The premium for mid-sulphur petroleum coke on an fob US Gulf basis may widen again as higher coal prices push Turkish cement makers to this grade in order to remain within overall sulphur limits.
Mid-sulphur coke could begin to be more actively traded in Turkey as buyers there seek to reduce the amount of coal in their fuel mix, with coke becoming much more price competitive, a cement producer said.
Most Turkish cement plants can now use higher sulphur coke, but in order to do so, they must use a higher proportion of coal to meet emissions limits. And the number of coal trades has fallen sharply in the second half of the year.
Coke's discount to coal on a delivered basis has widened as coke prices have steadily fell and coal prices rose. Cfr Turkey 5.5pc sulphur dry basis coke reached a 38pc discount to coal on a heat-adjusted basis as of Argus' last weekly fuel-grade coke assessment, compared with a 31pc discount a month before and a 10pc discount during the same week last year. Both mid- and high-sulphur coke in Turkey are now at their widest discount to coal since 16 March 2022.
Cement plants were already starting to prefer mid-sulphur over higher-sulphur material because the premium has narrowed to a multi-month low. Since the start of October, mid-sulphur coke's premium to high-sulphur coke has remained at $2.50/t in Turkey, the lowest since 27 March.
The 5.5pc sulphur coke's average premium to 6.5pc sulphur on a cfr Turkey basis declined by 65pc on the year from January-September, to $4.98/t. This is slightly narrower than the premium for 4.5pc as received coke on an fob US Gulf basis, but this has also traded at a historically narrow premium to high-sulphur coke so far this year. The fob Gulf premium averaged $5.47/t year-to-date through September, falling by more than half from the same nine-month period last year. And last week it narrowed to its lowest since late August, after the 4.5pc sulphur assessment fell by $1.50/t on the week while 6.5pc sulphur prices held steady for the first week since 21 August, as spot demand emerged.
The lower premium is a result of weak demand for mid-sulphur coke outside of the Mediterranean as well as higher supply of 4.5pc sulphur Venezuelan coke over the past two years. This coke still attracts demand in Turkey, India and China despite US sanctions on Venezuela's oil industry. But Chinese demand for mid-sulphur fuel coke has sputtered since last year as stocks there have climbed, leading Mediterranean buyers to lower bids, feeling that suppliers have limited options elsewhere.
Some cement plants in Turkey have been lowering bids for 5.5pc sulphur coke even further to below $80/t cfr, basically in line with high-sulphur prices, which were assessed at $77.50/t last week. Two cement plants already achieved this price level for 5.8pc sulphur max coke earlier this month, purchasing a joint cargo at about $77-78/t cfr.
It remains to be seen if the stronger interest in mid-sulphur coke from Turkish buyers reverses the trend of a falling spread between the two grades of coke. At least two firms this week are seeking seaborne mid-sulphur coke cargoes for November-December loading.
