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INTERNATIONAL TAR ASSOCIATION2020 ANNUAL CONFERENCESEPTEMBER 22 (WEBINAR)
2020 EUROPEAN COAL TAR
AND
COAL TAR DISTILLATION MARKET
AN UPDATE
DR. ZYGMUNT STOMPEL, POLAND
2020 EUROPEAN COAL TAR MARKET
• PRODUCTION OF COAL TAR IN THE EUROPEAN UNION 2018 – 2020
• PRODUCTION OF COAL TAR IN THE REST OF EUROPE
• IMPORT OF COAL TAR TO THE EUROPEAN UNION, INTRAREGIONAL TRADE
• A STRANGE MOVEMENTS OF TAR BETWEEN RUSSIA AND UKRAINE
• ENOUGH TAR FOR EVERYBODY?
• TAR PRICE EVOLUTION 2018 – 2020
• EUROPEAN COAL TAR INDUSTRY IN 2019/20: A CLOSER LOOK
• COAL TAR PRODUCTS IN 2019/20: PITCH
• COAL TAR PRODUCTS IN 2019/20: CARBON BLACK FEEDSTOCK
• THREATS FOR THE EUROPEAN COAL TAR INDUSTRY:
• - FEEDSTOCK SIDE: SHORT TERM, LONG TERM
• - PRODUCTS SIDE: SHORT TERM, LONG TERM
PRODUCTION OF COAL TAR IN EUROPE 1: EU (kt)
COUNTRY PROD. ‘18 PROD. ‘19 CLOSURES ‘18/20 HOT IDLED ‘19/20 PROD. ’20 (est.)
Austria 40 40 35
Belgium 42 42 38
Czech Rep. 96 90 80
Finland 33 33 30
France 104 95 AM Florange, IV ‘20 AM Fos, 1 battery 70
Germany 267 238 220
Hungary 48 44 ISD, 1 battery 30
Italy 64 54 Arvedi Servola, I ‘19 45
Netherlands 68 66 65
Poland 372 351 AM Zdzieszowice, 2 bat.JSW Dębieosko, 1 bat.
AM Zdzieszowice – 2 bat. 290
Slovakia 55 52 US Steel Kosice, 1 bat. 40
Spain 45 35 AM Aviles, Q4 ‘19 AM Gijon, 2nd batterydelayed
15
Sweden 41 40 35
UK 45 40 BS Scunthorpe - ? 30
TOTAL 1 320 1 220 3 plants, 3 batteries Appr. 3 mln t/y coke cap. 1 023
PRODUCTION OF COAL TAR IN EUROPE 2: OTHER COUNTRIES
COUNTRY, PLANTS PROD. ’18kt
PROD. ’19kt
CLOSURES ‘18/20 PROD. ‘20 (est.)Kt
Bosnia/Herzegovina:AM Zenica, ISPAT Lukavac
28 16 ISPAT Lukavac, ‘19 15
TurkeyErdemir: Eregli, IskenderunKardemir: Karabuk
180 180 170
RussiaSeverstal, NLMK: Novolipetsk, Altay KoksMechel: Chelyabinsk, MoskowGubakha, Magnitogorsk, Kemerovo, Novotroitsk, Evraz: Nizhny Tagil, Novokuznetsk
1 140 1 135 1 080
UkraineAM Krivij RihMetinvest: Avdeyevka, Azovstal, Zaporozhya, Dniprodzerzhinsk.Evraz: Dnipropetrovsk, Dniprodzerzhinsk.(Source: Ukrkoks Association)
440 410 380
IMPORT OF COAL TAR TO EUROPEAN UNION, 2018 - Q1 2020(data: CTC International/Carbon Management + own observations)
Year:Source:
2018 2019 Q1 2020
Brazil 56 000 58 000 12 100
Canada 66 200 48 400 -
Turkey 85 400 98 900 52 200 (!)
Russia 134 600 116 300 19 500
Ukraine 90 100 129 000 42 800 (!)
Total imported, metric tons 432 300 450 600 126 600
PRODUCTION OF COAL TAR IN EUROPE 3 - REMINDER
• Since 2014/15 six Ukrainian cokemaking plants in Lugansk and Donetsk regions remains in the hands of not recognized internationally authorities, i.e. separatists.
• These plants: Alchevsk Coke & Chemical (ISD), Donetskoks, Makiivkoks, Yasinivka Cokery, Yenakieve Coke and Chemicals, and Istek (Gorlovka) represented 8 million tpy coke capacity. In real terms they produced ca. 4 million tons of coke annually (2013/14) and 140 –150 kt of tar per year.
• Forces which had taken them did not do that in order to destroy, but in order to get some profit.
• However, with lack of international recognition, the new „owners” are unable to issue certificates of origin and – therefore – actively participate in the international trade.
• They need some help.
STRANGE TOURISM OF TAR BETWEEN UKRAINE AND RUSSIA(data thanks to CTC International/Carbon Management)
Year:
Tar movement:
2018 2019 Q1 2020
Import of tar to Russia from Ukraine(not seen under „Ukrainian export”)
metric tonsaverage price, US$/t
82 500125 - 150
57 200130 - 145
9 400140
Export of tar from Russia to Ukraine:
metric tonsaverage price, US$/t
35 800240
11 100250
6 500250
Import of tar from Russia to Ukraine:
metric tonsaverage price, US$/t
33 100320
9 400310
8 100305
AVAILABILITY OF COAL TAR IN EUROPE, 2019, kt
REGION EUROPEAN UNION
RUSSIA UKRAINE
Production within Region: 1 220 1 135 410(Ukraine Proper)
Import: 450(see Table above)
8357 from Ukraine (?)26 from Kazakhstan
9From Russia (?)
Export: 5029 to Canada
21 to USA
127116 to EU
11 to Ukraine
129
Total available: 1 620 1 091 290
PRICES OF COAL TAR IN EUROPE 2018 – 2020(France, Hungary, and Poland – Euro/t ex works or FOB, Turkey and Ukraine – Euro/t
recalculated from contract prices in US$/t FOB)
EUROPEAN COAL TAR PROCESSING INDUSTRY 1: EU
Company Plant Tar distillationcapacity, kt/y
Tar processingin 2018, kt
Tar processingin 2019, kt
Rain Carbon Inc. Castrop Rauxel, Germany
500 440 405
ZelzateBelgium
300 290 290
Deza a.s. Valasske Mezirici Czech Republic
460 360 307
KoppersInternational BV
NyborgDenmark
300 290 290
Quimica del Nalon SA
TrubiaSpain
370 250 245
Bilbaina de Alquitranes SA
BilbaoSpain
120 110 73
Total EU 2 050 1 840(CUR 90 %)
1 610(CUR 78 %)
EUROPEAN COAL TAR PROCESSING INDUSTRY 2:RUSSIA AND UKRAINE
Company Plant Tar processingcapacity, kt/y
Tar processing2018
Tar processing2019
Rain Carbon Inc. Cherepovets, Russia 300 250 280
MMK Magnitogorsk, Russia 350 200 230
Mechel Chelyabinsk, Russia 200 110 120
Evraz Novokuznetsk, Russia 400 320 350
Nizhniy Tagil, Russia 150 100 120
Total Russia 1 400 980 1 100
Metinvest Avdeyevka, Ukraine 200 110 110
Zaporozhya, Ukraine 200 100 100
Dniprodzerzhinsk, Ukraine
200 90 80
Total Ukraine 600 300 290
EUROPEAN TAR PROCESSING INDUSTRY IN 2020
• Facing decreasing availability of tar in the European Union in the second decade of XXI century, the regional tar processors went for purchases outside EU. Imported tar made 25 – 28 % of the total volume available for processing in the EU in 2018 – 2019.
• Radical program of cokeovens’ idling that started already in H2 2019 and equally radical decreasing of coke output from batteries still under operation has decreases production of tar in the EU in Q1 2020 by some 18 % (quarter to quarter). Data for Q2 2020 are fragmentary but there are already signals that the drop could be stronger. Figure for estimated annual EU production of tar in 2020 given in one of the Tables above (1 023 kt) is based on Q1 data; it already looks too optimistic: the final 2020 tar production in EU is expected to drop below 1 million tons.
• In this light there is not a surprise to see further growth of tar import to the EU in Q1 2020.
EUROPEAN TAR PROCESSING INDUSTRY IN 2020WHAT IS AHEAD?
• However, countries outside EU (Russian Federation, Ukraine, Turkey) face similar problems with decreasing output of coke (and tar) from slowing down steel industry.
• Fragmentary data for Q2 import of tar to EU does not show special changes comparing with Q1, but recent signals from July – August do suggest that some decrease may be already going on.
• The estimated total processing of tar by all five EU companies (Rain Carbon Inc., Koppers International BV, Deza a.s., Quimica del Nalon SA, and Bilbaina de Alquitranes SA) in Q1 2020 was 390 000 tons, 5 % less that in Q1 2019. Available data for Q2 2020 do not show any special change, maybe a slight decrease will be observed. Q3 remains uncertain.
• The story gets complicated from the sales side of the tar business. A closer look at market for coal tar products is then necessary, with special attention paid to pitch and carbon black feedstock.
COAL TAR PRODUCTS: PITCH FOR ALUMINIUM INDUSTRY
• Total demand for coal tar pitch in Europe without CIS in years 2016 –2018 was estimated at ca. 520 – 525 kt per year. Of this amount aluminium industry (EU + Norway + Iceland) used to consume 385 –390 kt for its prebaked anodes and Soderberg paste.
• In 2019 Alcoa has closed its two smelters in Spain (Aviles and La Coruna). Demand for pitch has decreased by 15 kt per year.
• In Q2 2020 Alcoa has announced possible closure of its remaining smelter in Spain (San Ciprian). This move may decrease demand for pitch in the Region by further 20 kt per year.
• A medium size smelter in Mostar (Bosnia/Herzegovina) went out of business in 2019, decreasing demand for pitch by 9 kt.
• RUSAL production of primary aluminium remains stable in the whole analysed period (2016 – 2020) at the level of 3.70 – 3.75 million tpy. Demand for pitch by all Rusal smelters is therefore in the range of 330 – 350 kt annually.
PRODUCTION OF PRIMARY ALUMINIUM IN EUROPE 2016/20AND DEMAND FOR PITCH
(Source: International Aluminium Institute + own calculations)
YearRegion
2016 2017 2018 2019 H1 2020
Remarks
Primary aluminium inEurope ex RUSAL, kt
4 075 4 068 4 028 3 853 1 875 2019: closure of Aviles, La Coruna, Mostar; 2020: closure of San Ciprian (?)
Primary aluminium by RUSAL, kt
3 685 3 707 3 753 3 753 1 867 Gradual introduction of Boguchanskiy smelter
Total production of primary aluminium in
Europe, kt
7 760 7 775 7 781 7 606 3 742
Demand for pitch fromEuropean aluminium industry
ex RUSAL, kt
386 382 378 362 176
Demand for pitch from RUSAL smelters, kt
368 370 375 370 178
Total demand for pitch fromEuropean Al industry, kt
754 752 753 732 354
COAL TAR PRODUCTS: PITCH FOR ELECTRODE INDUSTRY
• EU demand for graphite electrode pitches (binder and impregrating pitch) between years 2016 and 2018 has increased from 62 kT to 70 kt following an increase in share of EAF steel in the total production of steel.
• Demand for pitch for other carbon and graphite products (cathodes for aluminium smelters, blast furnace linings, carbon electrodes, specialty carbons and graphites) was stable at the level of 50 kt.
• A drop in demand for steel from automotive industry that took its full shape in 2019 has led (among others) to a drop in utilization rate of EA furnaces – it is easier to shut EA furnace than a blast furnace when the market is shrinking. Consequently, production of graphite electrodes has already started to decrease in the second half of 2019.
• The real hit came in H1 2020. Capacity utilization rate among main graphite electrode manufacturers (GrafTech, Showa Denko, Tokai) has dropped to 60 – 65 %, with obvious consequences for pitch demand.
BALANCE OF PITCH IN EUROPE 2019/20 – EUROPEAN UNION
• Processing of ca. 1 610 kt of coal tar by European Union companies in 2019 gave close to 700 kt of anode and electrode grade pitches.
• Consumption by aluminium industry is estimated at 362 kt, graphite electrode industry used not more than 65 kt, other consumers – 50 kt, making a total of 477 kt.
• Overproduction of pitch is a permanent feature of EU tar processing companies; 2019 surplus was in the range of 220 kt.
• Export of EU pitch concentrates on Americas: Canada (ca. 100 kt in 2019), Mexico, Argentina, Brazil; lesser volumes go to South Africa and Mozambique, occasional cargoes – to the Gulf.
• Estimated processing of 1 500 kt of tar in 2020 should give 645 kt of quality pitch. Assuming Al output in H2 2020 not worse than in H1, aluminium industry will consume 350 kt of pitch; graphite electrode and other carbon and graphite industries won’t use more than 90 –100 kt. Like in the previous years, close to 200 kt of pitch will have to be exported – and to face competition from Far East.
BALANCE OF PITCH IN EUROPE 2019/20 - CIS
• Processing of some 290 kt of tar in Ukraine in 2019 has allowed to obtain ca. 140 kt of pitch.
• Demand for quality pitch in Ukraine is limited to 10 – 12 kt coming from Ukrgrafit, a producer of graphite and carbon electrodes and other carbon products.
• Majority of Ukrainian pitch produced by three existing tar processing plants of Metinvest is therefore exported to Russia (101.7 kt in 2018, 99.8 kt in 2019) and Egipt (25.8 kt in 2018, 22.7 kt in 2019).
• One of peculiar features of Russian tar processing industry is the fact that (with few exceptions, one of them being Severtar) produced pitch is unsuitable for majority of smelters and graphite electrodes manufacturers. Therefore, the big chunk of total demand for pitch coming from RUSAL and Russian graphite/carbon industry of 420 kt/y is covered by import. In addition to 100 kt of pitch from Ukraine, Russia has imported in 2019 32.4 kt of pitch from China, plus 180 kt of prebaked anodes.
COAL TAR PRODUCTS: CARBON BLACK FEEDSTOCK 1
• The starting point of the carbon black feedstocks market’s troubles was a sharp decrease in production of motor vehicles in EU in 2019. After a record figure of 19.4 million units (in all categories) in 2018, year 2019 saw only 18.5 million units: 15.8 million passenger cars and 2.7 million commercial vehicles.
• A drop in production of motor vehicles obviously affected tyre industry. Between 2018 and 2019 production of new consumer tyres has decreased by 6.1 %; production of new track tyres decreased by 10 %. Replacement consumer tyres decreased by 3 %.
• In Q1 2020 the tendency observed along 2019 continued, but the real catastrophe came in the second quarter of 2020. In April 2020 majority of car plants in the EU just closed. Production has started in July, albeit at a much reduced rate.
• Situation in the car industry is followed by the tyre industry: some manufacturers idled their plants between April and June 2020.
COAL TAR PRODUCTS: CARBON BLACK FEEDSTOCK 2
• Rubber carbon black (aka reinforcement carbon black), used mainly in manufacturing of tyres, forms between 60 and 70 % of the total production of carbon blacks. In an obvious way decrease in production of tyres translated itself into lesser demand for carbon black feedstock. The trend observed already in 2019 got a full scale crash in Q2 2020.
• Precise data are fragmentary, but few examples should suffice. Cabot Inc. output in Q2 2020 was 42 % lower than in Q2 2019. Orion Engineered Carbons capacity utilization rate in April 2020 was 40 %; it increased to 70 % in July (a drop in specialty carbons is much smaller than that observed in rubber carbon black).
THREATS FOR THE EUROPEAN COAL TAR INDUSTRY:FEEDSTOCK SIDE
SHORT TERM:
• Slow and limited recovery (when ?) in the BF – BOF steel production may affect cokemaking industry: some hot idled batteries may be cooled down and closed (keeping a battery hot requires a lot of cokeoven or natural gas, without any income due to lack of products); production of coal tar registered in 2019 (already smaller than in 2018) might never be achieved again.
• Emphasize on reducing carbon footprint by the steelmaking industry means a more determined shift towards EAF technology. This clearly means lack of any new investment in BF - BOF technology and –consequently – in cokemaking. Battery No 2 in ArcelorMittal Gijon coking plant is the only one being put into operation this year; no signals about any new cokemaking project in the EU, what means that we won’t see any new cokeoven battery in the next 3 – 4 years.
THREATS FOR THE EUROPEAN COAL TAR INDUSTRY:FEEDSTOCK SIDE
LONG TERM:
• Apart from the emphasize on EAF steel technology as leaving much smaller carbon footprint (and at the same time being more flexible in operations), in the long term perspective a direct reduction of iron ore to pig iron is considered as a real solution to carbon trace problem. Various practical solutions of direct reduction technology are investigated, but the most advanced seems to be application of hydrogen as a reducing agent. This of course requires a real cheap way of producing hydrogen (by water electrolysis?) using electric power from sustainable sources. Full scale implementation of the technology seems to be requiring an active participation from the governments (energy policy, taxes, etc), and it is not expected to be ready by 2035 at the best. However, once being real, we may forget about blast furnace and cokemaking battery, and – thereafter – about coal tar.
THREATS FOR THE EUROPEAN COAL TAR INDUSTRY:PRODUCTS SIDE - PITCH
SHORT TERM:
• Global primary aluminium production has stabilized at the level of 64 million metric tons per year (2019 – 2020 est.) after a historical maximum of 65.3 mt in 2018. Average quarter LME price in 2019 –2020 rarely exceeded US$ 1 800 per metric ton, while hovered above US$ 2 000 in 2018.
• After closing Aviles and La Coruna in 2019, ALCOA is negotiating with the unions conditions for closing its last Spanish smelter San Ciprian.
• Forecasted demand for anode pitch in the European Union in 2021 won’t exceed 340 kt (compared to 362 kt in 2019).
• Prices of electrode pitch in the EU are regularly decreasing from the level of 750 – 770 EUR/mt in Q1 2018, to 670 EUR/mt in Q1 2019, to 560 – 600 EUR/mt in Q1 2020. Any increases are not expected in the near future.
THREATS FOR THE EUROPEAN COAL TAR INDUSTRY:PRODUCTS SIDE - PITCH
LONG TERM:
• In 2019 „Rio Tinto and Alcoa has joined forces for the most significant innovation in the aluminium industry in more than a century: carbon free smelting technology named ELYSIS”.
• The initiative has been supported by the Government of Canada, Government of Quebeck Province, and Apple Corp.
• ELYSIS R&D Center, located at one of the Saquenay basin smelter, is expected to commercialize the new inert anode technology by 2024. The main feature of ELYSIS is replacing emission of CO2 by emission of oxygen.
• The new technology will be applicable in new and old smelters.
• If (!) ELYSIS inert anode technology proves successful, then in the longer perspective (10 – 20 years) at least some smelters in the EU will introduce it in some of their lines. Demand for anode pitch will decrease significantly.
