Aluminum smelters see CPC price fall again, but Chinese effects eyed
Global calcined petcoke prices continued on a downward trend in January, but the freefall ran into some resistance late in the month as suppliers tried to hold ground, eying potential support from the effects of the coronavirus.
The Platts monthly US Gulf Coast assessment fell to $235-$240/mt FOB US Gulf ports in January from $240-$250/mt in December, reflecting the transactable value for CPC with max 3% sulfur, 300-400 ppm V and typical metals.
Several negotiated deals were booked in January in a range of $238-$246/mt FOB Gulf, for either spot or first-quarter contracts, as confirmed by both aluminum smelter buyers and suppliers.
"I think there was quite a bit of early activity," one market observer said, citing both US and European business.
A couple of smelter buyers also reported offers — and one concluded first-quarter deal — at $220-$235 FOB Gulf basis, but this was not yet determined to be repeatable.
"The low $220s [FOB Gulf] is like the starting point," said one buyer who had not yet booked Gulf business for Q1. He heard of a possible spot deal as low as $210 — not confirmed.
The market observer thought buyers perceived "$220 is achievable without much difficulty" and heard of an offer at $225.
But calciner sources said they were not prepared to book Q1 volumes in the $220s, arguing that something that low, this early in the Q1 negotiations, would have to be a "one-off" or tied to another negotiation or credit.
ATYPICAL SPOT DEAL SEEN
One of them cited an unexpected spot booking in January for a 20,000 mt cargo at $240-$245 FOB as a sign that Chinese supply could be tightening, whether due to the virus or other factors.
"I think something's going on," he said. "Maybe it's more anticipation of a potential disruption of shipments, and maybe a way to hedge that risk."
A second calciner agreed, "The Chinese coronavirus is adding an interesting dimension to the market, and I think it could underpin CPC prices. The Chinese stopped offering just before Lunar New Year started. So all those cheap offers are gone, and it's far from clear whether they come back, or when they come back."
Two aluminum buyers booked cargoes in January before the Chinese holiday in the low to high-$220s/mt FOB China for max 3% S grades loading in February. One of them previously booked a cargo in December at $220 FOB for late January loading and said it was ready to go last week, with "no impact whatsoever" from the virus. He had heard calciners were all still operating, since they were mostly outside Hubei province.
"Personally speaking, I don't see much impact," he said, aside from possible inland transportation delays.
The other buyer, however, said he hoped to "track the shipment closely!" when the Chinese return from their holiday starting this week.
"Right now our people in China tell us the government has issued a directive effectively suspending all non-essential industrial activity because the workforces are stranded in their home provinces and can't get back, because of the travel restrictions internally," the second calciner said. "Whether calciners come under that category, we just don't know."
Suppliers thought the CPC market could be bottoming out. They pointed to the early bookings not just in the Gulf but in the Middle East and South America at the $250-$260 FOB level.
Most buyers and refinery sources were less bullish, however, largely due to another round of price cuts in Europe.
While most Q1 talks had not yet started, one aluminum company reported booking some Q1 contract business at around $220-$225 delivered Rotterdam basis.
Another buyer had booked spot business in December at around $210-$220 FOB European refinery, and a refiner heard of business at $200 FOB but thought that sounded too low for quarterly business.
Still, refiner sources were less optimistic of achieving rollover pricing from Q4 to Q1. Offers initially were expected at around $260 basis Rotterdam, but by late-January were down another $10-$20 from the last Q4 bookings, to the $240s-$250s if not lower.
"We were thinking of rolling things over for Q1, and now it feels like it's coming down further," a refiner said. "It feel likes there's a surplus of aluminum and a surplus of coke around too. There's probably a bit more downside for this quarter."
Smelter buyers also cited lower prices for anodes with deals reported at $440-$460 FOB China for max 3% S.
Suppliers, for their part, cited thin calciner margins, with green coke prices halting their decline. One of the calciners thought GPC prices could even be trending up, calculating a $75-$80 netback for GPC from Argentina's YPF, based on a recent price of $105-$110 CFR Gulf.
Other market participants, however, cited YPF deals at $90-$100 CFR Gulf for a netback of no more than $60-$70 FOB, and Brazilian GPC also trending downward, booked at around $100 FOB in January.
US GPC business for Q1 was also heard in the high $90s/dmt FOB for 2% S, which was down from $110/dmt FOB in November.