On the domestic supply side: In the second half of the year, international crude oil prices will likely continue to struggle to escape their volatile downward trend. Concerns about declining oil demand triggered by economic recession persist and are intensifying. The slowdown in economic growth in the Eurozone and the United States has outweighed concerns about supply-side uncertainties, becoming the key factor driving the recent drop in oil prices.

Once the domestic refined oil market enters a period of continued wait-and-see sentiment, further, although domestic gasoline demand remains relatively strong, the sluggish performance of diesel demand is unlikely to improve. As a result, it is expected that the operating rates of coking units in the second half of the year will be constrained, making it difficult for domestic petroleum coke supply to increase significantly.

On the import supply side: Apart from the relatively low long-term contract prices, most overseas spot prices remain at high levels overall. Coupled with robust demand from India and Europe, the overall volume of imported coke in the second half of the year is unlikely to rise significantly, thus limiting the actual impact on domestic coke production.

On the demand side: As the Federal Reserve enters a cycle of interest rate hikes and balance sheet reduction, electrolytic aluminum profits have gradually declined due to falling aluminum prices. Overall, electrolytic aluminum companies may operate around the break-even point in the second half of the year. However, with the implementation of the country’s 12-trillion-yuan stimulus package, the domestic economy will receive strong support, and the operating capacity of the electrolytic aluminum industry is likely to continue increasing. We expect electrolytic aluminum production to remain at a high level in the second half of the year. Negative electrode materials are still in the ramp-up phase; as new-energy vehicles and digital products benefit from a new round of stimulus, demand for petroleum coke remains robust.

Related products: In the thermal coal market, on the supply side, domestic coal production remains at a high level. Major coal mines continue to prioritize fulfilling long-term contracts and ensuring stable supply, leaving relatively limited room for incremental increases in market coal supply. On the demand side, with expectations of improved electricity demand during peak summer periods and a recovering macroeconomy, demand is expected to rise compared to current levels, providing some support to the market. Overall, the coal market in the second half of 2022 will likely remain supported and could see a robust balance between supply and demand. However, it is still essential to closely monitor policy adjustments and regulatory developments.

Considering both supply and demand as well as related products, on the supply side, for the second half of the year as a whole, domestic petroleum coke production and imports are unlikely to see significant increases. On the demand side, capacities for electrolytic aluminum and negative electrode materials remain at high levels, ensuring stable demand for the raw material—petroleum coke. As for related products, the thermal coal market is experiencing robust supply-demand dynamics.

Against the backdrop of a complex interplay between domestic and international economic conditions, downstream industries are expected to maintain robust demand for petroleum coke in the second half of the year. However, as the impact of Federal Reserve interest rate hikes intensifies, if the peak price of primary aluminum gradually declines, it will become increasingly difficult for petroleum coke prices to remain persistently high. Nevertheless, given the strong supply-and-demand fundamentals, it’s also unrealistic to expect petroleum coke prices to fall back sharply to lower levels. Therefore, we recommend that all parties prioritize risk management above all else, with profit optimization coming second.

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