A possible renewed and expanded global trade war in president-elect Donald Trump's second term could lead to retaliatory tariffs from the US' major petroleum coke export destinations, pressuring US Gulf coast coke prices and adjusting trade flows.
Trump campaigned on plans to impose tariffs of up to 60pc on imports from China, reviving memories of his trade policies in 2018 and 2019 that chilled coke trade with the country. He has also threatened to add 25pc tariffs on imports from Canada and Mexico, and up to 20pc on imports from all other countries.
It is far from certain Trump will follow through on all his tariff threats once he does take office, or that they will be as large as he has promised. But if he does, China could repeat its retaliatory response to the prior Trump tariffs. And if other countries join in on those retaliatory measures, US coke exporters could face even more challenging conditions than in the past.
First term fight
In June 2018, the Trump administration announced plans for a 25pc tariff on what was then $34bn/yr of Chinese imports. Later that month Beijing retaliated, announcing a punitive 25pc tariff on US exports of fuel and calcined coke, thermal and coking coal and many other products. Total tariffs on greater-than-3pc-sulphur green coke, the US' largest grade exported to China, ultimately reached 33pc.
The dueling tariffs led to significant shifts in US Gulf high-sulphur coke markets. Green coke exports from the US Gulf coast to China dropped by nearly 60pc year over year in 2018 to 638,000t, according to Global Trade Tracker (GTT) data, as no US Gulf coke shipments loaded for China from July-October. US Gulf export volumes to China stayed nearly flat in 2019 before surging back to 1.8mn in 2020 after China began issuing exemptions for its green coke tariff.
US Gulf high-sulphur coke prices also started to fall sharply late in the third quarter of 2018 after China's retaliatory tariff came into effect in late August, while Indian and Turkish demand also fell. The average price of US Gulf 6.5pc sulphur coke dropped significantly in 2019, down by $27/t year over year.
US coke exports to other countries were also hurt during that time. Turkey imposed a tariff on US-origin coke imports in 2018 after Trump doubled tariffs on Turkish steel and aluminium imports. US Gulf coke exports to Turkey fell by almost 50pc in 2019 compared with the year prior.
Although some analysts think it is unlikely China will retaliate to tariffs as aggressively as it did during the first Trump term, Beijing would likely still target select industries. Coke could be high on this list, as these tariffs are still officially in effect and the government could easily withdraw the exemptions it has issued since 2020.
A wider battlefront
Trump's threat to issue tariffs against other countries in his second term, including 25pc tariffs on imports from top US trading partners Mexico and Canada, could lead to even more challenges. Already, Canadian prime minister Justin Trudeau and Mexican president Claudia Sheinbaum have indicated that they could retaliate if the US goes through with Trump's plans.
While Canada has only taken about 800,000 t/yr of US coke since 2021, Mexico has been a large consumer. The US' southern neighbor has been the fourth-largest offtaker of US Gulf coast coke so far this year. It was the largest in 2018 and 2021 and second-largest in 2019 and 2020, helping to absorb some of the lost demand from China, alongside India, Brazil, Turkey and Italy.
India has typically been the biggest offtaker of US Gulf coke in recent years, and it has increased its share of US Gulf exports to 24pc in January-October of this year from 14pc in 2022. This step-up in US coke shipments to India followed a significant drop in China's higher-sulphur fuel coke demand over the past two years, especially since the government began signaling in late May that it would limit its consumption, as well as an increase in Indian cement makers' use of coke in their kilns.
While India is likely to absorb even more US Gulf coke if Chinese demand declines further, India already took 20pc more of this coke in 2023 than it did in 2019. This suggests that new buyers may have to come into the market for the potential overhang in next year's US Gulf coast supplies to be worked down. This will only occur if US coke remains at a wide discount to coals from countries like South Africa, Australia and Indonesia in order to encourage more coal consumers to make the switch to coke.
If a wider trade war results in India implementing tariffs on US coke, sellers might prefer to sell to other destinations, particularly in the Atlantic basin, rather than discounting coke deeply enough to draw more Indian demand.
No help from Europe
But while European countries like Italy, Spain, France and Greece were top importers of US Gulf coke in 2018 and 2019 when Chinese demand dropped, these countries are not as well-positioned to absorb more coke now.
Cement makers in the region have invested in alternative fuels over the last few years as the EU Emissions Trading System has increased the price of carbon emissions, lowering their overall appetite for fossil fuels. The US exported 31pc less coke to Europe in 2023, at 4.4mn t, than it did in 2018, at 6.4mn t.
