Changes in fuel distribution contracts in Brazil have resulted in an increase in both the country's petroleum coke exports and seaborne demand.
Green petroleum coke (GPC) exports rose to 55,300t in March from near-zero levels a year earlier while imports more than doubled in the same period, according to GTT data.
Brazil's state-controlled Petrobras recently divided up its domestic fuel distribution contract to different local suppliers, with US coke trader and calciner Oxbow Carbon's Brazil branch receiving the rights to market coke from refineries in the northeast and south regions, and Brazilian coke marketer and calciner Grupo Unimetal handling a group of refineries in the southeast. Petrobras also continues to market some of its own coke for export and domestic use.
Previously, fuel distribution company Petrobras BR — until recently a subsidiary of the oil company — marketed almost all of Petrobras' domestic coke. BR tended to keep this coke within the Brazilian market, selling to steelmakers and cement makers even when the export market was particularly strong.
But Oxbow and Unimetal are not as committed to reselling the coke within Brazil, especially considering the strong seaborne market for anode-grade GPC. The price for 0.8pc sulphur coke similar to Brazil's quality on a cif US Gulf basis nearly tripled over the past year, rising to a midpoint of $352.50/dry metric tonne last month compared with $132.50/dmt in March 2020. The distributors are also likely keeping some of the Brazilian coke for their own calcining operations as GPC supply globally has been exceptionally tight.
Of the 55,300t of GPC exports in March, 52pc went to China, 35pc went to the US and 12pc went to the Netherlands.
Brazil also maintained steady GPC exports to China from October to December 2020, while shipments prior to 2020 were more sporadic. Anode-grade coke supply has remained reduced in China since the emergence of Covid-19, with some indications that the decline may be structural as China's refiners cut coke production.
The pandemic has further complicated supply availability in Brazil. While Brazil did not enter a strict lockdown like other countries, transportation fuel demand has remained low, keeping refineries at reduced rates. This has resulted in less coke available for both export and domestic use.
Brazilian steelmakers, which use low-sulphur coke as a feedstock, are increasingly having to look to the import market for the quality of coke they need, competing with the strong Chinese anode-grade market for limited global supply.
"None of the industries using coke here were prepared to have these distribution issues," a Brazilian market participant said.
Brazilian cement makers, which prefer to use coke over coal, also face their own overseas supply constraints.
Coke is preferred over coal not only for its high calorific value but because US coal has a chlorine content that is problematic for cement kilns. Colombian coal is a possible alternative for Brazilian cement makers, but plants far from ports face high costs to transport lower calorific-value fuel.
Brazil imported 260,400t of green coke from the US in March, more than double imports from March 2020 and up by 5.2pc from March 2019, a year before Covid struck.
This was down by 39pc from February 2021 imports, which were at a record high of 427,000t.
Calcined petroleum coke (CPC) imports and exports also increased.
CPC imports were at 26,500t in March, up by 77pc on the year and all from the US. It was the biggest volume from the US for any month going back to January 2020.
Calcined coke exports were up by 43pc on the year in March, with the majority of shipments headed to Turkey or South Africa. Monthly CPC exports were down by 65pc from 95,000t in February, which was a record-highin data going back to 2014.
Persistently tight global supply and rising CPC prices have likely encouraged CPC exports from Brazil.
Many market participants expect these trends to continue as distributors export more Brazilian coke and domestic end users are forced to the seaborne market. But some buyers say that if seaborne coke prices continue to rise while coal prices decline, this will push more cement makers to the coal market and reduce demand for fuel-grade coke imports.
