In this, our second episode of the Petcoke Podcast with calciner Rain Carbon, Argus editor Lauren Masterson continues her discussion with Les Edwards, Vice President of Production Control and Technical Services, about the aluminium industry’s efforts to design an inert anode that could replace carbon anodes made from petcoke.
Listen in as they discuss key innovations, challenges and the ongoing research and development needed as the industry moves towards a lower carbon future.
Related linksListen to Part 1 of this episode here
TranscriptLauren: Last week, we heard from Les Edwards, Vice President of Production Control and Technical Services for Rain Carbon, who discussed Rain’s research and development efforts to allow its business to be more environmentally friendly. We also began to discuss the industry’s efforts to design an inert anode that could replace carbon anodes made from petcoke. You can access that episode on our website, at argusmedia.com forward slash petcoke. Here’s the second half of our conversation on this topic.
Okay. Thanks for that information. It's interesting that you mentioned the Canadian government's heavy involvement in terms of funding for that project. Do you think that other governments may also take steps to promote R&D into low carbon aluminum? Is this something that we might see that will affect the long-term trajectory of the carbon market?
Les: Yeah, I think other governments, you know, will sort of consider funding that development. So, I would say Canada was in a bit of a unique situation where, you know, the government there has been very active in funding green energy sort of projects, green energy development now for some time. And that's partly because, you know, Canada is blessed with a very large, you know, hydroelectric industry. So, you know, there's, a lot of reasons why they would want to promote that sort of technology. And then they have an aluminum industry, which, of course, is a very important contributor to the economy over there.
So, if you look around elsewhere in the world, what countries might want to consider funding that sort of work, I think China is an obvious one. I mean, China, as we all know, is the world's largest aluminum producer by a significant margin. And they also have most of their smelting capacity today is coal-fired smelting capacity. But they've also given, you know, a timeline that they will become carbon neutral. And, of course, when the central government decides they're going to do something in China, they generally can get very aggressive in achieving those targets. So, I think China is one country where, you know, we might expect to see some government funding there.
And they have done work on inert anodes before. So if you go back and look at what's been published, there's been a steady stream of papers published out of China. Again, no one has really been successful in getting much beyond bench scale. But I would expect there to be some government funding in that region. Russia, I guess, is another country with a lot of hydroelectric capacity. And Rusal certainly has done a lot of work in the inert anode area. So they've had a program, a very active program going now for the last 10 years. I'm not aware that there's been much government funding involved but that's not to say that the government wouldn't step in and maybe do some funding in the future.
And in terms of who else, I think it would be countries that, you know, do have access to a lot of renewable energy. So, Norway, you could look to and say, okay, they've got a very large aluminum industry. They have a lot of renewable energy, again, hydroelectric power. But interestingly, Norway, they've sort of... And, you know, Hydro Aluminium, of course, is the big aluminum producer over there, they've looked at inert anodes in the past but it seems that they have taken the sort of pathway that they're focusing now on reducing the energy consumption in the smelting process. So the government-funded a lot of development work in a new low energy potline that they've put in place at Karmøy. And that's really aimed at reducing the energy consumption in the smelting process. They're not actively doing inert anode work at the moment, but they are doing a lot of work in the carbon capture and storage area. So I think that tends to be the technology approach they've taken. So but yeah, to come back to your original question, yes, I think we can expect some other governments around the world to finance this sort of work. But I don't think it's going to be widespread across the world. It really will depend on where there's reasonable access to renewable energy sources.
Lauren: Yeah, that's interesting. So it's interesting that you mentioned China as a potential big, you know, funder of this kind of research. I think pointing out that they do have these goals to be carbon neutral by 2060, that is a big factor. But another thing that I think about is how they're adding a lot of smelting capacity at the moment, which obviously, we don't have these kinds of, you know, zero-carbon technologies available yet, as you mentioned. You know, they're more, like, looking down 10, 15 years down the line. Is the fact that China is building a lot of smelting capacity now, is that sort of baking in carbon anodes into the market for some period of time to come? And with China reducing a lot of their own petcoke production because of, you know, some of it is Covid effects, but a lot of it is just structural changes in the market there over time, are they potentially going to be a major importer of anode grade petcoke, you know, in these next, like, 20 or so years? Where do you see the China market moving in the kind of medium-term?
Les: Yeah, well, I think certainly today they're fairly active in the, you know, importation of anode grade petcokes, so which, you know, is not helping the sort of petcoke balance elsewhere in the world. But I think part of that is because, you know, the world is still...let's say, recovering from Covid-19. So we still have, you know, refinery capacity is down, petcoke production is still down in some regions, including in China. So I think, once the world, you know, fully recovers from Covid and refining capacity gets back up to some of the pre-Covid levels, we would expect that situation to ease somewhat. But I think the reality is that, you know, carbon anodes, I think are gonna be with us now for I would say the foreseeable future.
And yeah, so I think, you know, China, even though they may start to fund some work in the inert anode area, carbon anodes will remain a major part of their smelting base for the future. So, whether they're going to be continually importing anode grade petcoke in the future, I don't have a good answer to that question. You know, they have... You know, one thing that is, will act as a bit of a cap is the central government has already put a capacity limit on the amount of smelting that they will allow the region to grow to. So it's I think, 45 million tonnes. So they will not grow their primary smelting capacity beyond that. I think it's a question of, okay, how much, when things get back to normal, you know, how much petcoke will they produce in country and will they need to continue to import, you know, petcoke from elsewhere in the world, once some of their own, you know, coking capacity increases? Then, you know, there is a long term question about, you know, what's the future for refining, in general, around the world as as, of course, the world tends to focus on EV, you know, alternatives to internal combustion engines.
Lauren: Yeah, one thing that seems like a bit of a contradiction to me is that aluminum is being used as this lightweighting metal for electric cars and you have needle petroleum coke that can be used as a feedstock for the electric car batteries. Could you see potential problems scaling up electric car production as much as the kind of levels that we're talking about if the loss of gasoline demand results in less availability of these carbon byproducts?
Les: Yeah, I mean, there's a lot of speculation now on when the world will sort of reach peak oil. Some people might argue it's already reached peak oil. Other people say it's out in 2030. I'm not sure what the answer is. But certainly, there is no doubt a big trend now towards EVs. And, you know, synthetic graphite is still the material of choice to make the anode part of the lithium-ion battery. So, you know, the two alternatives are synthetic graphite or natural graphite. And EVs overwhelmingly prefer synthetic graphite because it has more consistent quality, more, let's say a higher performance. So, we are expecting to see a lot of growth in that market. And that does raise the question, you know, will the needle petcoke be available? And so you can produce synthetic graphite with needle coke, you can produce it with coal-tar pitch, you can also produce it with, and there's been more work done in this area, with some of the very low sulfur sponge cokes. So, there's no doubt in my mind that that market is gonna grow at a very fast rate.
And what you're seeing now is most of the synthetic graphite that's produced... Well, actually, both synthetic graphite and natural graphite that's produced in the world for LIBs is being produced in China. So now you have a lot of, you know, auto manufacturers are looking to establish supply chains outside of China. So especially in Europe, and now I think, in North America as well. So there is a lot of activity for companies looking to, you know, develop battery anode businesses in Europe, in North America. And, you know, the availability of the raw materials, I think is gonna come under a lot of threat or it's gonna become more challenging. You know, the one thing that EVs or lithium-ion batteries have going for them as an application versus pushing the coke into the anode grade market, it's a much higher premium market. So, we know if you are a lithium-ion battery anode producer, you can afford to pay a significantly higher premium than someone using that petcoke to make an anode, for example, or even an electrode, you know, graphite electrode for electric arc furnace, you know, production of steel. Yeah, so I think there is, with the growth in EVs, there will certainly be a rapid increase in demand for synthetic graphite. And that is gonna put some real pressure on the supply chain.
Lauren: Yeah, so you kind of have some push and pull and in both directions, both on the supply side and the demand side. So that's interesting. You know, you do mention that we don't see carbon getting out of the aluminum market anytime soon. What about carbon capture technology? Do you see a role for this in aluminum production?
Les: Yes, I think it's inevitable that that is going to have to be part of the solution. And if you look around the world, I would say there's a lot of momentum now, you know, for companies to really focus on, you know, carbon capture, and storage, and usage. So at the TMS meeting that we've just had a few weeks ago, so in the keynote session we had on sustainability in the aluminum supply chain, there was a presentation given by Dr. Hans Erik Vatne from Hydro Aluminium. So he's the chief technology officer. So he talked about Hydro Aluminium's approach to sustainability. And he talked quite a bit about carbon capture and storage. And so I think that is a technology that Hydro are pursuing very actively.
And, you know, one of the points he made is, if you look at the CO2 concentration from the smelter off-gas, it's very low. So it makes, you know, carbon capture quite challenging to be able to do that at the smelter because of those very, very low concentrations. So the alternative approach is to look at direct air capture technology where you don't have to do the CO2 extraction at the smelter. You can do it somewhere else and then get a CO2 credit. So for whatever CO2 you pull out on the air, and then store somewhere, whether you store it on the ground or use it for enhanced oil recovery, what the application is, you can get a CO2 credit for the smelter. So I think that technology is being actively pursued.
There are direct air carbon or direct air capture plants already being built around the world. And I think as the world moves to, you know, putting a price on carbon, putting a price on CO2 emissions, I think the economics will start to favor those plants more. So I think that ultimately will drive that technology. So, you know, in the U.S., for example, we recently had a change in administration here. And so there is a lot of talk now about whether the U.S. should adopt, you know, a carbon tax or put in some form of CO2 pricing. That's the kind of government-led initiative that I think will get the industry going down that pathway.
So, you know, ExxonMobil recently just announced that they were setting up I think a $3 billion business unit that was gonna focus pretty strongly on CCS. Yeah, so I think that is absolutely gonna be one of the solutions for the industry. And, you know, if you look around the world, I mean, 60% of the world's aluminum today is produced from coal-fired power. So, you know, we're not gonna change that overnight. It's gonna take a long time to transition to renewable power carbon anodes. I think as I said before, they're gonna be around for some time. So it has to be one of the solutions, you know, for the industry as we try and meet these fairly aggressive climate change targets
Lauren: So with all these things considered, what do you see as the future for anode grade green coke and calcined coke? Do you think we will ever see a fully carbon-free aluminum market?
Les: I think it's gonna take I believe a long time to get there or, you know, it's gonna take quite some time to get there. What we are starting to see, you know, some companies, some end users now are prepared to pay a small premium for not carbon-free aluminum but certainly low carbon aluminum. So, I think over time, as those premiums increase, I think the economic driver to move to lower carbon aluminum is just going to grow. But it is gonna take time. And, you know, some people that are prepared to pay the premium today are the users who perhaps are producing products that can afford to pay the premium but if you're, you know, producing a commodity aluminum product, I think your capacity to pay a premium for low carbon aluminum is perhaps not there. And again, it's not gonna be until governments, you know, put a price on carbon that the economics will sort of drive the industry, you know, down that pathway. But it's going to take time.
And, you know, today, you know, some would describe the small volume product that Elysis has produced... You know, so they still produce what they call carbon-free aluminum in their technical center in Pittsburgh, which is where they've done a lot of their inert anode development work until they get their new R&D center running at a higher scale. But the aluminum that's produced there is not truly carbon-free because, you know, you're still needing to produce that from alumina. And the alumina refinery still needs energy, so you have to, you know, produce steam for the process heat. You've got to calcine the alumina. So that's done, you know, in kilns. And that still has a CO2 footprint. So, if you talk about, you know, 100% carbon-free aluminum, you've gotta take the CO2 out of the whole supply chain. And that's a significant challenge. So not only do you have to successfully implement the inert anode but you've gotta convert the aluminum refineries to be carbon-free as well. I think that's not so hard on the process heat side. It's much harder for the calcining piece. So, you know, I think the industry is gonna move in that direction but it's quite some way off.
Lauren: Okay. Thank you, Les. Really appreciate getting all those insights and look forward to seeing what happens in the markets in this next I guess we're looking at more of, like, a 30-year time frame in terms of a lot of these things. But there are a lot of exciting interesting developments going on and I think, you know, some stuff is gonna happen quite rapidly here it sounds like as the world is, you know, picking up more interest in this and we're starting to see premiums and things like that. So, I really appreciate you taking the time to talk with us today and letting us know about all these initiatives. And thank you everyone for listening. And if you enjoyed this podcast, please be sure to tune in for the other episodes in our series the "Petcoke Podcast." For more information on Argus Petroleum Coke coverage, please visit www.argusmedia.com.