I’d Like To Buy The World A Coke – Can An Impending Aluminum Industry Petcoke Shortage Be Fixed?

A critical ingredient consumed in the production of aluminum is sourced exclusively from petroleum refineries. Complex refineries use coker units to break up residual fuel left over from initial crude processing to squeeze out the last drops of lighter components – leaving a solid carbon based residue known as petcoke. Without anode grade petcoke (GPC) there would be no aluminum industry. As we explain today aluminum producers are scrambling to address a looming petcoke shortage that could seriously disrupt their industry.

This blog series is based on the recently published “Alliance Anode Coke Study” prepared by Turner, Mason and Company, AZ China Ltd and Cascade Resources. For more information about the study please contact jauers@turnermason.com

In Episode 1 we described how aluminum is made using an electrolysis process at very high temperatures where the anode electrode is made almost exclusively from higher grades of petroleum coke known as GPC. Every metric tonne (MT) of aluminum produced consumes 0.4 to 0.45 MT of GPC. This makes the aluminum industry highly dependent on petroleum refiners to produce enough GPC to meet their needs. Petcoke is a residue byproduct of refining that is produced by coker units that extract light components from fuel oil – leaving behind a layer of solid carbon. However the supply of anode grade GPC is not growing fast enough to meet aluminum demand. Part of the reason is to do with crude quality because GPC is only produced from heavy crudes with low impurities and low sulfur whereas many of today’s heavy crudes contain a lot of sulfur and unwanted impurities. As a result when these crudes are processed through a coker the resultant petcoke is inferior “fuel grade” that is not suitable for GPC. In addition in the U.S. despite rising coker capacity at refineries, the output of petcoke is falling because the overall slate of crude has become lighter with less carbon as a result of the surge in shale production. This time we look at global GPC supply and demand for the next 10 years to understand when petcoke demand will exceed supply in different scenarios.

State of the Energy Markets, October 28, 2015

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What is going on in today’s markets for natural gas, NGLs and crude oil, why it is happening, and what is likely to happen next?

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Global Anode Petcoke Supply Forecast

The Anode Coke Study includes a comprehensive country-by-country forecast of anode petcoke production out to 2025. This forecast is built up on a refinery-by-refinery basis. The wild card in the petcoke supply total is China. That is because (in part because of the impending shortage of GPC) China has increasingly been using lower quality “fuel grade” petcoke for aluminum production in addition to anode quality GPC. The lower quality fuel grade petcoke contains impurities and sulfur that are both less effective (i.e. they reduce the quality of the finished aluminum and or the efficiency of the electrolysis process) and contravene environmental regulations in most countries such as the U.S. where the use of high sulfur petcoke is not permitted. To some extent China’s use of low grade petcoke is considered “robbing Peter to pay Paul” since it will lead to quality problems and is susceptible to environmental regulation over time. As a result the total supply estimates in the study include a comprehensive analysis of Chinese refinery output of both GPC and fuel grade petcoke and assumptions about how much fuel grade petcoke the Chinese will continue to use. 

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