The Supposed Chinese Petcoke Ban: Carry On As Normal

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This is part 2 of a blog on a possible ban of “unqualified” Chinese petcoke and how it relates to global aluminum prices. Check out part 1 if you missed it.

Let’s just examine prior history… prior Chinese history….prior Chinese history involving reducing pollution and emissions.

We have to look no further than the rare earths market – one in which China controls a lot more of the global supply than it does aluminum.

AluminumSmelter_565

Can an “unqualified” Chinese petcoke ban cause the cost of smelting to go up? Is the ban even real?

For several years China implemented controls to help “clean up” the rare earths processing industry.

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The scare had many pundits suggesting that quotas would cause rare earth metals price spikes. Guess what? It never happened. Instead, prices have plunged. They have plunged farther than any other group of metals we track.

What if the Ban Really Happens?

Going back to our criteria, could this impact one of the metals markets we track? Absolutely. How big is the order of magnitude impact? Well, without even being able to validate that China’s supposed new law banning unqualified petcoke was published, the fact that there is no clarity on what the Chinese authorities consider to be “unqualified” and that we haven’t even discussed the fact that there are likely dozens, if not tens of dozens, of refiners who would jump into this market if there was a supply squeeze, could we see rising aluminum prices?

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Sure, but there are many other reasons we may see rising aluminum prices in the coming years. It might be hard to ascertain the causal factor.

Therefore, unless/until we see evidence of enforcement, this “petcoke” supply shortage will stay firmly in the “low impact” category to metal buying organizations.

Carry on with business as usual.

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