Fuel-grade petroleum coke is maintaining a favourable discount to imported coal on a delivered basis in major markets, but weak construction activity, regulatory concerns and a desire for smaller cargoes are keeping a lid on coke demand.
Buyers typically opt for coke when it holds a discount of at least 10-20pc against thermal coal, its main competing fuel, when accounting for coal's lower calorific value (CV). Discounts in most major high-sulphur fuel-grade markets are larger than this, but coke demand is still lacklustre.
In India, 6.5pc sulphur coke's discount to 5,500kcal/kg NAR coal was at 22pc on a heat-adjusted, delivered basis as of the last Argus assessment on 31 July. Although this was down from 28pc a month earlier, coke was at just a 3pc discount to mid-CV coal in the last week of July 2023.
Coke's discount is smaller when compared with US Northern Appalachian (NAPP) NAR 6,900 kcal/kg coal because of its high CV — coke has a CV of roughly 7,500 kcal/kg. In mid-July, a Capesize cargo of NAPP coal was heard traded at $110/t cfr, in line with Argus' cfr India assessment for 6.5pc sulphur coke that week, meaning a coke-to-coal discount of about 8pc. But demand for this coal has yet to rise significantly, as it has generally been offered in the mid-$110s/t up to the mid-$120s/t cfr east coast India for a Panamax or Capesize cargo, while the price for smaller cargoes would be higher.
Also, some cement makers kept fuel purchases on hold in July because of high stockpiles and lower production rates. A rebound in fuel demand is expected in September, as monsoon rains recede and construction activities increase. Until then, small-to-medium-sized cement makers are focusing on domestic coal and local coke purchases given these products' prevailing prices and steady availability.
A negative downstream demand outlook has also kept coke demand under pressure in China, despite a 20pc discount to imported coal as of 31 July.
China has been cutting its high-sulphur coke imports over the past few months. The market started weakening even prior to the late-May rollout of the Chinese government's decarbonisation plan, which looks to severely restrict coke as a fuel source.
Cfr China 6.5pc sulphur coke prices have remained unchanged at $109/t since 12 June, putting this specification at a 19-23pc discount to cfr China NAR 5,500 kcal/kg coal from 12 June-31 July, when adjusting for coke's higher heat content. In the same period last year, coke's discount to coal narrowed to 10pc from 21pc as coke prices surged. And by the end of August, coke prices had reached a six-month high and were at a 7pc premium to coal.
In Turkey, US petroleum coke's discount to Russian coal on a delivered basis has widened, after coal prices increased and coke prices remained unchanged. But some cement plants have still preferred coal over coke recently, since coal is available on demand from local traders and in smaller parcels on a seaborne basis.
Delivered Turkey 5.5pc sulphur dry basis coke was priced at a 20pc discount to coal as of Argus' last weekly fuel-grade coke assessment on 31 July, the largest discount since 5 June. This compared with a 14pc discount in the same week a month earlier. Coke and coal were at parity on a heat-adjusted basis on 26 July 2023.
Discounts for 6.5pc sulphur coke on a cfr Turkey basis are still more than 20pc, and this discount has also widened over the past two weeks. The discount reached 24pc on 31 July, compared with 21pc on 26 June.
The Argus cfr Turkey 5.5pc sulphur coke assessment for Supramax coke cargoes was unchanged from 10-31 July at $94/t, down by $2/t from late June. But at least one cement buyer that was in the market for a 10,000-30,000t part-cargo of this coke received offers in the high-$90s/t to above $100/t cfr in late July, pushing it to postpone the purchase and focus on seaborne coal and supplies from local traders.
At least two other cement makers have also decided to seek coal recently, as coke offers have been higher than expectations.
