Destination petroleum coke: Trade war lifts US coke exports to Japan

Author Sarah Tucker, Reporter

The US-China trade war is forcing US west coast sellers to seek alternative markets, pushing more green petroleum coke to Japan.

From January through September, US green coke exports to Japan rose by 17pc to 3.18mn t, according to the latest US Census Bureau data. In September alone, US shipments to the country were up by 57pc on the year to 301,900t.

Despite the increase, overall Japanese solid fuel demand is stable or lower this year, with cement and steel production in the country lower than in 2018. Coke is replacing coal in buyers' fuel mix largely because of the ongoing US-China trade war, market participants said.

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When the Chinese market is weak, sellers become more interested in Japan, a market participant said.

The trade war has weighed on coke sales to China, traditionally the largest buyer of US west coast supply. Sellers on the west coast have had to reduce prices to offset tariffs, and Japanese buyers have taken advantage of the larger discount compared with coal.

In July, when coke purchases for September delivery were completed, prices for US west coast 4.5pc sulphur coke delivered to Japan averaged $2.29/mmBtu on an energy-adjusted basis, a 35pc discount to east coast Australian 6000kcal/kg landed in Japan at $3.56/t.

Prices for US west coast 4.5pc sulphur coke delivered to Japan averaged $70.65/t in July, while prices for east coast Australian 6000kcal/kg coal landed in Japan averaged $88.32/t over the month.

"The supply is ample at the moment in the US, and Japanese companies can take more discount, especially for the products from the west coast," a Japanese steel producer said.

Chinese customs restrictions on higher-sulphur coke are another reason some US west coast sellers are seeking alternative markets such as Japan. Chinese demand for coke with more than 3pc sulphur has continued to fall as buyers seek lower-sulphur cargoes to avoid customs delays.

Some west coast coke suppliers have been seeking other alternative markets for their higher-sulphur coke, such as Mexico. The shorter distance has allowed sellers to achieve higher fob prices for these sales. But import demand there remains limited as state-owned Pemex has been producing more coke recently.

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