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Petroleum coke economics in
cement kilns to 2016
Kerry Satterthwaite
23 May 2013
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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.
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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
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Quantifying the cement fuel
market
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Quantifying the cement fuel market
2012:
Cement production 3,700 Mt
Assumptions:
Energy consumption 750-900 kcal/kg clinker
Energy demand in 2012:
300Mt of coal equivalent
% that is alternative (not coal or petroleum coke):
Still
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Cement sales by leading producers
Company Total production capacity
(Mtpy)
Total cement sales (Mtpy)
Anhui Conch 209.0 187.0 1
Holcim 217.5 148.0
Lafarge 2 17 .0 1 41 .1
Heidelberg Cement
122 .0 89 . 0
Cemex 94.8 65.8
Italcementi 74 .0 2 51.1
2
Buzzi Unicem 41.6 27.3
Taiheiyo 38.9 14.6
Eurocement 39.2 3 30.0
2
Grasim (Aditya Birla Group) 51.8 4 4 0.0
2
Source: Company presentations of 2012 results
Note s : 1 Cement and clinker sales are combined for Anh ui
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
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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
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The role of petroleum coke
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Typical fuel breakdown for a major cement producer in 2013
Coal 57%
Petroleum coke 20%
Heavy fuel 1%
Shale/lignite 5%
Alternative fuels 10%
Biomass 2%
Natural gas 5%
Source: Roskill based on 2012 annual results for selected major
cement producers
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Advantages and disadvantages of petroleum coke versus thermal
coal
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
Can have a high metal content
Price
Price
Price
Disadvantages Advantages
10
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Petroleum coke trade flow pre 2009
11
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Petroleum coke trade flow 2012 to 2016
12
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Fuel grade petroleum coke trade flow has changed oceans
Source: Global Trade Atlas
13
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China also now the main prop of the Asian market for thermal
coal
Source: Xinhuas China Economic Information Service
14
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Baltic Dry Index of Ocean Freight Costs
15% Africa
32%
Europe 99% USA
2% Asia
40% Other
15
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Delivered prices: petroleum coke price as a % of thermal coal
price
Source: Petroleum Coke Global Industry Markets & Outlook,
2012, Roskill
16
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Price of fuel grade petroleum coke imports into Asia (US$/t)
Source: Petroleum Coke Global Industry Markets & Outlook,
2012, Roskill
17
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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
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Future economics and
conclusions
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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
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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
[email protected]
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Thank you very much for your
attention
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