US Gulf calcined petcoke prices maintain downward trend
Global calcined petroleum coke prices continued to trend lower during September, and opinion was divided fairly evenly between the buy and sell side over the market's near-term direction.
The Platts monthly US CPC price assessment fell to $260-$275/mt FOB US Gulf in September, from $270-$285/mt in August. The assessment reflects the transactable, repeatable value of CPC with less than 3% sulfur, 300-400 ppm vanadium and typical metals, loading 30-60 days forward.
Third-quarter settlements concluded near the beginning of the month were toward the higher end of the range, while those completed later were in a range of around $260-$265/mt.
A couple of smelter buyers alluded to possible deals below $260/mt, but no details were given to determine if that was more of a bid level, or if the deals could have been off spec or possibly estimated netback values.
A calciner source reported concluding third-quarter settlements at an average of $270/mt, but a range of around $265-$275/mt, while another calciner source concluded Q3 sales earlier in a range of $270-$290, with the higher end achieved much earlier in the quarter.
Calciners thought the market had reached a floor but did not see any sign of prices increasing in the near term. One said the market had found support from "1 million mt of smelting capacity coming on in the next 6-9 months." This was in reference to the restarts at Aluminerie de Becancour in Canada and Albras in Brazil and the new number six line at Aluminium Bahrain.
"That will allow things to stabilize and be balanced moving forward. I'm not saying CPC prices are going to leap ahead, but I think this puts a floor under it," he said.
He also said aluminum prices had stabilized on the London Metal Exchange, although smelter sources described current metal pricing as still low.
Another calciner source also saw a floor.
"The buyers say they think Q4 will be lower, and we don't know if that's the case," he said. "We think the market is at the bottom."
He said some of the reported low prices in the market might be formula-based contracts, or buyers talking the market down.
Smelters tended to doubt that the CPC downtrend was ending. One buyer who had booked at the low end of the range said he was "seeing signs it could be stabilizing, but there still seems to be plenty of material that needs to be worked through."
Another aluminum buyer concurred.
"I don't know if the market has reached a floor -- possibly in the US Gulf, but we won't know that until we test it again for Q4."
MARKET TIED TO CURRENCY MOVES
A trader believed market direction would depend on China and its currency moves.
"If it weakens further, then CPC is going lower," the trader said of the renminbi.
For now, he said he agreed with the view "that we're at the bottom or bouncing along the bottom. But I don't agree that it's just up from here on now."
A third smelter source said he expected to see a continued downtrend in Chinese CPC prices and the US Gulf because of the market being oversupplied.
"There are pockets of length everywhere," he said.
A market observer said based on the latest settlements and reported forward offers that prices would "go down in the fourth quarter and the first quarter."
One smelter buyer, who saw prices stable at $270-$280 FOB Gulf midmonth, revised that later in the month to say he"d heard prices down to $255-$275. He had also heard offers as low as $250 FOB China. Other buy-side sources had indications of lower offers in both Q4 and Q1, trending down another $10-$20 each period.
One buyer who was still finalizing Q3 CPC settlements pointed to the declining trend seen in Q3 bookings, expecting to conclude in a range of $260-$285/mt. He also thought some suppliers were resigned to fourth-quarter pricing eroding further "and hence are trying to discuss a bundle deal for both Q3 and Q4. We oppose the thought and asked to keep both discussions separate."
He believed the small increases in CPC demand from ABI, Albras and Alba would be offset from increased supply from both China and the Middle East.
"Not so much [production] cuts are expected in this winter season in China, due to the economic situation, so all signals are pointing towards a continued fall in prices in Q4," the buyer said.
LOWER PRICES IN EUROPE
Smelter buyers thought that CPC prices in Europe had even more downside potential.
Refiners reported Q3 settlements for low-sulfur European CPC in a range of $290-$320/mt, normalized to CIF Rotterdam basis, while a couple of smelter buyers reported booking at $290-298.
Another buyer said he had not concluded his Q3 European settlements and had received offers in the $290s range, basis ex-Rotterdam, and rejected all of them. "We expect it to be in the $280s," the buyer said.
One smelter source said he had booked a small part of his requirements at around $290, but still had more to conclude.
"The price in the US and Europe had a huge gap, which is narrowing, and the big smelters are pushing hard to get it below $300," a refinery source said. He conceded that it was harder to get a quality premium in a falling market than in a rising market.
Another refinery source who had booked an early H2 deal around $320 thought that it would not be surprising to hear numbers at $300 or below for more short-term business.
PRICE EROSION ELSEWHERE
Some sources reported an impasse in US West Coast CPC negotiations, but pricing in the region was following the trends seen elsewhere. Buyers reported receiving offer levels in a range of $280-$290, while one buyer reported settling at $275/mt. The buyer said the price "was higher than we wanted."
Another buyer said US West Coast prices did not make any sense "unless you need that chemistry" given Chinese prices were in a range of $260-$280/mt FOB, depending on chemistry.
Brazilian CPC Q3 price settlements were heard at around $275/mt FOB, and market sources indicated that fourth-quarter settlements were likely to be in line with the US Gulf trend. One source said the Q4 settlement would be "within a few dollar"s of the US Gulf market average [in the quarter]." Earlier Brazilian Q3 settlements had been heard at closer to $300/mt.
Several sources indicated Chinese CPC prices may be under pressure from weakness in the Chinese renminbi, making CPC priced in US dollars competitive on the export market. Prices were heard in a range of $250-$280/mt FOB China.
Export prices from India were heard to be in a similar range to Chinese FOB prices. One source said the market remained "structurally short" because of the import restrictions on green coke and calcined petcoke and did not expect to see any change to the situation, or any relief on the import restrictions in the near future.
GREEN COKE DIRECTION UNCLEAR
Results of a late-September tender for green coke from Argentina"s YPF were not known at the time of the assessment. In August, YPF sold two cargoes at the equivalent of $90/mt FOB, and there were reports it had sold another in September netting back to around $70/mt.
There were also reports YPF had offered a cargo at around $115/mt CFR, which could net to around $70/mt FOB.
But an aluminum buyer and a trader said the latest YPF cargo, which was due to close September 26, may have been lower density than normal and was unlikely to be used for calcining. A trader said the low density could mean the price level was "skewed."
Market participants continue to look for the bottom of the GPC market as an indication of when CPC prices will find a floor, and one source noted that a number of GPC sellers offered extra cargoes in September.
A trader said that green coke prices in China had followed a pattern in the last five years, typically decreasing first quarter, flattening out Q2, then rising in Q4.
"The independent refiners [in China] are now controlling the coke market and the price," he said. "If there's a slowdown in China, are the refineries going to slow throughput? If they do, then we've definitely hit the bottom on green coke."
He said small independent refineries dominated the Chinese market, whereas the large integrated oil producers dominated the markets in the West.
"Maybe the Chinese economy is better than we give it credit for, so it's a wild card," the trader added.