China’s Petroleum Coke prices are on the rise in the new year

Petroleum coke demand had risen once again as the discount to coal widens in the new year as per the initial assessment from China’s north-eastern city of Daqing. Shortage of coal supply due to lagging production at the mines had once again widened the discount margin of petroleum coke to that of coal. The Chinese government’s intervention in the month of November to address the country’s impending power crisis and stabilize the price of coal did not seem to make a difference in the long term as strict lock downs and rising energy demand during the peak winter season had neutralised any government efforts to prioritise supply to the power generation companies at subsidized rates.

The shortage led to more cement and steel industries opting for the cheaper petroleum coke once again which caused the demand for petroleum coke to shoot up in the new year. Prices had been revised upward by an average of 50 USD/Mt in North-East China. Shandong 3 # A petroleum coke average price went up by 60 USD/Mt in the second week of January, FY22. With increasing Aluminium outputs in the new year, domestic demand for anode grade coke rebounded after witnessing a fall in the closing weeks of FY21. China’s total output of pre-baked anode had seen a slump of around 3.5% month on month in December while the average operating rates too had seen a corresponding decrease of around 4%.

Demand for both calcined and green petroleum coke is set to increase in the new year as per the initial trend captured by ChemAnalyst’s market intelligence unit. While shortage of coal due to strict quarantine measures is going to be the major supply push, demand from the downstream metallurgical and cement industries is going to be the major pull factor for a resurgent petroleum coke market in China in the first quarter of FY22. Although, production cuts will be frequent owing to strict pollution control measures taken up by the government in the backdrop of Winter Olympics, the impact on domestic supply is going to be largely insignificant.