By Li Yushi, CNCIC Consulting
Needle coke is a pitch coke with a quite high degree of graphitization. It is mainly used to produce HP and UHP graphite electrodes for EAF steelmaking and anode materials for power lithium cells. Needle coke is classified into petroleum series and coal series on the basis of different raw materials. Needle coke produced with petroleum heavy oil as raw material is called petroleum series needle coke. Needle coke produced with coal tar pitch and its fractions is called coal series needle coke.
The domestic supply amount is higher
The needle coke market in China was monopolized by products from foreign countries such as Japan and Germany for long years. The needle coke sector in China was started rather late. In November 1995 Jinzhou Petrochemical Co., Ltd. used the technology of Sinopec Research Institute of Petroleum Processing and successfully made the production of petroleum series needle coke. In 2006 the commercial production of coal series needle coke was achieved by Shanxi Hongte Coal Chemical Co., Ltd.
Despite a considerable upgrading of the needle coke capacity made in China in past years, the output was much smaller than the average level in foreign countries and the operating rate was kept on the low side. Reasons are as follows. First of all, as China issued quite a few environmental protection policies in past years many processing enterprises made production reduction or shutdown for rectification and the output of needle coke was affected. Secondly, with impacts from its involvement in bankruptcy mutual insurance for other enterprises leading needle coke producer Shanxi Hongte Coal Chemical Co., Ltd. suspended production. Thirdly, due to various reasons some new projects failed to start production after completion. Furthermore, because of multiple factors in the international community such as natural economy (global financial crisis) both the output and the import amount of needle coke in China made a considerable shrinkage after 2011. The market of the needle coke was once quite slack.
Starting from 2017, with the start of production in Shandong Yida New Material Co., Ltd., Shandong Jingyang Technology Co., Ltd., Fangda Hekko (Jiangsu) Needle Coke Technology Co., Ltd. and Baotailong New Material Co., Ltd. and the restoration of production in Shanxi Hongte Coal Chemical Co., Ltd., the output of needle coke got out of the valley as seen from 2013 and once again climbed to the peak. Figure 1 shows the supply of needle coke in China during 2010-2018.
Figure 1 Supply of needle coke in China during 2010-2018
The downstream demand makes a drastic increase
The iron/steel sector in China has capacity surplus and is a major sector for de-capacity. In 2017 China banned more than 600 “substandard steel” producers in the iron/steel sector and the related capacity was around 120 million t/a. EAF steelmaking has become a new development trend. As EAF steelmaking becomes more and more popular, the consumption of HP and UHP graphite electrodes is higher and in turn the demand of needle coke is making a constant increase.
The consumption of graphite electrodes in China presented an overall declining trend during 2010-2015. With the higher pressure of environmental protection, EAF steelmaking gradually became the mainstream after 2016 and the demand of graphite electrodes started to go up. The output of graphite electrodes in China was close to 600 kt in 2017 and the output of HP and UHP graphite electrodes accounted for nearly 80% of the total. The demand of needle coke has therefore made a drastic increase. It is expected that the output of graphite electrodes will reach over 700 kt in 2018. The consumption of needle coke in graphite electrodes will likely be over 350 kt in 2018 and the brisk market and the price rise of needle coke will last.
Anode materials for lithium cells constitute another major application sector of needle coke. With the development of relevant technologies and the powerful stimulus of related state policies, the lithium cell sector has made a rapid development in recent years. The output of anode materials is also going up fast. It is expected that the output of anode materials for lithium cells will reach close to 200 kt in 2018. As the consumption proportion of needle coke in anode materials is very small, the demand of needle coke in anode materials is not affected by the price rise of needle coke. Anode materials for lithium cells will further maintain the trend of high needle coke demand in future.
The price of needle coke started to soar at the beginning of 2017, reached the peak in the third quarter of the year (being 10 times the price at the beginning of the year) and made a little drop at the end of the year. Another wave of price rise was however triggered in 2018 and the average price was RMB23 000/t in the first quarter of the year. The price made a stable increase afterwards and the average price was RMB26 000/t in the second quarter of 2018. The third quarter of 2018 was the price peak period and the price of needle coke almost reached RMB30 000/t. As the downstream demand of needle coke will make some reduction at the end of the year, the supply shortage will be eased and the price will likely come down to RMB26 000/t.
The future prospect is quite optimistic
First of all, the policy influence on needle coke is quite obvious. Since the Eighth Five-Year Plan period China has always regarded needle coke as a project of the national key technologies R&D program. It is proposed in the “Program for the Readjustment and Upgrading of the Iron/Steel Industry (2016-2020)” issued by the Ministry of Industry and Information Technology on November 14, 2016 that by 2020 the supply-side structural reform in the iron/steel industry will achieve major advances, the capacity surplus will be effectively eased and the capacity of crude steel will make a reduction of 100-150 million t/a.
Secondly, in terms of supply the capacity of needle coke has always been kept at the stage of rapid growth. After a period of low operating rate the output has also made a gradual pickup in past two years. In terms of demand the demand increase of graphite electrodes is the major drive. Restructuring and energy conservation implemented in the iron/steel sector will greatly boost the application of HP and UHP graphite electrodes. As the charging of new energy vehicles becomes more convenient and more widely recognized, the demand of needle coke in anode materials for lithium cells will also be promoted. It is expected that the demand growth of needle coke in China will be over 15% in next 5 years.
In a quite optimistic prospect, the future development of needle coke in China will also have risks of capacity surplus. According to released information about needle coke projects being constructed or planned for construction, it is expected that by 2021 a needle coke capacity of around 800 kt/a will be added in China. At the time of output increase, upgrading the product quality to domestic and international leading levels will be an important decision-making factor to the future development of needle coke producers.
