The spread between Saudi Arabian 8.5pc sulphur coke and US-origin 6.5pc sulphur coke in China and India is narrowing again, which may indicate demand in these destinations is returning to more typical levels.
Cfr India 6.5pc sulphur coke's premium to 8.5pc sulphur coke fell to $18/t as of the last assessment on 19 January, down from a record $44/t on 8 December. On a cfr China basis, the premium has dropped to $15/t from a record $30/t on 1 December. The decline brings the premiums more in line with the 2021 average, which was $10.27/t and $10.77/t, respectively.
The spread between the two main high-sulphur cokes has swung wildly over the last six months, following sharply rising and falling demand in India and China. US high-sulphur coke has been somewhat less volatile, as it tends to sell to a wider variety of regions, while Saudi Arabian coke is more closely tied to Asia-Pacific market fundamentals. An unprecedented premium for Saudi coke over US coke in October signalled record high cfr pricing for coke, while the recent record discounts have reflected abnormally weak demand in the two countries. The Saudi-to-US discounts coming more in line with historical averages may suggest that demand is returning to more typical levels.
In October, Saudi coke was particularly valued because of its shorter delivery time, as supply of coal and coke was tight. A surge of Saudi coke arrived to India and China in November as a result, just as the coal price sharply corrected following Chinese government intervention.
On top of this, cement demand in India unexpectedly contracted in November, and domestic coke tilted into oversupply. In China, steep increases in domestic coal production combined with the effects of the country's dual control measures to cap energy use. The exceptionally weak high-sulphur demand in both destinations led to the record premiums for US coke over Saudi coke, as Saudi sellers were forced to discount offers more deeply while US sellers simply sold elsewhere.
Fob US Gulf coke prices did finally begin to fall in late October, after 18 months of steady increases, but many buyers were still stuck receiving large volumes booked earlier that month at peak pricing. Indian cement makers received 12 cargoes of US coke in December, the largest volume from the country since May 2020.
"The India market just got really burned in October-November and now they do not even want to think about coke from the US", one cement maker said. "They have all these cargoes arriving now in the $200s/t, they do not even want to think about it coming."
The result is that US coke prices on a cfr basis in India continued to fall until mid-January, even as Saudi coke prices began to recover in mid-December.
An abrupt ban on Indonesian coal exports at the beginning of this year ushered in a recovery in coal prices, making coke increasingly competitive as a fuel. But buying interest has remained fairly sluggish, particularly for US supply. Bid-offer spreads have now begun to narrow, and some US coke is now under discussion again in both destinations, with demand potentially returning to more normal levels.
