OREANDA-NEWS. China’s amended Air Pollution and Control Law includes a restriction on the import, sale or use of higher-sulfur petroleum coke, which is likely to tighten supply of anode-grade petcoke for the aluminum industry, according to analysts.

Petroleum coke is a byproduct of oil refining, and about 80% of global production is considered fuel-grade, used for generating electricity and in the cement industry. The remaining 20% is calcined, or further refined, and serves as a key ingredient in other manufacturing ? in particular, aluminum production. Calcined pet coke (CPC) is used to make the anodes that provide the carbon for the electrolytic chemical reaction during aluminum smelting.

AZ China reported that Chinese President Xi Jinping signed the revised pollution law into effect in late August, banning the production or use of “unqualified” petcoke as of January 1, 2016, but without yet setting the sulfur standard for what is qualified.

The Chinese government will take 12 months to develop the new standard, and if it caps sulfur levels at 3%, it would eliminate more than 4 million mt of calcinable petcoke used in aluminum production. This could cut Chinese exports of CPC and anodes, according to analysts at AZ China and Cascade Resources.

Aluminum company sources, however, have downplayed the news, expecting the regulations to be phased in over time or to exclude certain companies or sectors.

“The report is like that yellow paper in London with the sensational headlines,” said one aluminum buyer, predicting that the Chinese refining industry would adapt.

“I think there will be some impact, but there a lot of refineries producing high-sulfur coke, so what are they going to do ? shut them down? If they ban everything over 3% there is not even enough for the domestic industry.”

The buyer had recently visited Chinese calciners that were already on target to meet new emissions standards.

“Why would they tell a plant already complying with environmental regulations they have to shut down? Most of the Chinese calciners that aren’t meeting the emissions standards are not exporting, and the capacity utilization of the others is not that high, so they could just increase,” he said.

AZ and Cascade warn, however, that all of the low-sulfur coke will be needed in China, and that some smelters were already finding it more difficult to source CPC from China.

“The more worrisome news would be if the [Chinese] smelters are moving toward low-sulfur coke,” agreed another aluminum buyer. “We are hearing from our sources in Shanghai some smelters are moving toward more lower-sulfur coke and lower metals, focusing on efficiency and reactivity.”

Still, he thought that China tended to float proposals but to extend deadlines if they found they could lead to job losses. “There is no smoke without fire, but I think it’s going to be a process and not a knee-jerk reaction.”

Stuart Ehrenreich, director of Cascade Resources, spent years in China and agreed that sometimes China floats proposed regulations that end up being scaled back. He said this one, however, was serious because it states that local enforcement authorities can confiscate the petcoke and impose fines of three times the value of the coke.

“When the Chinese authorities attach a penalty to a regulation, they are giving the enforcement authorities ? whether provincial or local or federal ? a significant incentive to enforce it, and they fund their budgets with a percentage of the fines they collect,” Ehrenreich said.

A calciner source agreed that when regulations are signed by the president they usually have more teeth. Still, “We need some clarity before we panic,” he said, questioning whether it might mean coke being burned in co-generation that calciners could blend to meet the sulfur limit. He said suppliers he’d consulted in China were also not yet clear on how the change will take effect. (A recent Platts Energy Spotlight podcast looked at how other countries are fretting about the changing Chinese standards.)

Another aluminum smelter source said, only half-jokingly, that he hoped the regulation would be as bad as feared and lead to Chinese aluminum smelter curtailments. Ehrenreich said he did not rule that out as an intended outcome.

“I think there’s more to this than meets the eye,” he said, suggesting it relates to many issues in China, including not only mitigating the social impacts of pollution but also possibly moving aluminum production to more efficient regions of the country.

“This could be a method for the government to actually reduce aluminum production to a certain extent so they are not accused of overproducing and dumping on the world market,” he said.

China produced about 53% of the world’s aluminum, based on statistics from the International Aluminum Institute for 2014. The world’s total output last year was 53.1 million metric tons, and China produced 27.5 million mt. That level of output requires some 15 million mt of calcined pet coke.