Hurricane Ida drives up fob coke prices
US Gulf petroleum coke prices have jumped in the past two weeks as the aftermath of Hurricane Ida shifted market fundamentals in the region.
Throughout August, US Gulf high-sulphur coke prices were increasing at a slower pace than in prior months, rising by $2/t from 4-25 August to $113.50/t. In the week prior to Hurricane Ida's 29 August landfall, there had been an increase in high-sulphur cargoes on offer and prices were on the cusp of edging lower, with the following week's assessment even falling for the first time in over a year after a deal was done at slightly under $113/t on 1 September. But the disruptions caused by Hurricane Ida tightened the supply of coke and drove prompt freight rates downward, giving fob prices room to rise.
The Argus 6.5pc sulphur fob US Gulf assessment increased by $6.50/t from 25 August to 15 September to $120/t, while the 4.5pc sulphur fob US Gulf assessment rose by $10/t over the same period to $130/t. The two 15 September prices were record highs in assessments going back 20 years. Although 6.5pc coke was already at a record high by late August, the 4.5pc assessment only surpassed its all-time high after the hurricane's effects hit supply.
Previous hurricanes in recent years have also pushed coke prices higher after having significant effects on US Gulf refining capacity. Last year, Hurricane Laura hit eastern Texas and Louisiana, lowering coke output by an estimated 500,000t. The Argus 6.5pc sulphur US Gulf fob assessment rose by $9.50/t from 26 August to 30 September 2020 to $61/t, roughly one month after Hurricane Laura made landfall. The specification rose by the same amount from 23 August to 20 September 2017, to $72/t, following Hurricane Harvey's reduction of coke supply on the Texas coast. Harvey disrupted more than 25pc of total US refining capacity.
Hurricanes Laura and Harvey respectively caused prices for 6.5pc sulphur coke to increase by 18pc and 15pc in the month following their landfalls. Hurricane Ida has so far led to a 6pc increase in high-sulphur coke prices, but it will likely take until the end of September, about a month after the storm's landfall, for the full price impact to be understood.
Hurricane Ida idled fuel-grade refineries in Louisiana for as little as three to as many as 20 days. Recent Argus Consulting Services estimates place lost fuel-grade coke production at more than 200,000t, all from Louisiana refineries. Although Hurricane Nicholas also recently moved through the US Gulf, making landfall on the Texas coast early last week, the storm was not as destructive as Ida, allowing Texas refineries to continue operating even though some reduced their run rates.
US Gulf petroleum coke production had already been dampened this year by a shift to lighter, sweeter crude slates, which resulted in some high-sulphur refineries producing mid-sulphur coke, while overall coke output was lower.
Mid-sulphur coke, which has been mainly produced in Louisiana recently, has largely been unavailable since Ida hit the state. This likely spurred that price's larger increase.
Lower freight boosts fob prices further
As some bulk cargo freight bookings were cancelled following Ida, US Gulf freight rates eased sharply for nearby loading dates. The Argus Supramax petroleum coke US Gulf-to-China freight rate fell by $8/t from 25 August to 16 September to $70/t. In turn, fob pricing rose as buyers had more flexibility to place higher bids. Buyers were bidding around $112/t for US Gulf high-sulphur cargoes in the week of 1 September but upped their bids to about $117/t or higher by 15 September.
Coal export disruption offers further support
While Hurricane Ida did not reduce coke output as severely as hurricanes Harvey and Laura had, one critical difference with Ida was the storm's disruption to coal export infrastructure. Louisiana coal and coke terminals were battered by Hurricane Ida, with the Convent Marine Terminal, Burnside Terminal, United Bulk Terminal and International Marine Terminal taken out of service.
Suncoke Energy's Convent Marine Terminal resumed full operations on 13 September, roughly two weeks after the storm, while Host's United Bulk Terminals resumed limited operations on 10 September. Host said last week that it expected to resume full operations on 17 September. Impala's Burnside terminal is understood to be operating with limitations, but Impala has not returned requests to confirm its status. Kinder Morgan's International Marine Terminal in Myrtle Grove, Louisiana, was still without commercial power and workers were assessing damage and making repairs as of 14 September.
The shut-in Louisiana terminals led to scarcer supply of Illinois basin coal, forcing the price upward. The Argus 11,300 Btu/Ib typical 3pc sulphur coal fob New Orleans assessment increased by $29.25/t from 27 August to 17 September to $114.25/t. The assessment broke $100/t on 3 September for the first time in assessments stretching back 10 years.
Offers for US Northern Appalachian (NAPP) coal, which competes more directly with coke, have risen to more than $200/t in India this week as a result of the supply squeeze, even though most of this coal ships from the US east coast.
But the factors that have boosted coke pricing over the past two weeks are not likely to persist. While freight rates for very prompt liftings of Supramax cargoes dropped sharply in the weeks following Hurricane Ida, freight for October liftings remained mostly steady at higher levels. As coal and coke terminals continue to re-open, a glut of bulk cargoes may come into the market, further lifting freight rates and potentially softening fob prices.
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