How will IMO 2020 affect the petroleum coke market?

Author Hayden Atkins, Consulting

The introduction of IMO 2020 is expected to have a marked impact on petcoke markets, with some current aspects of supply and pricing the mirror image of expectations for the next few years.

As IMO 2020 approaches, several aspects of the petroleum coke market are vastly different to the way it is expected to look once marine emission standards take effect. We see four key influences on the petroleum coke market from IMO 2020:

  • • Higher volumes of petroleum coke produced — wider crude and product spreads should boost coker utilisation, with new capacity also coming on line
  • • Specification of petroleum coke produced — threat to some production of low-sulphur petroleum coke as coker feedstocks change
  • • Higher cost of freight — higher marine fuel costs should affect netbacks to key exporting regions
  • • Competition from HSFO in consuming sectors — likely to be small, but excess HSFO may displace some petroleum coke usage in industries like cement.

 

Anode grade gpc and cpc price assessments

Petroleum coke in some regions is getting a boost from recent coker additions, but right now, output in the USGC is falling compared with last year. This is partly due to elevated maintenance on cokers ahead of IMO 2020. But a shift in crude slates is also reducing coke output, as the loss of Venezuelan supply has prompted the use of more domestic light crudes.

Low-sulphur anode grade petroleum coke prices are also very weak. Anode grade GPC and CPC prices have fallen faster than Aluminium prices as some merchant calciners have struggled with the impact of changes in Indian regulations. The supply of very low-sulphur anode grade petroleum coke is seen as under threat from the change in coking margins given this feedstock could be blended into higher-value 0.5pc Sulphur bunker fuel market.

We explore how the petroleum coke market may shift in our recently published Argus Petroleum Coke Market Outlook to 2023. In this report we provide our best estimates on the impact on supply, demand and petroleum coke benchmarks.

Looking into next year, what will significantly stronger coker utilisation and supply of fuel-grade petroleum coke mean in an already weak price environment? Fob USGC 6.5pc Sulphur petroleum coke prices have already fallen significantly over the past 12 months, to $45/t from $85/t. Expanding USGC petroleum coke supply into a depressed thermal coal market is one of our key variables in our fuel-grade price model.

The potential impact of IMO 2020 on the anode-grade petroleum coke market is something that has been on the industry’s radar for several years. But with implementation only months away, there is little indication from current pricing that buyers are concerned about the availability once refineries start to make changes. But a supply disruption to this segment of the market could very quickly change the trajectory of prices given they are currently very weak.

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