Cold snap freezes USGC coke production

Extreme winter weather in Texas last week may have a bigger impact on petroleum coke production than previous hurricanes.

Petroleum coke market participants expect anywhere from 300,000t to more than 500,000t of coke production to be lost from subfreezing conditions that reduced or shut down at least 28pc of US refining capacity. Some market participants calculate roughly 30,000t-37,000t/d of coke production lost, with the outages lasting anywhere from 10-15 days.

But it is difficult to gauge exactly how much coke production will be lost from the winter storm, since many refineries were not operating at full capacity because of the Covid-19 pandemic.

The Texas ports of Houston-Galveston and Port Arthur shipped out a combined 1.35mn t of green coke in February 2020, according to US Census Bureau data. But this is before the Covid-19 crisis hit and refiners began cutting production.

The sudden and acute shutdowns also have some saying the freeze may be worse than Hurricane Harvey in 2017.

"Harvey we saw coming, and there was more chance for mitigation plans," one market participant said. "I do not think anyone thought cold would completely wipe out the power grid and cut off power."

At its peak, Harvey disrupted roughly 5mn b/d of US refining capacity in Texas and Louisiana, or approximately 27.5pc of US refining capacity.

Harvey also disrupted coke production and loading operations at US Gulf refineries and ports, forcing refiners to declare force majeure on some coke cargoes. Several US Gulf refineries did not restart or return to full capacity for weeks or even months.

For comparison, Hurricane Laura, a category 4 storm that struck the Texas/Louisiana coast in August 2020, idled 16pc of US refining capacity. Market participants then estimated a range of lost coke production from as little as 100,000t to as much as 300,000t.

Calciners in the region were some of the hardest hit by Laura, with some declaring force majeure. Most calciners seemed to have escaped the wrath of the winter storm, with some reporting brief power outages and no issues restarting.

Despite the massive disruption, refineries will likely come back faster from the winter storm than from the hurricanes because of the lack of wind damage, which could mitigate how much coke production is lost. A handful of Texas refineries began restarting as early as late last week by bringing up utilities and checking for leaks.

Some refiners have also been heard delaying coke cargoes or plan to in the near term.

By Sarah Tucker