangxi Baikuang Aluminum Co., Ltd. 300 Shanxi Huaze Aluminum & Power Co., Ltd. 423577 Total1057496 66
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— Domestic aluminum consumption has been rising in recently years with the growth rate always being better than expected. The output of aluminum products has increased remarkably in China, while exports of these products have also maintained strong momentum. As a result, investors have continued to increase their investments with optimistic expectations. About 4.96 million tons of design capacity is expected to be put into production in 2016. However, as there is no obvious improvement in downstream demand and prices for the material still hover around low levels, some enterprises haven’t decided the release time and specific volume to be released, such as East Hope, Xinfa Group, Inner Mongolia Jinlian Aluminum Co., Ltd. and Qinyi Group. As aluminum prices have picked up recently, these enterprises are expected to speed up capacity release.
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World Aluminum Raw Materials Summit 2016 —————————————————————————————————————————————————————————————————————————— Xinjiang Tianshan Aluminum Co., Ltd. and Jiarun Resources Holdings Co., Ltd. plans to put 200,000tpy and 90,000tpy of electrolytic aluminum capacity into production respectively after the Spring Festival, while Guangxi Baikuang Aluminum Co., Ltd. gradually started electrolytic aluminum cells last December. Shanxi Huaze Aluminum & Power Co., Ltd. plans to commission the electrolytic aluminum project with an annual capacity of 70,000t in 2016, but when to start the project depends on the market situation. China is facing severe overcapacity in the electrolytic aluminum sector, which will be addressed by the Chinese government in 2016. In view of the market situation in 2015, enterprises in Henan, Qinghai, Hubei, Gansu, Sichuan and other traditional producing regions generally controlled or reduced output during the year. Therefore, it is expected that the release of new capacity will slow down in 2016.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— At present, China's electrolytic aluminum industry has taken the leading position in terms of the capacity, output as well as the technology and equipment level. With strong scientific research and innovation ability, the industry has a strong competitive advantage in the international market. However, as the central government put forward the reform concept of "structural adjustment" in late 2015, the industry is now confronted with the task of capacity optimization and adjustment. China witnessed a total reduction of around 3.75 million tons in electrolytic aluminum capacity during 2015, while the total capacity was slashed by about 1.65 million tons in 2014. Although domestic aluminum prices have picked up by about 10% compared with the rock bottom price seen last year and are close to the average production cost, most enterprises which suspended production haven’t resume operation rashly as the restarting cost is relatively high.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— Chinese electrolytic aluminum reduced capacity in 2015 (Unit: 10,000t) ProvinceReduced capacity Design capacity Output in 2015Up/Down (YOY) Henan43393286-12% Shanxi1110773-17% Qinghai26288218-8% Sichuan399249-26% Ningxia32255120-12% Yunnan231581306% Guizhou201266820% Chongqing2376543% Inner Mongolia1235431825% Gansu6230026011% Shandong3474471122% Hunan163327-17% Liaoning25704573% Hubei93010-37% Total37530262368-2% The above chart shows that Gansu province, which slashed 620,000tpy of capacity in 2015, ranked first, followed by Henan with a capacity reduction of 430,000tpy. The average power charge of the two provinces was RMB0.38/KWh and RMB0.40/KWh respectively during the first three quarters of 2015.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— Chinese electrolytic aluminum prices continued to decline during the first eleven months of 2015. Prices for the material slid to RMB9,700/t last November, hitting a record low since 1994. Therefore, the majority of electrolytic aluminum plants suffered heavy losses and cut output. The reduced capacity was expected to be above 4.5 million tons per year in 2015, but as some local government didn’t approve of the shutdown of some plants and promised to give subsidies on power charge, the reduced capacity was actually about 3.75 million tons per year. At present, the gap in production costs witnessed by different regions can mainly be attributed to different power prices. For example, the power charge in Xinjiang is RMB0.21-0.25/KWh, while that in Henan is RMB0.45/KWh on average. However, it is hard to calculate the production cost in Shandong as local electrolytic aluminum producers use the power generated by their own power plants. Whether the capacity expansion will slow down or not? Will the growth rate of domestic aluminum consumption be parallel to that of output and capacity? Will global market supply be in line with or exceed demand? All of the above factors will affect the development of the electrolytic aluminum industry in China.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— Aluminum price trend from January 2015 to April 2016
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World Aluminum Raw Materials Summit 2016 —————————————————————————————————————————————————————————————————————————————— 2. Analysis of the status quo and development trend of Chinese carbon industry The Chinese prebaked anode market remained bleak during 2015 due to the slow recovery of global economy and sluggish demand. The whole carbon industry continued to struggle during the year and saw a decline in profit margins despite the high operating rate. What’s more, downstream electrolytic aluminum industry faced greater financial strain because of continuous losses, which had a negative effect on the carbon industry. It was a tough year for prebaked anode enterprises with high production cost, environmental protection pressure as well as downstream consumers pressing down prices. Chinese prebaked anode output by month in 2015 (10,000t) Total output of prebaked anode in China was around 5.9 million tons in 2015, down by 6% YOY. Chinese producers of the material saw an average operating rate of around 77.3% with total capacity of around 7.7 million tons per year. As a carbon investor, we should evaluate the market from the entire industrial chain, such as the profit status and capacity of the electrolytic aluminum industry as well as the profit status of our company, to seize opportunities and strive for success.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— The above data show that the prebaked anode market ran slowly in H2 of 2015. Output of the material decreased sharply during the period from August to September 2015 as most plants in Hebei and Henan suspended production for the Victory Day Parade. Some plants in Henan halted production in last December when the SCO Summit was held in Zhengzhou, leading to a small slide in output. What’s more, the government has promulgated new environmental protection law and major producing regions have also implemented strict control measures successively, which has exerted greater environmental protection pressure on carbon producers. As a result, producers are often seen to reduce or control output and increase investments in environmental protection and technical transformation at the same time.
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World Aluminum Raw Materials Summit 2016 ————————————————————————————————————————————————————————————————————————————— Shandong ranked first in terms of commercial prebaked anode output in 2015. With an annual capacity of around 4.2 million tons, Shandong province produced roughly 3.43 million tons of the material during 2015 and registered an operating rate of around 82%. Henan province, whose annual capacity was 1.8 million tons, took the second place with a total output of about 1.2 million tons and an operating rate of around 67.8%. The output of commercial prebaked anode in Southwest, Northwest and other areas was around 630,000t, 340,000t and 280,000t respectively. The capacity and output of prebaked anode used in electrolytic aluminum production were around 10 million tons and 8.25 million tons respectively in China in 2015. Specifically, the capacity of the material was 5.02 million tons in Northwest, 1.31 million tons in East China, 1.46 million tons in Central China, 1.07 million tons in North China, 1.22 million tons in Southwest and 380,000t in Northeast, while the output of these regions was 3.56 million tons, 1.17 million tons, 1.21 million tons, 1.03 million tons, 960,000t and 250,000t respectively.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— China’s commercial prebaked anode production capacity distribution in 2015
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— Prices for carbon products continued to retreat and the profit of enterprises kept falling, all because of overcapacity. Practical problems of market environment and overcapacity in carbon industry became more and more serious in 2015. The change in the government’s relevant industrial policies in recent years, especially the regulation on downstream electrolytic aluminum industry, accelerated production reduction and output control speeds of electrolytic aluminum enterprises that suffer higher electricity prices, and thus caused selling profits of aluminum products to deteriorate, which has exerted a profound influence on the production and operation of carbon enterprises. (Accounts receivable has increased gradually) During 2015, electrolytic aluminum enterprises, as dominant price drivers, shifted price pressure onto prebaked anode enterprises, but the pricing right was held by aluminum enterprises, so prices for prebaked anode are lack of upward momentum, coupled with the increase in the production cost, profits of prebaked anode kept falling and anode enterprises are only able to make thin profits with some of them being even unable to survive with higher production costs.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— Influenced by general background of “supply side” reform, the increasing speed of new electrolytic aluminum capacity will slow down further in 2016. The confirmed amount of new capacity which will be put into operation in 2016 is only around 700,000t. In particular, the expanding speed of 1 million tons of new capacity in Shandong is expected to slow down. Meanwhile, in order to reduce costs, the self-sufficiency rate of anode in electrolytic aluminum plants in Xinjiang region is expected to increase in 2016. According to the statistics, the self-sufficiency rate of anode was around 68% at the end of 2015. China expects to increase 1.83 million tons of new prebaked anode capacity in 2016 and the confirmed amount is around 900,000t. Specifically, Jinan Haichuan, Jiaozuo Wandu, Jingxin Carbon, Jiangsu Suling and Jiayuguan Suotong will increase 100,000t, 150,000t, 130,000t, 180,000t and 340,000t respectively. Most anode enterprises will have to bring in desulfuration or even DeNOx devices to treat chemical odors in 2016 due to increasing environmental pressure. Besides, both wages and benefits of workers will continue to increase. All of the above will further raise production cost of prebaked anode and squeeze profit margin. Demand for Chinese commercial anode is unlikely to increase significantly and the output of anode has decreased sharply. According to producers, they can only manage to perform orders from regular customers mainly because of the financial constraint. It is very hard to collect payment from downstream buyers. Financial constraint remains the most important factor which hinders anode prices to rise and raw material constraint certainly cannot be ignored. Carbon enterprises are struggling to survive.
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World aluminum raw material summit 2016 During 2015, the Chinese prebaked anode market experienced uneven development. Demand in South and Central China reduced gradually, but the Northwest market saw a resource shortage. It is anticipated that prices for prebaked anode are unlikely to rise remarkably in 2016 subject to the international economic environment and domestic market factors. Although carbon industry will suffer increasing pressure, prices and output of will remain stable in the short term thanks to the support from electrolytic aluminum to carbon industry; however, the support from electrolytic aluminum is unsustainable owing to the slowdown in global economic growth. According to experts’ prediction, aluminum prices will suffer severe downward pressure in the middle or long term. Once aluminum enterprises’ losses grow, demand for carbon from downstream electrolytic aluminum will decrease, which will lead some carbon capacity into the dormant state and put additional pressure on carbon industry. Therefore, the whole carbon industry should be cautious about the upcoming risk.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— 3. Exports of Chinese prebaked anode Exports prices of Chinese prebaked anode kept falling in 2015 influenced by demand and competitive factors in the international market. Most export enterprises turned to the domestic market with demand for prebaked anode continuing to increase in the Chinese market; as a result, export volume declined gradually. According to the Statistics from China Customs, China exported around 1.07 million tons of prebaked anode in 2015, down by 6.5% compared with 2014, the value of China’s prebaked anode exports totaled USD530 million in 2015, down by 15.6% over 2014. Exports in December 2015 declined to around 91,000t in December 2015, down by 13.3% month-on-month.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— China’s prebaked anode exports by month (tonnes) China exported more prebaked anode in H1 than in H2. In the middle of 2015, some electrolytic aluminum companies from overseas countries reduced or suspended production, which weakened the demand for anode.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— Malaysia imported around 196,000t of anode from China in 2015, up by 4.6% and ranking first among all importers. However, demand from Malaysia declined sharply in H2 because of cells failure. Around 330,000t of production capacity were affected. Due to poor prices, they didn’t resume production immediately after the maintenance and cut down purchase volume accordingly. Russia and UAE imported around 171,000t and 108,000t of the material respectively in 2015, up by 47.7% and 39.7% compared with 2014, and ranking second and third respectively. RUSAL increased the purchase volume thanks to the maintenance of its carbon companies. RUSAL’s Boguchang Aluminum Company, which located in Siberia and with a planned capacity of 600,000t in 2016, planned to launch 150,000t of capacity in January 2016 with a monthly consumption of 2,000t of anode. RUSAL planned to purchase 270,000t of prebaked anode from China throughout 2016. Alcoa increased export volume as two of its supporting companies in Canada reduced prebaked anode output and will continue to perform purchase contracts in 2016. Exports to India and Kazakhstan dropped dramatically in 2015 mainly because demand decreased significantly. Carbon companies supporting aluminum companies in these two countries bad been put into operation and started to import calcined petroleum coke from China. Kazakhstan purchases petroleum coke and calcined coke from China currently and has no plan to purchase prebaked anode in the coming two years.
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World aluminum raw material summit 2016 —————————————————————————————————————————————————————————————————————————————— China’s prebaked anode exports by country in 2015 (tonnes) China’s exports of prebaked anode dropped dramatically in the middle of 2015 as Malaysian electrolytic aluminum companies suspended production for three months, as shown above. However, demand will pick up in 2016 as electrolytic aluminum companies planned to expand production.
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World aluminum raw material summit 2016 ————————————————————————————————————————————————————————————————————————————— FOB prices for Chinese prebaked anode from January to March 2016 (USD/t) Country JanuaryFebruaryMarch Malaysia 409404406 Russia 441419415 Canada 509491480 UAE 495483482 Sweden 405398392 Iceland 468463453
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- FOB prices for Chinese prebaked anode declined to around USD500/t in 2015, down by USD50/t year-on-year. In H2 of 2015, prices for petroleum coke and electrolytic aluminum slipped in the Chinese market; as a result, export prices for anode declined and export volume shrank gradually. FOB prices movement for Chinese prebaked anode (USD/t)
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- 4. Difficulties and future of carbon industry ⅰ Severe safety and environmental protection pressure. Investment in environmental protection facilities will directly increase production cost. ⅱ The increase in wages and benefits of workers, including increased wages resulting from vacation system. ⅲ Young workers don’t want to work in carbon companies due to poor work environment, so there will be a worker shortage in the future. ⅳ Poor situation in aluminum industry had led to thin profit margins or even losses in carbon industry. ⅴ More and more companies are facing cash flow problems owing to the lack of bank loans and thin profits. ⅵ Companies are incapable of transforming old roasters, although old devices will increase production cost through consuming more gas. So carbon industry have to actively cope with various of pressures and risks. As far as our company be concerned To invest in environmental protection equipment. To transform old roasters and build a new one this year. To suspend supply to unfaithful aluminum companies and ensure the collection of payment. To develop high value-added products We have been increasing scientific research investment over the past few years. We have established research and developing base which can be used for production, study and development with Shandong University of Technology and established joint research lab with Hunan University. We have been granted with a number of patents.
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- Coke/Sulfonated graphene carbon graphite material used for sealing element
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- Project Overview carbon graphite material has several properties such as self-lubricating, high thermal conductivity, low coefficient of linear expansion and high heat resistance, which makes it become the most widely used mechanical seal friction pair matching material. Mechanical seal carbon graphite material available now has been widely used in pumps, compressors, reactors, blenders, rotating disc column, centrifuges, filter separators and other devices for characteristics of high reliability, low leakage rate, long service life, low power consumption, etc. With the improvement in mechanical seal requirements, the traditional carbon graphite materials have been unable to meet the application requirements under harsh conditions and the industry desperately need to develop a special kind of carbon graphite material with properties of high strength, high air tightness, active toughening. In addition, there are few reports about producing carbon graphite materials with low- density, high-strength and high heat dissipation through prilling and modifying raw materials or tempering binding materials. Given the deficiencies of current technology, the project provide a kind of coke/sulfonated grapheme carbon graphite material used for sealing elements, which can effectively alleviate micro cracks and defects caused by heat stress and mechanical deformation, significantly improve product quality and thus reduce sealing failures resulting from low-strength property of pure carbon basis material.
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- Superiorities of the project ⅰ The project provide a kind of coke/sulfonated grapheme carbon graphite material used for sealing elements. The feature of this kind of material is that coke has been partly coated and jointed with sulfonated grapheme, which perfectly disperses sulfonated grapheme with large size, even quality, high dispersity and active group on surfaces or tabling places of blended carbon material and achieves homodisperse effect in pitch. According to the current data, there are no reports about such mechanical seal material. ⅱ The project blends dispersed sulfonated graphene into graphite carbon material with large-size, low-density and high-strength, which can effectively reduce micro cracks and defects caused by heat stress and mechanical deformation, significantly improve product quality and thus reduce sealing failures resulting from low-strength property of pure carbon basis material. ⅲ This kind of coke/sulfonated grapheme carbon graphite material which used for sealing elements has excellent performance indicators with un-impregnated coal tar pitch and resin being able to reach static features of M120/121 pure carbon-based sealing material.
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- Performance index Inspe ction item volume density (g/cm3) Heat conductivity coefficient (W/(K.m)) Compres sive strength (MPa) Breaking strength (MPa) Shore hardness (HS) Rockwell hardness (HRC) Inspe ction result 1.64-1.652.82-2.85 203.87 Parallel pressure direction 30 Vertical pressure direction 64 Vertical pressure direction 37 Vertical pressure direction 52 Parallel pressure direction
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————- Item number volume density (g/cm3)Shore hardness (HS) Before impregnatin g After impregnatin g Before impregnatin g After impregnatin g 1# sample1.651.8386.5108.5 2# sample1.681.8290.6113.3 This kind of coke/sulfonated grapheme carbon graphite material which used for sealing elements has properties of low-density and high-strength. It can substantially improve sealing failures resulting from low strength property of pure carbon basis material and thus has important economic values and social benefits.
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World aluminum raw material summit 2016 ——————————————————————————————————————————————————————————————————————————-
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Carbon and aluminum companies share common interest. So I hope we can work together and go forward to the future. Thank you !
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