US Gulf-origin petroleum coke prices have dropped sharply over the past week, with traders competing fiercely for buyers.
A pair of Turkish cement makers closed tenders late last week, looking to secure coke ahead of a holiday in the country this week. The tenders received a larger number of offers than normal, with traders aggressively lowering numbers over the course of the bidding. One cement maker that had set its starting price for 6.5pc sulphur coke at $128/t ended up closing a deal at close to $121/t on 21 May, more than $10/t below the last assessment for this grade the previous day. And this price would net back to only the low-to-mid $80s/t on an fob US Gulf basis, since the lower draught at the cement maker's port means spot freight rates for a Supramax cargo would be in the mid-to-high $30s/t or even as high as $40/t, participants said.
"It seems there is a rush among sellers to get rid of coke cargoes," one Indian buyer said.
Other participants echoed this sentiment, with another cement maker saying it appeared some traders had become nervous about their stock positions at US ports. Several traders agreed that there were many prompt cargoes available for the next two months, with one company alone having at least 10 still available out of the US and Mexico for the period.
Sellers were similarly chasing buyers lower in the Indian market. High-sulphur coke offers dropped sharply over the course of last week from the high $140s/t on a cfr west coast India (WCI) basis to the low $140s/t by 22 May. By 23 May, a deal had concluded at $140/t cfr WCI and deals were heard in the high $130s/t by early this week.
These recent deals to India were heard to have some flexibility baked in, whether of origin, such as the option to load US or Mexican coke; timing, loading in either June or July; or cargo size, between Supramax or Panamax. But one trader said that Mexican coke is not available for July, so the deals are likely to be of US origin.
"I see buyers returning to the coke market," the trader said. But "no Indian buyer will pay above $140/t cfr today on WCI."
While the steep drop in prices has rekindled interest from Indian cement plants, many companies likely will want to see a further decline before making any buying decisions, since they have already restocked with coal, another trader said.
"We are well covered and won't buy until the price comes down to the $120s/t cfr," a second Indian cement maker said.
Rising supply meets depressed demand
It is hard to say with certainty whether the recent trend is more related to rising supply out of the US Gulf or falling demand from global cement makers, since coke prices have been pricing higher than coal for several weeks, one trader said.
On the supply side, coke production would be expected to rise because refiners have increased runs to take advantage of demand to export middle distillates. Valero's 380,000 b/d Port Arthur, Texas, refinery began returning to normal rates following a fire in late March.
But demand has been especially weak, with coal pricing at a discount to coke in most key markets for the longest period since the height of the Covid-19 pandemic.
The cfr India 6.5pc sulphur coke priced at a premium to cfr India 5,500kcal/kg coal on a heat-adjusted basis for nine weeks between 18 March and 13 May, the longest period coke had held a premium to coal in India since 2021. In Turkey, the premium to the 6,000kcal/kg coal benchmark has held for 15 weeks since 11 February, also the longest period since 2021. Cement makers usually seek a 10-20pc discount to coal to purchase coke because of its higher sulphur content and lack of a financial market.
China may return to the picture
Although China has in recent months been a non-starter for sellers, with bids far below offers, the sudden steep drop in Turkey and India prices has made the Chinese market potentially more attractive.
Another trader was focused on the Chinese market for offering three end-June, early-July loading US coke cargoes as prices in that market were still around $145-$150/t. But other sellers said high freight costs through the Panama Canal are keeping the Chinese market uncompetitive for now.
Chinese high-sulphur fuel grade demand could pick up because domestic coal prices are set to rise after a deadly accident at a Shanxi mine triggered widespread safety checks. The mining inspections' impact on coking coal supply could tighten the market and encourage silicon carbide producers to buy more high-sulphur petroleum coke.
