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India, China set to take different paths in petroleum coke consumption: Bancosta

Highlights

Global consumption of petroleum coke continues to grow, with China and India remaining key importers, but while India's appetite for it is expected to carry on growing, recent changes in Chinese air pollution policy look set to dampen China's relationship with the commodity, Italian shipbroker Banchero Costa (Bancosta) said Thursday.

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According to Bancosta, global petcoke production grew at an average annual rate of 3.7% between 2003 and 2013, with about 120 million mt produced in 2013.

During that year, the US remained the world's largest producer of the commodity, accounting for 46% of global output.

The lion's share of US petcoke production is carried out in the US Gulf Coast area, Bancosta said. The region's output is expected to increase in the coming years, as more heavy crude is imported from Canada.

However, increasing regulation and criticism over petcoke storage in the US -- with it mostly stored in open facilities -- is making US refineries eager to export their petcoke, according to Bancosta.


INDIA WAXING

One potential candidate for the US to export more of its petcoke is India, which in 2013 accounted for 10% of global petcoke consumption.

Bancosta data shows that in 2014 India accounted for 12% of US petcoke exports, on a par with Japan.

According to Bancosta, India also produces its own petcoke, with production reaching 12 million mt in 2013, up from 11 million mt in 2012.

Looking forward, the shipbroker said Indian petcoke imports are expected to carry on increasing, potentially reaching 10 million mt/year by 2017.

This will partly be due to a gasification project in Jamnagar, Gujarat, West Coast India, coming online, which is expected to use half of India's own petcoke production, increasing the need for imports.

However, Bancosta said India prefers to import fuel grade petcoke from Saudi Arabia over petcoke from the US Gulf Coast.

The Middle East has traditionally been a net importer of petcoke, but a significant increase in its refining capacity in recent years has spurred more petcoke exports, with the Yasref refinery in Saudi Arabia exporting its first petcoke shipment in April.

Bancosta predicted that the start of Middle East petcoke exports will affect current trade routes, as markets in close proximity, like India, will be able to shift suppliers. This means that Saudi petcoke exports to India could chip away at the volumes the US could ship to India.

CHINA WANING

In 2014, China accounted for 11% of US petcoke exports, Bancosta data showed. Chinese imports of US petcoke peaked in 2013, at just over 9 million mt, but appear to have fallen in 2014 due to high inventories, tight credit and a poor performance across all of its economic sectors.

Adding to the overall uncertainty over China's future demand for dry bulk commodities, Bancosta said tighter regulations on air pollution in China, due to take effect early in 2016, are expected to reduce China's import volumes of US petcoke.

The threshold level of sulfur allowed in petcoke consumed by China has yet to be finalized by Beijing, though China chiefly imports US petcoke with high sulfur content.

This, combined with high penalties expected for those going above that threshold, is expected to scare off some Chinese importers, Bancosta said.

LACKLUSTER Q4

Meanwhile, according to Platts shipping sources, the first two weeks of the fourth quarter of 2015 have seen very little petcoke inquiry from India and China, as well as from another key importer, Turkey.

As a result, freight rates for shipping petcoke from the US Gulf to North China, East Coast India and Turkey are at very low levels compared with this past summer.

For example, Platts assessed Wednesday the Houston, Texas to Qingdao, China, petcoke route, basis 50,000 mt, at $25.50/mt.

Houston-Qingdao 50k petcoke freight

In contrast, the rate on this route peaked for several days in a row at $33/mt between July 1-September 1, Platts data shows.

Similarly, the rate for carrying 50,000 mt of petcoke from Houston to Aliaga, Turkey, has been assessed at $13.90/mt since October 6, having hit a six-month high at $19/mt in the period July 17-22.

Houston-Qingdao 50k petcoke freight

Amid a weak petcoke pricing environment, low inquiry for ex-US Gulf petcoke in the past few weeks has been partly due to domestic petcoke prices in India also being low, while Chinese imports have been hampered by the lingering uncertainty over China's future sulfur threshold level.

In Turkey's case, its appetite for petcoke has been declining this past summer, partly due to political instability, after a June 7 election resulted in a hung parliament, with a repeat election scheduled for November 1.

--Kostya Tsolakis, konstantinos.tsolakis@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com