US Gulf CPC prices slip further in illiquid year-end market
Prices of calcined petcoke for aluminum smelters slipped again in December in very illiquid markets , with the last of fourth-quarter settlements emerging earlier in the month at close to the bottom of the November spread.
The Platts monthly US CPC price assessment fell to $355-$365/mt FOB US Gulf for December from $360-$380/mt in November. The assessment reflects the transactable, repeatable value of CPC with less than 3% sulfur and 300-400 ppm vanadium , loading 30-60 days forward.
December's assessment was based on two fourth-quarter settlements reached in the first-half of December at either side of $360.
Market participants on both the buy and sell sides said they had not begun negotiations for first-quarter contract pricing , in part because the Q4 negotiations had dragged on for so long and because of a lack of enthusiasm all round to start Q1 talks before the year-end holidays. One market observer heard second hand that smaller aluminum companies had booked Q1 CPC deals at around $350 FOB US Gulf, but the details could not be verified.
"If you're asking about first quarter, we 've done absolutely nothing, and we don't expect to even start for another few weeks yet, maybe a month," said one smelter source. "I don't think I'm different to anyone else in that respect."
This sentiment was echoed by others.
"No deals done yet on Q1. Maybe in the next couple of weeks we might get some action," said a calciner source.
Aluminum buyers gave price targets for Q1 at $350 or lower. The first smelter source said lower aluminum prices and premiums and the margins squeeze on smelters could put further pressures on CPC prices .
"It has to be $350 or lower if you look at the metal prices and if you look at premiums. And if sanctions are lifted against Rusal , then in the first half of 2019 that metal will flow again and put even more pressure on prices ," the first smelter source said.
A second smelter source also pointed to lower green coke prices , meaning there was still room for CPC prices to fall further.
A YPF cargo of anode-grade green coke from Argentina was widely reported to have been traded in the second week of December at around $210 CFR US Gulf, netting back to around $155-$160/mt FOB basis. Last month, a P66 cargo was understood to have been sold at around $186 FOB Immingham , UK , and destined for the US Gulf.
While the chemistry of the two were different, the price trend was still downward, the source argued.
Indications on Brazilian green coke ranged from $170-$185/mt FOB, with this origin generally thought to still be able to command a premium over Argentinian. A buyer indicated he was likely to test the market during the course of January.
The second smelter source also thought Q1 CPC pricing could be at around $350 FOB US Gulf or lower.
A third aluminum raw materials buyer said he was pushing for lower prices for Q1. He also mentioned that the latest capacity cut at ABI in Canada , announced in December, would free up CPC supply in North America and added smelters in Europe and North America may face pressure from Russian metal flows, post sanctions.
"This is the situation suppliers need to understand," the buyer said. "They've had it very good for an extended period, and now it's pay-back time. The calciners and everyone need to get back into the realms of reality."
But the calciner source said while he would not be surprised by smelters looking for $350 or lower, it was possible the lower end of the most recent Q4 spread may hold.
"And without negotiations, it's really hard to pinpoint the price at all in any region," the calciner said. "The smelters will say one thing; the suppliers will state their case, but without any negotiations, it's nothing more than talk."
Another calciner source echoed the sentiment. "I just don't know where Q1 will shake out. The smelters will have their position and the calciners and suppliers will have theirs, but as the talks haven't been initiated, it's hard to say where prices will be."
And a refiner source thought the drop in US Gulf pricing for Q1 compared with Q4 would be smaller than the decline of Q4 from Q3. "I think last quarter we thought CPC would lose $40 from Q3 but don't think it will lose so much in Q1. It may be closer to a floor now," the refiner source said.
There was a sense from participants that European CPC prices could see more downward pressure in Q1 than US Gulf pricing .
A European refiner source noted that US Gulf prices had slipped further. "We know smelters are seeing some margins pressure, so it's hard to know where things will settle," the source said. "Nobody seems to be in any hurry."
One market source had heard of low-sulfur US Gulf material offered in Europe for Q1 shipment at around $395/mt FOB, which if directed at Europe , could equate to an FOB Rotterdam price of about $430/mt.
With additional transshipment costs, that could amount to around $445/mt. Elsewhere, European price indications had been heard as low as $440.
The second smelter source said the European CPC market had not had "the correction yet it should have. The tightness in green coke is not what it was in the first half of ."
He attributed that tightness to a BP refinery maintenance program and P66 directing more anode-grade green coke into the then-red-hot needle coke sector. But that tightness eased in the second half of the year.
"They've got to recognize the quality premium is gone. That much is clear in what's happened to GPC prices there," the second smelter source added.
The third smelter source also believed European prices were too high. "The European price is so completely out of line, especially with the US , or with Chinese CPC. We think it's time it was below $400, although we probably won't get there for Q1."
FOB China CPC prices were widely heard to be broadly in line with US Gulf prices , depending on quality. Several sources put Chinese prices in a range of $350-$360/mt FOB, with low sulfur grades put at $360-$380. However, a January cargo was heard traded at around $395 FOB for a cargo with 3%-4% S and 400 ppm vanadium , which several sources thought was high.
Indian buyers reportedly turned down offers of Chinese CPC at around $360-$370/mt FOB, according to one source, and told the Chinese exporters that for standard 3% S, the price needed to be closer to $340/mt FOB.
Another Chinese cargo for January loading was heard booked at around $385 for less than 3% S and 300 ppm V.
The second calciner source suggested $385 and $395 deals could be an indication Chinese prices were rising. "The Chinese may have had a bit of wiggle room to negotiate higher if it was still cheaper than US West Coast ," he said.
Sources said generally the Chinese CPC prices were a bigger threat to US West Coast petcoke .
But the third smelter source said there was no longer any arbitrage opportunity between Chinese and European CPC. He said if European prices were still at $500/mt FOB Rotterdam and Chinese low-sulfur prices were at $370/mt FOB "then you could probably do it." But he said it would not be easy as it would involve transshipping from Rotterdam by barge.
Sources said there were no negotiations underway for first-half semester pricing for US West Coast CPC. A refinery source indicated prices were likely to come down compared with H2 2018 at $410 FOB.