Weak fundamentals, petroleum coke still has room for decline

Since November, China has had sufficient supply of petroleum coke, and imported coke has been flowing into ports. At the same time, due to various factors, the demand release is weak, and the petroleum coke market has always been in a shock downward state.

1. Supply

In terms of supply side, according to statistics, as of November 29, China's local refineries' delayed coking unit capacity operating rate was 91.11%, and the major refineries' delayed coking unit capacity operating rate was 90.63%, both at the high level of the year. At the same time, due to the problems of crude petroleum quota and funds at the end of the year, some local refiners' use of raw materials has deteriorated, resulting in a severe decline in the petroleum coke index. The local refining of high-sulphur cargo was relatively abundant.

In terms of import market, according to the data of the General Administration of Customs, in October 2022, China's import volume of uncalcined petroleum coke was 1,247,100 tons, a decrease of 5.59 million tons or 4.29% compared with September, and an increase of 646,500 tons or 107.6% compared with October 2021. Among them, the amount of petroleum coke with sulfur content less than 3% was 394,600 tons and the amount of other uncalcined petroleum coke was 852,600 tons. At present, there are mainly fuel coke and medium and high sulfur sponge coke at the port, and the import source is in high conformity with the domestic market index. Affected by the decline in domestic coke prices, port shipments slowed down, adverse to the price of imported coke. However, supported by cost pressure, some traders are reluctant to sell at high prices. At the same time, affected by COVID-19, China's automobile transportation continues to be under pressure, which has led to high port inventory since the fourth quarter. At the end of November, the port inventory reached a two-year high of 2.265 million tons.

2. Demand

In terms of steel plants, the low profits situation has not improved significantly. Since November, the number of enterprises suspended production has continued to increase. Affected by this, the graphite electrode industry has been operating weakly and steadily. In terms of carbon used for aluminum, the production cycle of aluminum anode is relatively long and stable. This year, due to the impact of power limiting startup and shutdown of electrolytic aluminum enterprises, most current anode enterprises operate normally at full capacity; At present, the production of aluminum anode enterprises is relatively stable, but with the implementation of environmental protection policies in the heating season, some anode plants in Henan and Xinjiang have reduced production. At the same time, due to the impact of COVID-19, transportation is under pressure, and the release of winter storage this year is less than expected. To sum up, aluminum's demand for carbon is relatively stable, which plays a rigid demand support for the petroleum coke market. In the anode material, with the continuous implementation of new capacity, graphitization processing fee prices continue to decline. Downstream automobile enterprises have strong bargaining power, and the transaction price of anode materials decreases. Affected by the decrease in profits, enterprises are more cautious in purchasing. Enterprises actively promote the application of medium and high sulfur coke and the layout of natural graphite. In addition, in terms of fuel coke, affected by environmental protection policies, some enterprises have reduced the demand for fuel coke and turned to clean coal.

To sum up, in terms of supply, China's refineries are operating steadily and are expected to continue to increase production. In terms of ports, there is no possibility of significant stock reduction in the short term due to the impact of external price and transportation; In terms of demand, only the carbon used for aluminum maintains a stable and rigid demand. Under the current economic downward trend, the support for each terminal consumption is insufficient, and the impact of transportation is superimposed, so large-scale centralized procurement is expected to be small; At the same time, the market is pessimistic and trade activities are decreasing. Market participants are still holding a wait-and-see attitude. The petroleum coke market still has further downward space. Please refer to us for the latest report on petroleum coke.