Low-sulphur anode-grade coke could begin to trade into other industries besides aluminium and battery anodes as its premium to fuel-grade coke and metallurgical coal has evaporated in recent months.
Industries like glass in China and steel in Latin America could begin to absorb more low-sulphur anode-grade coke if demand from anode producers does not recover soon.
Lower demand from the battery and aluminium industries led to a steep build-up in low-sulphur anode-grade coke stockpiles in China in 2023, which has weighed on prices throughout the year. The price of 0.8pc sulphur anode-grade green petroleum coke (GPC) on a cif China basis fell by 72pc since the assessment's launch in July 2022, to a midpoint of $230/wet metric tonne (wmt) as of the last assessment for November. The cif US Gulf 0.8pc sulphur GPC assessment, which has a longer history, has fallen by 75pc since its peak in April 2022 and is now at its lowest since September 2020.
These steep declines have now brought pricing more in line with low-sulphur fuel-grade coke and coking coal, which could lead to competition between these markets.
The premium for China-delivered 0.8pc sulphur GPC — which originates mainly from Brazil, Argentina, Indonesia and eastern Europe and central Asia — fell to $38.80/wmt compared with the monthly average for fuel-grade less than 2pc sulphur coke on a cfr China basis, as of the latest November assessments. This is down from $62/wmt in October and $380.50/wmt in November 2022, when prices of seaborne low-sulphur GPC were $272.50/wmt and $665/wmt, respectively. The premium hit a peak of $538.88/wmt in September 2022, when the cif China 0.8pc assessment was $762.50/wmt.
The steep drop in prices for imported low-sulphur anode GPC could begin to put pressure on demand for US west coast low-sulphur fuel coke, which is typically supplied to glassmakers. Glassmakers require coke to have relatively low sulphur content in order to remain within emissions limits, but they are less sensitive than anode-grade buyers to metals impurities and shot content.
But as tenders for 0.8pc sulphur South American coke were sold at around $220-$230/wmt cfr China in November, down from prices above $300/wmt in late September to early October, a US west coast refiner closed a tender in late November for 1.7-2.2pc sulphur coke in the high-$170s/wmt cfr China, down from the $190s/wmt cfr in its previous tender a month before.
Although some of China's glassmakers shifted to medium-to-high sulphur coke last year, when prices hit record highs, cheaper low-sulphur anode-grade GPC may attract demand. This is particularly true as the government has stepped up enforcement of environmental standards, pushing some glassmakers back to lower sulphur coke.
There also could be less trade of these cokes into China as the coke becomes attractive to steelmakers in other regions. The latest cif China 0.8pc GPC price is at an $89.58/t discount to the November monthly average price of fob Australia premium hard low-vol metallurgical coal, a flip from a premium of $382.23/t in November 2022. Anode-grade suppliers, especially in South America, may choose to supply steelmakers within the region rather than exporting to the saturated Chinese market.
The high stocks of low-sulphur anode-grade GPC at Chinese ports could also begin to find new buyers as premiums decline, if traders are willing to sell off these stocks at lower levels. Chinese imports of this coke more than doubled in the first 10 months of 2023 to 1.57mn t, up from 653,900t in the same period a year earlier, according to customs data compiled by Global Trade Tracker, as supplies from most origins increased substantially. Imports from Azerbaijan tripled to 200,600t, imports from Argentina more than tripled to 342,100t, and imports from Brazil rose by 4.5-fold to 639,800t.
But as prices collapsed over the past year, much of this coke is still sitting at ports unsold. Coke inventory at China's main ports was approaching 4.5mn t at the end of November, an increase of more than 2mn t year over year, and around 80pc of this was anode-grade coke, sources said. The average import price of the January-October 2023 imports from Brazil, Argentina, Romania, Indonesia and Azerbaijan was $445.35/t, putting importers' costs at nearly double the current market value.
