Limited demand for mid-sulphur petroleum coke globally is likely to weigh on the premium for this coke compared with the benchmark high-sulphur fuel-grade quality.
Although fob US Gulf coast coke prices have dropped to their lowest levels since September 2020, the mid-sulphur premium is well above what it was at that time, leading market participants to forecast it could soon more than halve from current levels.
Mid-sulphur coke's premium to high-sulphur was at $6.50/t as of the last assessment on 3 January, down from $7/t in late December 2023. This was $4/t wider than the spread on 14 October 2020, the last time mid-sulphur coke prices were at the same $65/t fob level, making the premium a larger percentage of the outright price. While the premium today is 10pc of the mid-sulphur price, in October 2020, it was just 4pc.
Fob US Gulf mid-sulphur coke prices have been dropping since the fourth quarter of last year, shedding 34pc of their value since the week of 8 November. The US Gulf 6.5pc sulphur price has dropped even more sharply, losing 37pc of its value over the same period. At that time, the 4.5pc-to-6.5pc premium was just $6/t, or only 6pc of the mid-sulphur price. The slower decline in mid-sulphur prices compared with the more liquidly traded high-sulphur market is another sign that the spread has room to fall.
This is in spite of the premium being low compared with year-earlier levels. On 4 January last year, mid-sulphur coke held a premium of $20/t, or 13pc of the 4.5pc sulphur fob price of $148.50/t. The spread averaged $10.54/t in 2023, or about 10pc of the annual average price of $106.51/t.
This was down from an average spread of $13.80/t in 2022, although this was only 8pc of the average outright price for 4.5pc sulphur coke in that year. The spread was 7pc of the average outright mid-sulphur price in 2021 and 2020.
The mid-sulphur coke premium tends to make up a higher percentage of the mid-sulphur price when demand is relatively strong. The spread hit its lowest in July 2022 at just $2/t, or 1pc of the 4.5pc sulphur fob price of $146/t, after prices had dropped sharply by $15/t within a week and by $34/t in a month, the result of exceptionally sluggish mid-sulphur demand. But earlier that same year, on 6 April, the premium reached its record high of $30.50/t against a 4.5pc sulphur fob price at $235.50/t, following a significant increase in coal and coke prices.
Although coke prices were on an upswing in October 2020, the last time US Gulf coke prices were at current levels, this was supply-driven. Coke was rapidly losing market share to coal at that time, narrowing demand and thus the sulphur spread.
Some market participants expect the mid-sulphur premium to drop to about $1-2/t this month because of limited demand and wider coke availability. Buyers have shown little interest in purchasing prompt mid-sulphur cargoes from the US since November, aiming to reduce stockpiles before the end of the year. Although the new calendar year has started, buyers note stockpiles in the key Mediterranean region remain high, and they still peg bids at low levels for January- and February-loading cargoes.
In addition, there has been an influx of low offers of Venezuelan 4.5pc sulphur coke, which is not subject to an import duty in Turkey, the main mid-sulphur consumer. This has kept pressure on delivered prices of US Gulf mid-sulphur in the country. Most recent offers of Venezuelan coke on a cfr Turkey basis were heard at in the low-$90s/t, while offers of 5.5pc sulphur coke from the US were at about $98-99/t on a delivered basis.
