javascript:; Great Coal Tar News from a Most Unexpected Place: China | Coal Tar Free America
 



From the world's largest producer of coal tar, China, comes a glimmer of hope and perhaps better times ahead for the Chinese people. Poor air quality is the reason cited for shuttering a coking facility's operation at the end of June by the Chinese government. An associated coal tar producing facility was also scheduled to be shut down because the lack of a consistent, local raw material. The coking of coal is an important step in the production of steel. One of the byproducts of coking is coal tar, which is used in a variety of products including coal tar pavement sealers.

The community, Tangshan, produces a great deal of the nation's steel, but the air pollution from its industrial facilities has not been without controversy. The BBC covered a group of local citizens as far back as 2004 trying to get improved conditions for residents. Many claim cancers caused by the industrial air pollution. Tangshan is close enough to Beijing that much of their industrial air discharges were curtailed during the 2008 Olympics.

In the first 9 months of 2013, only 75 days met a minimum standard for air quality. One Chinese news source said Tangshan also had the "dishonorable" title of being in the top 10 worst air quality cities in China much of the year. This brought shame on the local government.

News of this came from the SEC filings of one of the world's premier coal tar producer, Koppers Holdings, Inc. ("Koppers"). Koppers is co-owner of some Chinese coal tar refining operations and as well as a frequent and vocal sponsor of coal tar sealer advocacy. To ensure accuracy in the circumstances, the entire section of this report is included below.

Why is this good news? While it is has been reported here that most coal tar for pavement sealant is imported, this should not affect the global supply to this country. Hower what it does show is that environmental scrutiny will eventually catch up with all polluters either in the US or overseas. The message is clear: the days of wholesale, wild-west, environmental onslaught are over and the complaints of the citizens of any nation will eventually be heard.



Impairment – Impairment charges for the three months ended March 31, 2014 were $4.7 million ($2.8 million, net of non-controlling interest) and were related to the Carbon Material and Chemicals’ plant in Tangshan, China. This impairment charge was calculated using a probability-weighted discounted cash flow model.
The impairment of the Company’s 60-percent owned plant in Tangshan, China is due to the forced closure of a neighboring metallurgical coke facility. In October 2013, the Company was informed by the Tangshan Municipal People’s Government (“Tangshan Government”) of its intention to close the two coke batteries owned and operated by the Tangshan Iron and Steel Group Co., Ltd (“TISCO”) in Tangshan, China. The Tangshan Government has ordered the closure of these coke batteries in an effort to improve the air quality in the Tangshan area. The Company was notified in March 2014 by TISCO that all coke batteries would cease production no later than the end of June 2014.
The Company’s 60-percent owned subsidiary, Koppers (China) Carbon & Chemical Company Limited (“KCCC”) is located near to TISCO’s coke facililty and relies on its operations for a significant portion of raw material supply, utilities and other shared services. Closure of the TISCO coke batteries directly impacts KCCC’s ability to operate its coal tar distillation plant and the Company has determined that it is unable to continue coal tar distillation activities at the site once TISCO ceases production activities at the adjacent facility. The Company is continuing to evaluate its options, which include transitioning to a new location or entering into other strategic partnerships with other unrelated coal tar distillation companies.
The closure of KCCC’s coal tar distillation facility would have a material adverse effect on the Company’s business, financial condition, cash flow and results of operations. For the most recent year ended December 31, 2013, KCCC contributed operating profit of approximately $3.3 million after deducting profit attributable to non-controlling interests and excluding asset impairment charges. As of March 31, 2014, the remaining net book value of fixed assets subject to impairment was $2.5 million. This amount will be reflected in depreciation expense over the next four months on an accelerated basis reflecting management’s estimate of the remaining useful life of the assets.
The Company believes it would be able to continue fulfilling current domestic Chinese customers and its export commitments with capacity at Koppers (Jiangsu) Carbon Chemical Company Limited, which is scheduled for production start-up in mid-2014, its other 30-percent owned Chinese company and other commercial relationships in China. However, the Company’s margin on export sales may be negatively affected as a result of these actions.

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