Petroleum coke economics in

cement kilns to 2016

Kerry Satterthwaite

23 May 2013

Disclaimer

The statements in this presentation represent the considered views of Roskill

Information Services Ltd. It includes certain statements that may be deemed
"forward-looking statements.
All statements in this presentation, other than
statements of historical facts, that address future market developments, government
actions and events, are forward-looking statements. Although Roskill Information
Services Ltd. believes the outcomes expressed in such forward-looking statements
are based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those in
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include changes in general
economic, market or business conditions.
While Roskill Information Services Ltd. has made every reasonable effort to ensure
the veracity of the information presented it cannot expressly guarantee the accuracy
and reliability of the estimates, forecasts and conclusions contained herein.
Accordingly, the statements in the presentation should be used for general guidance
only.

Table of contents

Cement fuel market

Role of petroleum coke
Petroleum coke is a by-product and priced to MOVE
Delivered petroleum coke price must be less than delivered coal price
on a per GJ basis
How much less? -> delivered prices comparison

Where are the cement customers? Where are their petroleum coke
suppliers?
Future economics and conclusions

Quantifying the cement fuel

market

Quantifying the cement fuel market

2012:
Cement production

3,700 Mt

Assumptions:
Energy consumption

750-900 kcal/kg clinker

Energy demand in 2012:

300Mt of coal equivalent
% that is alternative (not coal or petroleum coke):
Still <5% overall worldwide but could reach 12% by 2016 (see, for example,
Lafarges landfill mining efforts in China or HeidelbergCements
Sustainability Ambitions)

Cement sales by leading producers

Company
Anhui Conch
Holcim
Lafarge
Heidelberg Cement
Cemex
Italcementi
Buzzi Unicem
Taiheiyo
Eurocement
Grasim (Aditya Birla Group)

Total production capacity

(Mtpy)
209.0
217.5
217.0
122.0
94.8
2
74.0
41.6
38.9
3
39.2
4
51.8

Total cement sales (Mtpy)

1

187.0
148.0
141.1
89.0
65.8
2
51.1
27.3
14.6
2
30.0
2
40.0

Source: Company presentations of 2012 results

Note s: 1 Cement and clinker sales are combined for Anhui Conch. The company plans to increase cement
production capacity to 231.5Mtpy during 2013
2 Roskill estimates based on company reports
3 Eurocement plans to increase total production capacity to 45.4Mtpy by 2017
4 Grasim plans to increase total production capacity to 62Mtpy by 2014

Source: Gypsum Global Industry Markets and Outlook, 11th edition,

2013, Roskill

Recent quotes from cement producers on fuel

Anhui Conch:
A volatile construction industry, FUEL COSTS and the risks of further government regulation
constitute our greatest risks to 2017

Lafarge:
While we take a number of steps designed to manage energy and FUEL COST RISK,
these measures may not be fully effective in protecting us from this risk
Holcim
In our industry, companies that procure more efficiently in 2013 will have a cost, and therefore a
competitive, advantage

Roskill observation:
Cement is one of very few energy-intensive materials that saw its prices FALL over the period
2007-2012 despite a rising cost base of between 5% and 25% over the same period

The role of petroleum coke

Typical fuel breakdown for a major cement producer in 2013

Biomass
2%

Natural gas
5%

Alternative fuels
10%

Shale/lignite
5%
Heavy fuel
1%

Petroleum coke
20%

Source: Roskill based on 2012 annual results for selected major cement producers

Coal
57%

Advantages and disadvantages of petroleum coke versus thermal coal

Disadvantages

Advantages

Petroleum coke is relatively difficult

to burn and has to be blended with
coal

Price

Price

Petroleum coke can be hard to

grind

Price

High sulphur content can present

SOx challenges

Can have a high metal content

10

Petroleum coke trade flow pre 2009

11

Petroleum coke trade flow 2012 to 2016

12

Fuel grade petroleum coke trade flow has changed oceans

Source: Global Trade Atlas

13

China also now the main prop of the Asian market for thermal coal

Source: Xinhuas China Economic Information Service

14

Baltic Dry Index of Ocean Freight Costs

15% Africa
32%
Europe
99% USA

2% Asia
40% Other

15

Delivered prices: petroleum coke price as a % of thermal coal price

Source: Petroleum Coke Global Industry Markets & Outlook, 2012, Roskill

16

Price of fuel grade petroleum coke imports into Asia (US$/t)

Source: Petroleum Coke Global Industry Markets & Outlook, 2012, Roskill

17

Carbon footprint

Petroleum coke is a waste by-product

It is produced as part of oil refineries quest to maximize refinery profitability

This is important when considering relative impacts of the use of petroleum

coke versus use of fossil fuels in power generation

Coal, oil and natural gas are discretionary extracted fuels and every GJ
extracted has a carbon footprint associated with that discretionary use

Petroleum coke, a by-product of the production of transportation fuels, is

produced as the demand for transportation fuels, the crude feed slate and the
refinery design dictates

Future economics and

conclusions

Predictions to 2016

Cement production will continue to grow in all regions outside Europe, with
pricing gains everywhere

Cheap energy sources are required to fuel this growth

Petroleum coking capacity (fuel grade) worldwide will increase by 4%py to

2016. Roskill expects fuel grade petroleum coke production to total 143Mt by
2016. 30Mt of this will end up in cement kilns

America to Asia is by far the largest trade flow for petroleum coke

Low international shipping freight rates are facilitating this globalisation

Fuel grade petroleum coke will always be priced to move so delivered prices
will continue to be positioned lower than delivered coal prices on a per GJ basis

Petroleum coke
Global Industry Markets & Outlook
6th edition, 2012
Get accurate answers from independent experts

Gypsum & anhydrite

Global Industry Markets & Outlook
11th edition, 2013
Contact Kerry Satterthwaite
kerry@roskill.co.uk

Thank you very much for your

attention
Any questions?