The premium for US Gulf coast mid-sulphur petroleum coke to high-sulphur coke widened in late November to the highest level since April amid strong mid-sulphur demand globally and lower output in the US Gulf.
The premium reached $23.50/t on 21 November, up from $10.50/t a month before and $6/t at the end of September, but still was below the record high of $30.50/t in early April. The premium at $23.50/t is equal to around 15pc of the $157/t 4.5pc sulphur fob US Gulf price, compared with 13pc of $235.50/t at the start of April and this year's record low 1pc of the price of $146/t in late July.
Mid- and high-sulphur coke prices moved in opposite directions recently following shifts in demand and availability. Last week, high-sulphur coke prices softened by $2/t on the week to $133.50/t, while the mid-sulphur assessment rose by $8/t to $157/t fob US Gulf. But both prices were still much above their levels in August, when they dropped to this year's lows of $115.50/t and $125.50/t fob for high and mid-sulphur, respectively.
The premium increased this month as a result of lower production of this grade in the US Gulf over the past few months and as Chinese glassmakers switched to 4.5pc sulphur coke from less than 3pc sulphur, increasing competition with Turkey — another main buyer of the US medium sulphur grade. Loading disruptions in Venezuela in recent months also pushed up prices for this country's 4.5pc sulphur coke, which is usually discounted compared with US Gulf supply, increasing demand for the more reliable US coke.
Chinese glassmakers typically compare coke with fuel oil and natural gas, which are considerably more expensive. But cement makers in the Mediterranean, the other key mid-sulphur coke consumers, can switch between coke and coal.
Most clients in Turkey are unlikely to accept such a wide gap between high-sulphur and mid-sulphur coke prices, especially as coal prices have fallen recently, narrowing coke's competitiveness. Turkish cement plants have issued several tenders for mid-sulphur coke this month, but postponed trades or switched to use a blend of higher-sulphur grades and Russian coal instead as the limited spot availability from the US Gulf led to offers that were much higher than expected. Two Turkish buyers recently received offers for mid-sulphur coke at around $190/t cfr, even as trades of high-sulphur coke to the country were done this month in the mid-to-high $160s/t cfr.
Turkey limits petroleum coke imports to 5.5pc sulphur on a dry basis, unless the buyer is permitted to use higher sulphur in conjunction with online emissions monitoring. Some buyers were ready to purchase cheaper coke with up to 5.8pc sulphur on a dry basis and blend it with coal or lower-sulphur coke to remain within emissions limits. But a number of cement makers in Turkey are unable to burn high-sulphur coke and have to purchase mid-sulphur coke with strict rejection limits of no more than 5pc sulphur on a dry basis. This means they had few options to cover their needs in December, helping to boost the premium for mid-sulphur coke.
Some sellers expect the premium for mid-sulphur coke may stay high until the end of this year as buyers in Turkey and China have yet to cover all of their needs in the spot market, while production of mid-sulphur coke is unlikely to recover soon, unless the US government's recent decision to allow Chevron to sell crude cargoes from its joint ventures in Venezuela results in significantly more of this crude in US Gulf refiners' slates.
Year to date, the average mid-to-high sulphur spread in the US Gulf has been historically high, at $13.20/t for January-November, compared with an average of $8.72/t in full-year 2021 and $3.61/t in 2020, according to Argus data.
