Booming market, zooming prices

Meera Siva | Updated on January 09, 2018


Growing demand for aluminium and steel augurs well for calcined petroleum coke

Calcined petroleum coke (CPC) is a key input to major metal industries such as aluminium and steel. It is produced from raw petroleum coke (RPC), derived from refineries. Srinivas Dempo, Chairman of Goa Carbon, says that input prices have risen 50-60 per cent in the last six to eight months, with no immediate relief in sight. Excerpts from an interview:

What are your views on demand drivers for CPC?

Demand is directly linked with the growth of the aluminium market. As the aluminium industry globally, particularly in India, is growing year by year, the demand for CPC is going to be high.

Major aluminium producers in India have undertaken capacity enhancement, which will result in growth of aluminium from 2.8 million tonnes (mt) in 2016 to 4 mt by 2020. Aluminium smelters are undergoing major capacity enhancements in India, with Vedanta, Hindalco and PSU major Nalco adding capacity.

The aluminium industry is bound to grow due to government emphasis on boosting power and construction projects as well as from the automobile sector. Steel demand is also expected to grow at a robust pace. These bode well for CPC demand.

What is driving prices and how does it impact metal prices?

Majority of the CPC production goes to the aluminium sector (75 per cent of the output) — about 40 tonnes of CPC is consumed for 100 tonnes of aluminium produced; the balance goes to the steel industry and others.

CPC prices are mainly linked with the availability of the right source of raw petroleum coke.

Most of the calciners in India import raw material, mainly from China, with the US, Kuwait and Brazil being other sources.

Due to certain environmental restrictions by the Chinese government, availability of raw material has come down, resulting in steep increase in raw material prices, recently. Prices are up 50-60 per cent, just in the last six to eight months. In the CPC industry, the input and output ratio for material to final product is almost 1:1.4.

The steep increase in raw material prices will have an impact on CPC prices which, ultimately, the metal industry — aluminium and steel sector — will have to bear.

Currently, there is demand for the metals and the metal makers face a raw material shortage; so, we are able to pass on the prices. Price relief may not come in the near term; only when China eases the restrictions or new supply comes up can we see prices easing.

What is the supply and capacity situation for CPC in India and how do you see it changing?

There are only a few refineries, mainly in the North-East, that produce the right quality of RPC or raw petroleum coke. The raw material capacity in India is in no way a match to the demand.

There are no published plans of refiners adding capacity to produce RPC.

Now, since the availability of raw material from abroad, particularly from China, is becoming challenging, the CPC producers in India are not able to meet the rising requirements of metal producers, particularly aluminium industry at least, in the present situation.

What are the factors that determine whether local source or imports of CPC are used by metal producers?

Price is the main determinant of import versus local CPC for many metal producers.

But CPC being a bulk commodity product, quality and blending of the right mix is very important for the metal industry.

Therefore, import decision is based on the quality of material available to meet their requirements.

It is often difficult to meet the import quality requirement, but local CPC producers can work closely with the producers to figure out the optimum utilisation of various blends of RPC, which can strengthen the technical properties and meet the quality requirements of the metal industry.

Published on August 06, 2017

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