US fuel-grade petroleum coke imports have increased so far this year, as a quirk of US shipping law has made it challenging for some US buyers to secure supply from domestic sources.
Bill of lading and US customs data show imports from Colombia, the Netherlands and Saudi Arabia, all unusual suppliers to the US Gulf. The latter two countries have not supplied coke to the US in more than two decades, according to customs data.
The US does not usually import much fuel-grade coke, as refineries mainly in Texas and Louisiana supply a large proportion of the global seaborne market. But shipping law makes it expensive to transport coke by vessel from one port to another within the US. The more than century-old Jones Act requires that cargoes shipped between US ports use US-flagged vessels built, owned and operated by US citizens. Jones Act vessels typically carry a premium over foreign-flagged vessels, as the fleet is relatively small compared with the international ship market.
The availability of ships for domestic coke transportation has dwindled further this year. United Ocean Services, which had operated two Jones Act-compliant dry bulk carriers until late last year, has now scrapped both vessels. The line's dry bulk carrier Mississippi Enterprise was scrapped in October, while the Texas Enterprise was scrapped in May after ship repair costs were found to be higher than expected.
Other Jones Act shipping lines have not quoted freight rates to customers who used United Ocean Services, as they already have plenty of customers, market participants said. Some lines asked for six-month contracts to ship coke, preventing buyers from being flexible in their spot purchases. As a result, sellers have instead offered supply from other origins.
About 118,000t of northern European coke were shipped from the Netherlands to Jacksonville, Florida, where Florida electric utility company JEA is based, between March and June this year. Another cargo arrived at the port from Colombia in early July.
While some Colombian coke has been delivered to the US in recent years in the form of relatively regular annual shipments to Maine, it is typically sent to China, where glassmakers will pay a premium for its roughly 3pc sulphur content. But the dearth of Jones Act dry bulkers is now causing this coke to be in higher demand in the US Gulf.
JEA used to often buy imported coke from Venezuela and locations in the Caribbean, as shipping times were short and freight rates were lower than those from Gulf refiners. But those options are off the table for now because of US sanctions on the former and sputtering attempts to revive ageing Caribbean facilities.
Gulf calciner tries Saudi coke
The unique Saudi Arabian shipment was delivered to a calciner, according to bill of lading data, suggesting it was more to do with tight global supply of anode-grade coke than the lack of Jones Act vessels.
Most coke imports to the US typically go to calciners, as the country is short on calcinable coke and these companies must blend a wide range of qualities to meet strict specifications.
Coke from Saudi Arabia's 400,000 b/d Yanbu refinery has previously been incorporated into anode-grade blends in China, despite its 8.5pc sulphur content, as it is sponge-grade with low metals content.
US calciners usually have not used such high sulphur coke for their operations, as it would require a large amount of costly low-sulphur coke to blend it down.
But calciner Oxbow recently acquired the rights to market 0.8pc sulphur coke from some of Brazilian refiner Petrobras' refineries. This may allow the company to blend down the high-sulphur Saudi Arabian coke more economically.
It remains to be seen whether these new trade flows will become common in the coming years.
