Equilibrium: China's Petroleum Coke to Rebalance

In August, China’s petroleum coke market was mixed. PetroChina’s 1#A kept soaring into the sky, Sinopec made up the spread with mainstream market, but independent refineries were struggling with environmental protection inspection and other negative factors. Therefore, the market sentiment was chaotic.

As for the operating rate, the coking units in domestic market suffered in low utilization due to the sluggish refined oil market and the severe environmental protection supervision, and the operating rate kept dropping. 

According to SCI, the national average coking units operating rate was 62.09% on August 17, and that of the independent refineries was only 56.64%, down 2.19% from last week and 1.45% from the beginning of the month. Major refiners maintained largely stable production, but many independent refiners went into downtime.

According to interviews of market players and analysts, only 5% of interviewees show positive expectation on the future market, and 75% show stable expectation, and 20% show negative expectation. The stable expectation is mostly based on the stable downstream demand and multiple turnarounds. Thus, independent refiners’ offer will cease the drop, and those of major refiners will continue to rise. The negative expectation is mostly based on narrowing demand suppressed by the environmental protection inspection, and the offers of independent refiners may continue the drop. The positive expectation is mostly based on the possibility of major refiners to raise offers continuously.

As a whole, the recovery of the national economics brings flourishing to coal, aluminum and carbon product market, however, the severer environmental protection supervision will suppress not only the aluminum industry but also the coal industry, carbon industry and other petroleum coke downstream industries. China’s petroleum coke market will rebalance to a new equilibrium at the current stage and maintain stable operation in a medium term.