GLOBAL COAL TAR MARKET A.D BUSINESS AS USUAL?

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1 KOKSOWNICTWO 2018 Szczyrk, września 2018 GLOBAL COAL TAR MARKET A.D BUSINESS AS USUAL? DR. ZYGMUNT STOMPEL

2 2018 GLOBAL COAL TAR MARKET HOW MUCH COAL TAR AROUND THE WORLD: PRODUCTION GLOBAL COAL TAR TRADE: WHO HAS TOO MUCH? WHO IS STARVING? IS THERE ENOUGH TAR FOR EVERYBODY IN EUROPE? TAR PRICES: ARE THEY OVERHEATED? MARKET TRENDS FOR COAL TAR PRODUCTS: PITCH, CARBON BLACK FEEDSTOCK THE FUTURE: THREATS & OPPORTUNITIES

3 I EUROPE

4 Total AM HOW MUCH COAL TAR IN EUROPE PRODUCTION IN EU (1) COMPANY LOCATION 2018 INSTALLED COKE CAPACITY, MLN T/Y TAR 2017 (kt) TAR 2018 (kt) estimation ARCELORMITTAL Ghent, Belgium Ostrava, Czech Rep Dunkerque, France Florange, France Fos-sur-Mer, France Bottrop, Germany Taranto, Italy Zdzieszowice, Poland Kraków, Poland Aviles, Spain

5 HOW MUCH COAL TAR IN EUROPE PRODUCTION IN EU (2) US Steel Kosice, Slovakia COMPANY LOCATION 2018 INSTALLED CAPACITY, MLN T/Y Huttenwerke Krupp Mannesman (HKM) Thyssen Krupp Stahl TAR 2017 (kt) TAR 2018 (kt) estimation Huckingen, Germany Schwelgern, Germany Saltzgitter Saltzgitter, Germany Zentralkokerei Saar Dillingen, Germany JSW Koks JSW Koks Zabrze, Poland (Jadwiga, Radlin) Dąbrowa Górnicza, Poland (Przyjaźń) Tata Steel Ijmuiden, Netherlands Tata Steel Port Talbot, UK British Steel Scunthorpe, UK Voest Alpine Linz, Austria

6 HOW MUCH COAL TAR IN EUROPE PRODUCTION IN EU (3) COMPANY LOCATION 2018 Installed Coke Capacity, mln t/y Tar 2017, kt Tar 2018, kt estimation OKD - OKK Ostrava, Czech Rep Trinecke Zelezarny Trinec, Czech Rep SSAB Raahe, Finland SSAB Lulea, Sweden SSAB Oxelosund, Sweden Arvedi Triest, Italy Italiana Coke San Guiseppe di Cairo, Italy Częstochowa Nowa Częstochowa, Poland WZK Victoria Wałbrzych, Poland Industrial Quimica del Nalon Langreo, Spain Total EU except

7 Ural Steel Novotroitsk, Russia (Ural) HOW MUCH TAR IN EUROPE PRODUCTION OUTSIDE EU (1) COMPANY LOCATION 2018 Installed Coke Capacity, mln t/y Tar 2017, kt Tar 2018, kt estimation Severstal Cherepovets, Russia NLMK Novolipetsk, Russia NLMK Altay Koks Zarinsk, Russia (Siberia) Mechel Koks Chelyabinsk, Russia (Ural) Mechel Koks Vidnoye (Moscow), Russia Gubakha Koks Gubakha, Russia (Ural) Magnitogorskiy Met. Komb. (MMK) Magnitogorsk, Russia (Ural) Evraz - NTMK Nizhny Tagil, Russia (Ural) Evraz - Zapsib Novokuznetsk, Russia (Siberia) Metholding Kemerovo, Russia (Siberia)

8 HOW MUCH COAL TAR IN EUROPE PRODUCTION OUTSIDE EU (2) Company Location 2018 coke capacity, mln t/y Tar 2017, kt Tar 2018, kt ArcelorMittal Zenica, Bosnia Global Ispat (GIKIL) Lukavac, Bosnia ISD Alchevsk, Ukraine *? 40? Metinvest Avdeyevka, Ukraine Metinvest Yenakiyevo, Ukraine* ? Metinvest Mariupol, Ukraine Metinvest Zaporozhya, Ukraine Metinvest Dniprodzerzhinsk, Ukr Istek Gorlovka, Ukraine*? 10? Evraz - Dniprokoks Dnipropetrovsk, Ukraine Evraz - Yuzhkoks Dniprodzerzhinsk, Ukr Donetsk-steel Makeyevka, Ukraine*? 36? Donetsk-steel Yasinovka, Ukraine *? 0 0 Donetsk-koks Donetsk, Ukraine*? 12? ArcelorMittal Kriviy Rih, Ukraine Kharkiv Coke Kharkiv, Ukraine

9 * SPECIAL NOTE: UKRAINE December 18, 2017; 19:16 Industrial Union of Donbas (ISD) Corporation has officially announced today the actual loss of effective managerial control over its production assets (industrial sites and office premises) in Alchevsk, Luhansk Region, including Alchevsk Iron & Steel Works, Alchevsk Coke and Chemical Plant (Alchevskoks) and Ecoenergy, which together constitute a significant part of the ISD Group. Similar announcements came from Donetsk-steel (Yasinovka, Makeyevka), Istek (Gorlovka), and Metinvest (Yenakiyevo).

10 HOW MUCH TAR IN EUROPE PRODUCTION SUMMARY Region Tar 2017, kt Tar 2018, kt (estimation) European Union including ArcelorMittal ArcelorMittal share in EU, % Bosnia Including ArcelorMittal ArcelorMittal share in Bosnia, % Russian Federation Ukraine * - Including ArcelorMittal ArcelorMittal share in Ukraine, % TOTAL EUROPE Including ArcelorMittal ArcelorMittal s share, %

11 HOW MUCH COAL TAR IN EUROPE: IMPORT, EXPORT, AND INTRAEUROPEAN TRADE, kt 2017 import to: EU Russia Ukraine From: Brazil Canada Turkey Russia 102 Ukraine 96 Kazakhstan Total import to: Production in: export from: EU Russia Ukraine To: Canada EU Total available in:

12 IS THERE ENOUGH TAR FOR EVERYBODY IN EUROPE? Tar theoretically available: (kt) EU Russia Ukraine Total Europe Really available: (kt) Installed processing capacity: (ktpy) Real average capacity utilization rate: % ,5 64,3 48,3 69,7

TAR PRICES IN EUROPE 2016 2018 (Poland, France, and Hungary contracted in Euro/t ex

13 TAR PRICES IN EUROPE (Poland, France, and Hungary contracted in Euro/t ex works or FOB, Turkey and Ukraine contracted in US$/t, recalculated here for Euro/t)

14 TAR PROCESSING COMPANIES IN EUROPE 2018 Company Plant Tar distilation capacity, kt/y Est. processing 2018, kt Rain Carbon Inc. Castrop Rauxel, Germany Zelzate, Belgium Cherepovets, Russia (j-v) Deza a.s. Valasske Mezirici, Czech R Koppers Intern. BV Nyborg, Denmark Ind. Quimica d. Nalon Trubia, Spain Bilbaina de Alquitranes Bilbao, Spain Metinvest Avdeyevka, Ukraine Zaporozhya, Ukraine Dniprodzerzhinsk, Ukraine MMK Magnitogorsk, Russia Mechel Chelyabinsk, Russia Evraz Novokuznetsk, Russia Evraz Nizhniy Tagil, Russia Total Europe

15 II AMERICAS

16 HOW MUCH COAL TAR IN AMERICAS: PRODUCTION Country Coke capacity, ktpy Tar production, 2017, kt North America: USA by products plants Tar Production, 2018, kt USA non recovery plants Canada Mexico Total North America South America: Argentina Brazil Colombia Chile Total South America Total Americas

17 HOW MUCH COAL TAR IN AMERICAS: TRADE (2017, kt) Import to: Canada USA Argentina Belgium Denmark From: USA Canada Colombia Mexico Brazil Total:

18 COAL TAR PROCESSING PLANTS IN AMERICAS Country Company Location Distillation capacity, ktpy Real distillation 2017, kt Canada Rain Carbon Inc. Hamilton USA Koppers Inc. Stickney, Il Mexico Alto Hornos d. Mexico Monclova Total North America Total available tar 560 Balance 0 Argentina Carboquimica d. Parana Caba Brazil Elkem Carboderivados Serva Total South America Total available tar 320 Balance + 200

19 NOTE: KOPPERS DEEMPHASIZING TAR PROCESSING SEGMENT (TAR DISTILLATION PLANTS CLOSED RECENTLY) Location Capacity, ktpy Closing year Clairton, Pa., USA Follansbee, W.V., USA Uithoorn, Netherlands Port Clarence, United Kingdom Scunthorpe, United Kingdom Tangshan (KCCC), China Tangshan (TKK), China (sold) TOTAL: 1.155

20 III MIDDLE EAST & AFRICA

21 COAL TAR INDUSTRY IN AFRICA & MIDDLE EAST, 2017 Country Turkey Iran Egypt S. Africa Zimbabwe Production of tar, kt (?) 95? Tar export, kt Belgium 26.3 Denmark 10.5 India 19.5 Pakistan 9.0 Spain 62.7 Tar processing capacity, ktpy Real Processing, kt 36 (Kardemir) (Coal Tar Refining ) (Arcelor Mittal) 50 (Zimchem)? 40? 95?

22 IV ASIA (except China)

23 COAL TAR INDUSTRY IN ASIA (EXCEPT CHINA), 2017 COUNTRY PRODUCTION OF TAR, kt PROCESSING CAPACITY, ktpy REAL PROCESSING, kt REMARKS India ca 100 kt fuel Indonesia Japan Import from Korea and Vietnam South Korea Export to Japan, import from Vietnam and Japan (swap) Taiwan Part of production used as CBF Vietnam Export to S. Korea, Japan, and China Total: Average CUR 70 %

24 V CHINA

25 CHINA S MYSTERIOUS TAR PROCESSING INDUSTRY Year Production of coal tar, kt Installed tar distillation capacity, ktpy Real processing of coal tar, kt Capacity utilization rate, % Coal tar used as CBF, kt Average price, USD/t

26 VI AUSTRALIA

27 COAL TAR INDUSTRY IN AUSTRALIA Tar production: ca. 95 kt (2017) from two cokemakers: Blue Scope Steel, Port Kembla, NSW, and One Steel, Whyalla, South Australia. Tar processing capacity: 300 ktpy at two Koppers Australia units (150 ktpy each) in Newcastle, NSW. Real processing: 94.8 kt (2017, one distillation unit mothballed). Production of anode pitch: 41.5 kt (2017). Oceania s demand for anode pitch: ca. 145 ktpy. Import of anode pitch to Australia and New Zealand from China (18.9 kt), S. Korea (16.3 kt), and Taiwan (65.7 kt) data for 2017.

28 VII GLOBAL COAL TAR INDUSTRY: A SUMMARY

29 REGION Europe (including Russia & Ukraine) GLOBAL COAL TAR INDUSTRY: A SUMMARY TAR PRODUCTION, kt TAR PROCESSING, ktpy (2017) BALANCE, kt REMARKS Mostly carbon black feedstock North America Import from South America South America Export to North America + fuel Asia ex China Mostly carbon black feedstock + fuel China Mostly carbon black feedstock Australia Middle East and Africa Export to Europe (from Turkey), fuel TOTAL WORLD Mostly carbon black feedstock

30 VIII MARKET FOR COAL TAR PRODUCTS IN EUROPE 2018

31 MARKET FOR COAL TAR PRODUCTS IN EUROPE 2018: PITCH The wave of smelter closures is over. Production of primary aluminium is stable (or slightly increasing due to restarting of idled lines) in both Western and Eastern Europe: WE 3.6 mln tons in 2014 up to 3.78 mln tons in 2017; EE 3.76 mln tons in 2014 up to 4.0 mln tons in The newest RUSAL s Siberian Boguchansky smelter is already operational (149 ktpy), final capacity: 600 ktpy. Aluminium prices have increased from US$/t in January 2016 to US$ in June 2018, averaging US$/t in Graphite electrodes industry enjoys tremendous run; electrodes prices are skyrocketing no more talks about closing plants (SGL mourning the sale of the whole GE segment to Showa Denko just before the current bonanza?) Growing market for Li Ion batteries, which require needle coke and some pitch, creates new opportunities for tar processing companies.

32 MARKET FOR COAL TAR PRODUCTS: PITCH - continuation Decreasing production of coke (and tar!) in China combined with growth in production of primary aluminium means that local Chinese market will consume the bigger share of its pitch. Production of electrode grade pitches has decreased in China from 5.1 mln tons in 2016 to 4.9 million tons in Prices of pitch in China have increased in 2017 by 30 % comparing with 2016, and for the first time in history are floating well above prices of crude tar. Export of pitch from China remained strong in 2017, but with increasing prices it becomes less atractive for customers in South and North America, Africa, and Middle East. There are first signals that European producers of pitch return to South Africa.

33 MARKET FOR COAL TAR PRODUCTS IN EUROPE 2018: CBF Carbon black manufacturing plant closures we observed in Europe for several years is the story of the past (the last victim was Orion s Ambes plant, closed at the end of 2016). May 22, 2018: Through the combination of a plant expansion, operational improvements, and debottlenecking projects, CABOT is expanding its global capacity by over 300,000 metric tons per year In September 2017 BIRLA CARBON put into operation a new carbon black plant in China and is currently debottlenecking its Italian plant. OMSK CARBON GROUP is just putting into operation (September 2018) the first line of its new facility at Mogilev, Belarus. The final capacity, to be achieved by 2022, is 200,000 metric tons per year. ORION ENGINEERED CARBONS: price increases for rubber carbon blacks in North America from June 1, 2018, in EMEA from August ; for specialty carbon blacks worldwide from January 1, 2018.

34 EUROPEAN COAL TAR INDUSTRY 2018 AND BEYOND Business as usual (or better) for the existing tar processing companies in EU. To be observed: ArcelorMittal plans regarding Southern Europe facilities: will Gijon fully replace Aviles in time? What is the future of the coking plant at Taranto? (New Italian government seems to have a second thoughts ) Still unclear situation around Eastern Ukraine: is there a chance for returning to normality there? Where go the products from facilities taken over by separatist forces? Is there a chance for somebody to repeat Rain Carbon Inc. success in Russia? Is Chinese pitch export to Siberian smelters to be continued? To be observed: two countries with significant production of coal tar and lack of processing plant(s): Poland ca. 380,000 mtpy, and Turkey ca. 160,000 mtpy. To build or not to build; this is the question

35 THANK YOU VERY MUCH Parts of this presentation wouldn t be possible without the data supplied by Mr. Vince Guercio of CTC International, USA. Many thanks, Vince. Data for China are thanks to Mr. Deng Xiaoxing of East River Asia Limited, China. Thank you, Deng. Opinions expressed in the presentation are private opinions of the author, who is not in any relationship with any company engaged in production of coke or processing of coke-oven tar. stompel@stompel.pl.pl

DR. ZYGMUNT STOMPEL, POLAND

INTERNATIONAL TAR ASSOCIATION 2018 ANNUAL CONFERENCE SAN FRANCISCO, SEPTEMBER 17 18, 2018 2018 EUROPEAN COAL TAR AND COAL TAR DISTILLATION MARKET OVERVIEW: BUSINESS AS USUAL DR. ZYGMUNT STOMPEL, POLAND