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    Chinese prebaked carbon anode price to drop in 2018
    ----Interview with Du Baojun
    General Manager
    Zhengzhou Fenghua Carbon Co., Ltd.
    Zhengzhou Fenghua Carbon Co., Ltd., founded in 1986 and located in Dugou Village, Xiaoguan Town, Gongyi City, Henan, is a prebaked anode producer with annual capacity of 150,000t.

    Asian Metal: Mr. Du, thank you for accepting our interview. Could you please introduce your company and main business firstly?

    Mr. Du: Our company, Zhengzhou Fenghua Carbon Co., Ltd. was founded in 1986. We started our business by producing anode paste and now produce prebaked anode with annual capacity of 150,000t. We devote ourselves to the research and development of low-carbon anode, and mainly conduct business in Henan and Northwest China.

    Asian Metal: Could you talk about the difference between carbon production in Shandong and Henan?

    Mr. Du: The carbon production in Henan has no advantages over that in Shandong.
    Firstly, from the point of pet coke, plants of the material are mainly in Shandong, and other pet coke could be shipped to Shandong's ports, besides, more than 60% of pet coke in China could get across Shandong; thus the purchasing cost of the material in Shandong is lower. However, as for producers in Henan, they are not that lucky as they need to buy pet coke from Shandong; and even they purchase from Shanghai or other regions, the goods should still be transported via Shandong's ports. As a result, delivered prices for pet coke in Henan are RMB50-100/t (USD7.90-15.80/t) higher than those in Shandong.
    Secondly, from the point of coal tar pitch, Henan, Shanxi, Shandong and Hebei all produce the material; and the haul distance for Henan and Shandong is almost the same, so prices of coal tar pitch don't vary a lot in two cities.
    Thirdly, from the point of waste heat application, carbon producers in Shandong could generate power using waste heat from calcinators as their production scale is larger, they could also sell steam to surrounding plants with earning of RMB150-180/t (USD23.70-28.45/t). But due to small production scale, Henan rarely sees waste heat or plants which need steam.
    Above all, carbon plants have no advantages over those in Shandong. In 2017, many carbon plants in Shandong expanded capacity and once they go into operation, carbon plants in Henan would face severe challenge.

    Asian Metal: Prebaked anode prices rose all the way in 2017, what do you think about it?

    Mr. Du: In my opinion, main reasons for the price rise of prebaked anode were as follows:
    Firstly, the strict environmental protection resulted in a decrease in anode outputs. The inspection force strengthened in late 2016 and the central team went to many regions. At that time, many carbon plants cut or halt production in Henan, leaving output for prebaked anode decrease.
    Secondly, the production restriction during the heat-supply period urged primary aluminum plants to restock in advance and purchases for anode therefore increased. In early 2017, the government issued the production restriction policy for winter. Thus many plants began to make replenishment for fear of a difficulty in souring anode.
    Thirdly, downstream primary aluminum plants which increased capacity in 2016 put new electrolytic baths into production in early 2017 successfully, so demand for anode increased accordingly.
    Fourthly, with pet coke and coal tar pitch prices breaking new high in 2017, the production cost for anode increased greatly.
    These are the four reasons which led to the upward prices for prebaked anode.

    Asian Metal: Chinese prebaked anode prices decreased sharply from January 2018, could you analyze the reasons briefly?

    Mr. Du: On one hand, the profit margin for general companies is 5%, but after the price surge in 2017, anode producers' profit exceeded 5% noticeably, which was abnormal. Many carbon producers therefore began to add facilities, even some non-carbon plants also set up new anode plants, which resulted in a great increase in anode capacity. On the other hand, although new primary aluminum capacities were released in 2017, the supply-side reform in the later half of 2017 forced much illegal capacity to close, so anode consumption didn't increase a lot. Therefore, anode prices moved down continuously in 2018 due to oversupply.

    Asian Metal: What's your opinion on the market outlook of Chinese prebaked anode?

    Mr. Du: After the heat-supply season ends in mid-March 2018, the restricted 30% and 50% capacities of primary aluminum and carbon would recover; anode capacity would also be released in May alongside with new capacity built in 2017. Then prebaked anode supply would be more sufficient in China, and prices may move down further.

    Asian Metal: Will you adjust your anode business in the future?

    Mr. Du: Chinese anode supply is abundant now, so buyers have the say to determine prices. It would be difficult for us to develop new anode business. We would still focus on supplying anode to regular customers in the future; and if anode prices continue to go down, we would cut the outputs, refusing to lose money.

    Asian Metal: With new calcined pet coke and anode projects coming on stream, demand for pet coke would increase gradually. How do you perceive the market trend of pet coke in 2018?

    Mr. Du: I think pet coke prices would fluctuate at a high level in 2018.
    Firstly, as the coking industry is declining, refineries won't launch coking faculties rashly, therefore the coking capacity would be relatively stable.
    Secondly, the heat value of pet coke is higher than coal. Power plants usually use coal to generate power, but as coal prices are higher now, some plants turn to use high sulfur pet coke. As a result, pet coke supply for carbon for aluminum would decrease.
    Thirdly, demand for pet coke would increase with new calcinators started.
    Fourthly, downstream calcined pet coke, anode and primary aluminum markets are all sluggish, which would suppress the rise of pet coke prices.

    Asian Metal: Thanks for your time. May your company be more and more prosperous!

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