The Petcoke Podcast: Outlook to 2026

Author Argus

In this episode, petroleum coke editor Lauren Masterson and petroleum coke and coal analyst Hayden Atkins analyse the overall outlook for the fuel and anode-grade coke markets over the next five years.

Against the backdrop of record-high fuel-grade coke prices and near-record-high anode-grade coke prices, Lauren Masterson and Hayden Atkins help you understand discuss the factors driving the price rally in the near term. They also provide an expert view of where the market is headed over the next five years and beyond. They will discuss  provide analysis of the high coal and freight prices, the cement market outlook, Covid-19 impacts on refining, Russian coke supply growth, China’s long-term role in the anode-grade market and the anode-grade market outlook as a whole, among others. To better understand the fast changing market better, listen to the Petcoke Podcast today. 




Lauren: Hello, and welcome to "The Petcoke Podcast." In this series, we'll be speaking with key industry participants to gain their insight into the latest trends for petroleum coke markets around the world. In today's episode, we'll be discussing the outlook for the five years going forward. I have my colleague Hayden Atkins with me today. He is the consultant for petroleum coke, and I am Lauren Masterson, petroleum coke editor. "The Petcoke Podcast" is brought to you by Argus Media, a leading independent provider of energy and commodity pricing information.

So thanks, Hayden, for joining me today. You've recently produced a multi-client report on the five-year outlook for the petcoke market and my team and I have been getting a lot of questions about this and what it covers. So I thought we could sit down today and talk a little bit about what you're seeing over the next five years and give people kind of a preview of what might be in that report. So let's start with the more near term, because it's been a pretty wild year and I think a lot of people are really wondering just what's going to happen with this price rally, how long that can last. For what it's worth, we've seen the U.S. Gulf prices kind of stabilizing at record levels right now over the last three weeks or so. And so what is your outlook for when we will start seeing the U.S. Gulf high sulfur fuel grade prices start to cool off?

Hayden: Yeah, first of all, thanks Lauren for having me on the podcast. I think when we talk about the short-term outlook, probably for the last six months, we've kind of thought a peak for high sulphur petcoke prices was around the corner and then every week it just keeps going up and up and up and up and up. So I think in terms of when prices will actually reach their ultimate peak, we'll probably only know really in hindsight. I think looking at the balance of risks over the remainder of this year, a lot of prices are getting pretty volatile at really high levels. So we've seen coal really have a parabolic rise in the last couple of months, and European prices in particular, we're seeing European natural gas prices skyrocket and now start to bounce around at really high levels.

So to the degree that some of these very elevated levels could see somewhat of a pullback in the next month or so is not out of the question. But I think the bigger question beyond the very short term is what will the winter look like for a lot of solid fuels? And for the most part, markets look kind of short. So, you know, European natural gas inventory is very low, there's a lot of concern about potential Russian supply, within China coal prices are very high right now. There are some things changing there, but there's still winter restocking risks. So that'll probably help keep prices elevated, maybe not as high as they are right now but, you know, certainly a lot higher than what we thought a couple of months ago.

And this has sort of really transformed the risks for petcoke pricing. So, whereas a few months ago, petcoke was very uncompetitive into a lot of key markets and we kind of thought that improving supply would sort of recalibrate relative prices to generate a bit of demand. We don't actually really need to do that now. The strength in coal prices is enticing some market participants back and the market looks a lot more balanced. So I think for the winter months, we may not beat the price levels that we have right now but certainly things are looking a lot stronger than what they were just a couple of months ago. So we can expect prices, I think, to remain at high levels at least until the end of the year, until we get a better sense of the risks throughout winter, which... Forecasting the weather can be a tricky game, but that's I think kind of the key thing once we get into that kind of January period.

Lauren: Okay. So specifically on China and India demand, I think that at least on the India side, that's where we've seen a lot of demand destruction over the last year, but it's been balanced by a lot of Chinese demand. So we're starting now, over the last couple of months, to see Chinese demand tapering off pretty much because of that super high freight cost, I think is the biggest factor there. But India may be starting to reenter the market. So I'm curious what you think specifically on those two markets. What is your outlook for the next few months?

Hayden: So I think when we look at India, there's this pretty clear relationship between relative price discounts for petcoke versus coal like sort of six months in advance of when we see imports starting to rise or fall in India. So imports right now are extremely low, almost zero in terms of fuel-grade imports. And that's really just a product of the non-existent discount for petcoke that we saw three to six months ago. And now we're at a point where there is some discount, it's still not particularly wide. In terms of the history before the last 12 months, it's actually pretty narrow. So we might see some additional demand generated from India, maybe particularly absorbing some of the Saudi Arabian coke that has had a bit more trouble finding a home more recently, and maybe less so for U.S. Gulf Coast coke at the moment.

But like you pointed out that the market didn't need Indian demand this year, partly because of supply destruction and, you know, we've still got lower supply for the most part coming over the next six months or so, and we've got increased demand from the Mediterranean and kind of European area. So we probably don't actually need a huge amount of Indian demand for the market to remain balanced over the next six months. As far as China goes, the risks are starting to look a bit more different for the second half of the year, as far as the kind of top-down view goes and what that could potentially mean for arbitrages versus coal as well. So coal prices are still very, very high within China, weather has been a big contributor to that, both in terms of very high temperatures and, you know, poor hydro generation.

There is a growing risk of actual industrial slowdowns, I think is that construction has been very weak, steel output is starting to fall and the iron ore price has fallen 10% today. So, you know, there's things changing within China that sort of gives you pause to think how strong will things actually be in Q4, you know, sort of outside of things like the weather and in terms of that underlying industrial activity. We may get to a situation where, you know, Chinese demand is sort of a bit soft right now, but kind of more importantly, in terms of driving very high coal prices, you know, that may start to change as well sort of coming into sort of that October-November period, when we get a bit of a better understanding about how their winter restocking is going. So I think that's probably more the bigger risk as far as China is going, that these kind of nascent signs of economic slowdown become, you know, something more serious over the next couple of months.

Lauren: So we've seen a lot more basin segregation in the last few months with freight rates at record highs. So U.S. Gulf coke is going more to Latin America, less to India, more to Europe and the Mediterranean and we've even seen some moves like U.S. west coast coke going to Latin America or Colombian coke going to the U.S. So do you think this is a trend that's going to continue or is it something that we're kind of just seeing right now and a temporary move?

Hayden: Yeah, I don't think it's kind of like a permanent change in the market. It's really a product of, you know, the extreme tightness that we have seen in terms of strong cement output in this part of the world, in particular, the Americas region and just the lack of supply that has come out of cokers for the most part this year as well. So things have improved kind of much more recently, but we're still sort of playing catch up to filling orders that were made, you know, three months ago or so. So I think that's just more of a market adjustment to, you know, both very weak supply or less than expected and very high freight rates.

So are those two things going to kind of continue indefinitely? Maybe. It's kind of not our expectation that they will, and we kind of expect a broader adjustment, you know, in terms of the market going back to a bit more of the way that it was say in 2019 in terms of trade flows. We sort of don't see a future for petcoke with India at zero imports forever. There's going to be a point at which they're going to have to come back to the market and absorb some supply be it because there's more coming out of the U.S. or, you know, demand is starting to falter in places like China. So probably a bit more of a temporary phenomenon we would say rather than, you know, something that's going to be a permanent feature going forward.

Lauren: Cement makers reported in the second quarter that their petcoke prices were specifically higher and energy costs were a lot higher. But cement demand was up so much that most of them still reported really high earnings for that quarter and are planning expansions. So what is your outlook for cement demand overall and what are the key countries where cement growth will lead to petcoke demand?

Hayden: Yeah. So for the most part, it still looks like cement demand growth is pretty good in the sort of key markets where it's most important to petcoke. So, you know, India has been a little bit up and down and certainly very heavily affected by the Delta variant wave through April and May. But more generally, you know, economically speaking things have sort of bounced back in the last month or so. But I think more critically is kind of like Latin America and to some degree Turkey as well, where cement demand still appears to be pretty solid.

There'll probably be like some slowdown in the rates of growth, so we're going to start lapping, you know, very strong growth that was seen at the end of 2020. So rather than growing 15%, 20%, you know, maybe we slow down to this sort of mid-to-high single digits just because it gets harder to keep growing at such a rapid pace. But it doesn't really seem like there's a structural headwind coming to knock the current underlying momentum off-course.

So to some degree, that'll continue to support solid petcoke demand in kind of the core countries. So Brazil and Mexico, in particular, have been sort of the lynch pin of supporting, you know, high sulfur petcoke prices for much of this year and, you know, now that the price relativities make sense for Turkey and the cement production is still pretty good there too. So, you know, that's kind of, I guess, the next leg of supporting demand. So, yeah, we don't sort of envisage any rapid slowdown, but certainly a slowdown in growth rates sort of seems likely just because they’ve been so strong for the last 12 months or so.

Lauren: What about a move away from solid fuel for cement makers? So this has been a trend for a while going towards different alternative fuels, waste fuels, things like that, biomass, but all the multinationals pretty much seemed pretty focused on this and Cemex even announced it will be launching its own ETS, emissions trading system, and the EU has now introduced their carbon border adjustment. So do you think that some of these things will effectively accelerate that transition to alternative fuels?

Hayden: Yeah. I mean, it does seem likely, it has become a much bigger talking point, it's become a much bigger focus for shareholders. Reducing carbon footprint is probably, apart from growing returns, the sort of key investment thesis for just about everyone at the moment. I think the rate of adoption of alternative fuels will probably be slower though than the speed at which cement demand will grow in a lot of these countries. So yes, we will have more alternative fuels in the mix and petcoke and, you know, other fossil fuels will lose market share, but the pie will be getting bigger at a faster pace. It seems to be pretty likely at this point. So, you know, if we have a 2% to 3% creep of alternative fuels into the mix and we have cement demand growing at, you know, 7%, 8%, we still need more petcoke in the short term.

So yeah, the speed of adoption could increase a bit faster, but there seems to be, you know, potentially technical limits to how quickly you can actually move some of these alternative fuels into the mix as well, and, you know, things like switching to gas or just lower carbon fuels doesn't sort of seem to be a long-term sustainable solution. So yeah, certainly something that, you know, potentially chips away a little bit at petcoke demand or potential petcoke demand growth. But in a lot of key countries, it does seem like the rate of growth in demand for cement will be faster. So probably more demand for petcoke as a result.

Lauren: What do you see as the long-term impacts of the COVID-19 pandemic on both production and demand?

Hayden: Yeah, I guess this is the really big question where we could go on for weeks and weeks of discussion and still probably not really know what the answer is. So I think, you know, there's maybe a couple of, you know, obvious ones in terms of refineries that have been shut. So in general, there will be lower supply than there was before, given the refinery closures that have already happened and the ones that are slated to happen in a couple of years’ time. Whether there's more to come in terms of, you know, the damage from COVID-19 is maybe an open question. It's potentially going to be more driven by other factors. 

As far as the U.S. goes, Renewable Fuel Standards is kind of one that is putting pressure on a lot of different refineries and conversion to biofuels sort of seems to be a topic du jour. So that is not a direct result of COVID-19 but something that's kind of amplifying the pressure on refineries in the U.S. in particular. We've certainly seen idlings of refineries elsewhere in Europe and lower utilization rates, you know, just about everywhere but not so much closures of very integrated refineries.

So, potential petcoke output from that perspective, you know, sort of hasn't changed dramatically outside of the U.S. which we'll kind of say at this stage. I think from a supply point of view, maybe the more interesting change is kind of around some of the potential long-term impacts to sort of U.S. crude supply or feedstocks to refineries. So if there has been this kind of permanent shift in oil majors producing tight oil, or what some other countries are going to do and big multinationals in terms of crude supply, one, because of COVID-19 and two, because of shareholder pressure. The crude landscape in terms of types of quality and supply could be sort of permanently changed, which has had an impact already on the type of petcoke being produced in the U.S. Gulf and, you know, that shift could potentially last a bit longer than just what we've seen over the last 12, 18 months or so.

So I think, yeah, there's a sort of a clear impact in the short term in terms of supply, but potentially sort of important long-term things to think about. From a demand perspective, I don't think that the impacts are sort of permanent. So the degree to which, you know, cement demand is strong now means that it'll probably be a bit slower at some point in the future. You know, it's not immediately, but the underlying demand for cement is not really going to be driven by a pandemic in the long run to the degree that utilities are still consuming. It is more driven by regulation than the pandemic response. So maybe some things have changed from that perspective, but I don't think there’s sort of been this underlying change in the demand profile as a direct result of Covid-19. I think it's more about the supply.

Lauren: So kind of on the flip side of that, Russia seems to be the only place where supply is really expected to expand in the near term. What will Russia's role be in the market over the next five years, say?

Hayden: Yeah. So certainly a lot bigger given it's going to be mostly exported. So there's no real appetite for domestic consumption, be it maybe a little bit more for anode grade. They've got some smelter capacity coming online, but for the most part, it will be moved into international markets. It doesn't really make sense to go into cement kilns or elsewhere at the moment. So yeah, it's going to be kind of a growing footprint in terms of international trade and, you know, really kind of moving into different markets, given the sort of varying specs. So kind of ranging from sort of fairly low sulfur, anode-grade petcoke to kind of marginal between fuel and anode-grade petcoke, so sort of mid-sulfur ranges. So to some degree, it certainly alleviates some of the maybe long-term pressure on, you know, where is anode grade GPC going to come from in the longer run.

It'll probably be used much more in blends going forward and, you know, the market will adapt and work out how to do that as things change and how the markets become kind of more difficult to source supply. But it's also probably going to push sort of more further afield into different markets. So the obvious local places of Turkey or Europe, in terms of exports from Baltic ports or Black Sea, kind of have their own challenges. So, you know, maybe pushing as far afield as Latin America, maybe balancing some of the sulfur constraints for some consumers. So yeah, I guess it will not only be a greater volume, but sort of spreading far and wide sort of seems to be likely as well.

Lauren: What about China's role on the anode grade side? It's been a net exporter for some years, but now it's taking on more of an importer role. Do you think this is temporary or is this going to be the case going forward?

Hayden: Yeah. It seems to be pretty permanent. It's not sort of something that's going to go away, you know, kind of next year. The sort of balance between the pace of expansion of smelting and the speed at which petcoke output is growing has, you know, kind of permanently shifted, it seems like. So to the degree that they're going to be importing, you know, more anode-grade GPC makes sense. They haven't really sort of radically changed the sort of CPC trade balance profile, and they have been exporting more anodes as well. So to some degree, their role within international carbon trade for aluminum smelters is shifting more up the value add curve, as opposed to just the anode grade GPC perspective, but I think it really shifts the dynamics of pricing.

So because it's becoming a much more important importer, you know, relative to a large domestic market where there's probably a bit more price transparency, you know, probably more spot trading as well, it does, I guess, change the way the market will work probably permanently going forward in terms of pricing points and liquidity as well. So yeah, something that we see as really a permanent shift and there are pressures on domestic petcoke supply that, some in the near term, some maybe longer-term challenges as well that, you know, will probably continue to boost their imports of anode-grade GPC.

Lauren: Okay, thanks for that. So, lastly, just to wrap up, is going to be another really broad question, but what are your longer-term views for the anode-grade market?

Hayden: I think the anode-grade market, you know, to some degree, has been shifted by these pretty radical change in the longer-term outlook for aluminum smelting, in general. So, you know, we've kind of gone through a period of maybe 10 years where ex-China smelters were just continuously under pressure, you know, constant pressure for capacity reduction, primarily driven by overcapacity within China and, you know, a lot of exports. So we saw a lot of tariffs and trade action, you know, nothing kind of really changed it. And then now over the last 12, 18 months, you know, the whole paradigm has been really turned on its head. So now we're kind of looking at, you know, a longer-term for the aluminum industry that is kind of really positive from a smelting perspective. Prices are expected to remain pretty high. China has turned to a really substantial importer of primary metal and there's not an expectation that's going to really dramatically change anytime soon.

So, you know, we may have ups and downs due to changes in the cycle and weaker industrial output, or, you know, things like weaker auto manufacturing is kind of becoming a bigger deal right now. So, you know, these sorts of things may sort of weigh on aluminum prices in the near term, but I don't think anyone is going to be shifting their longer-term view of aluminum pricing, which was pretty weak 12 months ago, to now looking actually pretty positive. So we don't have this kind of erosion of smelting output that perhaps we would have expected certainly in this multi-client last year when the Covid crisis first began. It was sort of all looking pretty ugly in terms of a big surplus of metal and smelter closures and weak pricing.

So from that perspective, it now actually looks kind of pretty positive. I think, you know, there's always this perpetual concern that there isn't any supply of anode-grade GPC and, you know, it's imminently going to totally run out. I think, you know, the market is pretty adept at finding a way of either incorporating different cokes when prices are really high or, you know, bringing it to market where it's needed, and we are starting to see great attraction in terms of higher Brazilian exports in particular. So sort of a long-term plan to expand logistics there is starting to pay off in terms of seeing higher exports. And it's actually affected prices, which is, you know, in a market where everything is going up a lot, the fact that low sulfur prices were actually a bit weaker in the last couple of months was kind of a bit of a surprise and really driven by supply. So supply actually now still kind of matters.

So to the extent that that process will continue and, you know, we probably have some more incremental supply from Russia, you know, some more of these anhydrous carbon pellets from Rain, you know, sort of displacing some need for anode grade petcoke as well. You know, these are all things know, we still expect prices to be high, but we don't expect it to be a problem. And then the bigger long-term question is really around inert anodes, you know, will they perform as sort of currently being marketed? How quickly can it be rolled out? Where will it make sense to implement it? Still all very open questions and, you know, we have now a multi-client kind of a five-year view and it's probably well beyond five years, I think, where that'll actually start to happen in a really big way in terms of affecting the use of petcoke.

But even, you know, just looking beyond, you know, will the technology work, will it make sense? Will there be this kind of green premium for near-zero carbon aluminum? We don't actually really know yet. There's a lot of marketing, but the actual pricing is still not that clear. How easily will it be to retrofit a smelter? How long will it take? How many can they do in a year? These are all questions we don't actually really know yet. So I think, you know, the safe assumption is, you know, assuming that it does work on the timelines that are being presented by companies at the moment, it'll probably actually take quite some time to roll out in a significant way. So maybe a bigger issue when thinking about the outlook to 2036 rather than 2026, I think, at this stage.

Lauren: Okay. Well, thanks for that. And I think there's probably a lot more interesting topics in the multi-client that we can wade through. And if anybody is interested in learning more about that, they can contact Hayden directly. Also, 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