US Gulf coast petroleum coke supply is tight and unlikely to increase in the coming months because of a refinery closure and a river navigation disruption, as well as weak coking economics, potentially keeping prices from dropping in the near term.
Although US Gulf coast coke prices had been dropping steadily since mid-April on lower demand, prices began rising in mid-October as supply tightened and demand for early 2025 cargoes picked up on wide discounts to coal.The higher demand for spot coke arriving early this year led the US Gulf coast 6.5pc sulphur coke assessment to rise to $67/t fob on 31 December, up by $17/t from 16 October. Although demand for high-sulphur fob US Gulf coast coke is ebbing from major destinations like India and Turkey, and buyers in China remain mostly uninterested, prices may continue to receive support from lower supplies in the first quarter and possibly beyond. Premiums for term contracts picked up toward the end of the year as buyers began to process how tight supply was looking for 2025, especially with a key US Gulf refinery set to close in the first quarter, one market participant said.
Refiner LyondellBasell's 264,000 b/d Houston, Texas, refinery is scheduled to begin a staggered shutdown in January, with the last crude distillation unit at the plant expected to shut by February. The refinery, which has a 100,500 b/d delayed coker, typically produces mid-to-high-sulphur petroleum coke.
And in the midcontinent, coke from Citgo's 184,000 b/d Lemont, Illinois, refinery will only be shipping until 15 January because of planned maintenance on a river lock. The Illinois River's Lockport lock will be fully closed from 28 January to 25 March for repairs, blocking the Lemont refinery's coke from shipping to export terminals for the majority of the first quarter.
This will likely mean three fewer cargoes will be made available to US Gulf coast coke buyers from Citgo's Lemont refinery than usual in the first three months of the year, although this will lead to additional volume available in the second quarter and potentially early third quarter. Other coke-producing refineries in the midcontinent will not be affected by the Lockport lock closure.
Meanwhile, overall coking economics are relatively weak, discouraging refiners from running coking units at full capacity.
The Argus-calculated US Gulf coker yield — a measure of the total value of products from a coker — averaged $384/short ton from 1 November-6 December, at parity with the fob US Gulf coast asphalt price, potentially incentivising refiners to sell asphalt instead of running feed through their coker units.
The coker yield rose to $405/st on 3 January, $20/st above the fob US Gulf asphalt price. But this is a narrower spread than in the same week a year prior, when the coker yield was $25/st above the asphalt price.
Coker economics are also under pressure from a shortage of residual fuel oil, a coker unit feedstock. This product will probably remain in tight supply this month because some US refineries are scheduled to undergo crude distillation unit maintenance.
And US residual fuel oil supplies are likely to face a challenging year even after the refinery works wrap up, because the US' fuel oil imports from Mexico are expected to fall as Mexican state-owned Pemex's 400,000 b/d Dos Bocas refinery ramps up operations. The refinery, which began starting up in August, will take a greater share of Mexican Maya crude, a grade that yields a substantial portion of fuel oil when refined. This will mean less Maya will be available for import to the US. In addition, the refinery's coker, which has a coke production capacity of 2-2.5mn t/yr, will also consume some of Pemex's excess fuel oil, curbing shipments to the US.