Calcined petcoke prices fall further on weak sentiment as Q2 negotiations make slow start
Calcined petcoke prices fell again largely on weaker sentiment and some spot negotiations at the end of March at prices close to $300/mt FOB.
The Platts monthly US CPC price assessment eased to $310-$330/mt FOB US Gulf in March, from $325-$345 in February, reflecting a general consensus on the sell and buy sides of the market that prices were still headed lower as well as one late first-quarter settlement near the lower end of the range.
Data for the assessment is normalized to the Platts specification of max 3% sulfur, 300-400 ppm vanadium and typical metals, loading 30-60 days forward.
There were reports of a late first-quarter settlement at around $310/mt FOB US Gulf, although details were not available.
At the end of the month, a smelter buyer was heard negotiating for a spot 10,0000-mt cargo for May loading with a number of potential suppliers on a formula basis that could net back to around $300 FOB basis, either US Gulf or South America . But he said US Gulf offers would have to be $30 less to compete with Chinese pricing of $300-$315 FOB for the max 3%, max 400 ppm V cargo.
Most negotiations for second-quarter contracts have yet to start, with smelters planning on using their tried-and-trusted method of delay to get what they perceive to be a better deal, much to the chagrin of suppliers, some of whom expressed a desire to start negotiations by the end of March or in early April.
One smelter buyer said he was not planning to start Q2 talks for either US Gulf or European CPC until after Easter, which could indicate the process may drag on into May. "So we don't even want to think about Q2, and we have absolutely no intention of starting Q2 discussions until after Easter. ...[There's] no point talking before then," the buyer said.
This buyer concluded US Gulf Q1 pricing at the end of February at $330/mt FOB, though he was offered lower if he was willing to lock in for Q2 as well. "If you think they wanted to do Q1 and Q2 at $325 and effectively give me semester pricing , that tells me they know pricing is still going down," the buyer said.
Several buyers were convinced the US Gulf market had length in it, putting downward pressure on pricing .
Another smelter buyer said he had concluded Atlantic -based CPC settlements at $315-$320/mt.
But on the supply side, calciners said they had concluded Q1 in a range of $325-$350/mt, with the higher-priced business having been booked early.
Several other aluminum buyers also said they were not ready to begin Q2 talks. "We 're not starting on Q2 yet. I don't know about after Easter, but we 're not in any rush to begin," said a second buyer, who thought Q2 pricing could end up close to $300/mt FOB.
A third aluminum buyer thought the US Gulf market may already be below $300/mt. "If you were to buy a spot US cargo today, it could be below $300 FOB for the standard spec," the buyer said.
One of the buyers added, "They [calciners] are swimming in CPC."
Calciners acknowledged CPC pricing would be lower than Q1, but did not expect as big a drop for Q2 form Q1 as the market saw in Q1 from Q4.
"Insofar as Q2 is concerned, not much is changing on a supply/demand basis, but there is clearly the ongoing sentiment," said one calciner source. "We think there will be a drop in Q2 pricing from Q1, but not a precipitous drop, based on fundamentals."
Another calciner source said he was hoping to "hold a line" on pricing for Q2. "A lot of people, even some of my customers, have said they don't necessarily expect such a big drop in price for Q2," the calciner source said.
A market observer said there was a disconnect between suppliers attempting to hold a line on pricing and smelters' expectations. "The buyers are expecting starting in Q2 you will start to see prices in the market below $300s or in the $270s-$280s," the source said.
OTHER REGIONS UNDER PRESSURE
CPC pricing in Europe also appeared to be under pressure, but there was a wide range of reported pricing . At the top end, a refinery reported Q1 sales at $415-$418/mt, basis FOB Rotterdam for Q1, while a second refinery source reported business in a range of $390-$410/mt, adding there were some settlements slightly above and below.
But one market observer said business had been concluded in a range of $365-$390 and expected Q2 to come down to around $345.
A refinery source said he was looking to the US Gulf and China for direction. "It's not easy to start Q2 talks right now, because there's so much uncertainty. If we could get an idea how much further US Gulf falls or what China is really doing, then we could go into a negotiation with some confidence," he said.
The source said his Q1 negotiations had taken far longer than expected and did not conclude with his last customer until mid-March. A customer was "looking for a decrease of $100 on their European CPC from Q4," the source said. "I told them we see it differently and that is why [it] took so long." In the end, the price reduction was in the region of $70-$80, the source said.
He expected Q2 negotiations to be lengthy. "If a customer is telling me he needs a decline of $5-$10, there probably won't be much objection on the sell side and it would all happen very quickly. But if they tell me $100, that's a different story."
The refinery source said while every smelter would be fighting for the lowest price , "it will eventually backfire on them, because the lower it goes, when it does finally turn, it will rebound very quickly and they will suddenly see themselves looking at $100 increases, because everyone on the sale side will be looking for their payback time."
He also said with crude oil prices at $65/barrel, if CPC fell back to the levels of three years ago when crude oil was at $28/barrel, "every oil producer would rethink what has to be done and decide whether or not they still need to produce coke or not."
Another European refinery source said the drop from Q4 to Q1 pricing had not been that big and expected only a small drop to Q2. The official expressed frustration at smelters delaying negotiations, noting that if the market suddenly turned around and supplier then wanted to hold off, "they would then accuse us of behaving irresponsibly."
In South America , Brazilian low-sulfur Q1 pricing was heard in a range of $315-$330/mt and a supply-side source indicated that Q2 pricing was likely to be lower.
AGGRESSIVE CHINESE PRICING
Several sources said they had seen aggressive pricing emerging from China . A trader said he had heard a Chinese cargo of 3% sulfur , 350 ppm vanadium , had sold into Europe at $310/mt FOB, which was down from previous pricing points of around $340 FOB at the end of February.
Smelter buyers also heard reports of Chinese pricing in the low $300s for similar chemistry, while a market observer source said it was possible to buy spot cargoes at below $300/mt for 2.8% S, 350 ppm V.
The smelter who took offers on the May cargo received multiple Chinese offers and said at the annual TMS conference in San Antonio mid-March that Chinese sellers were "begging for business."
Conversely, a calciner source said he had settled Chinese CPC into India at a level netting back to $320-$325/mt FOB. But business to India was also heard netting back to $310 FOB China , and business to Australia netting back to about $305 FOB.
Nevertheless, the lower Chinese prices appeared to be undermining pricing on the US West Coast , where first-half negotiations were said to still be ongoing.
The first US calciner source described China as a major driver and noted the country had some idle smelting capacity, which may be what was behind the recent lower CPC prices .
But another supplier described the $310 FOB China price for the cargo to Europe as an isolated example.
The first aluminum buyer said a US West Coast CPC cargo traded to Europe on a $360/mt landed basis, probably netting back to $320 FOB. Settlements were also heard in a range $335-$345/mt FOB US West Coast , with the $335 level reportedly tied to an annual contract. US West Coast sales to the Middle East were also reported in a range of $340-$360/mt CFR basis.
But other sources said the seller was holding out for higher pricing.
GREEN COKE PRESSURE
There was general agreement that green coke pricing was still under downward pressure, based on recent tenders by Argentina 's YPF . The company reportedly sold a cargo of anode-grade green coke to a Chinese trader in late February at the equivalent of about $150/mt FOB, but the sale fell through.
The cargo was reportedly resold to another Chinese trader at the equivalent of $130-$140/mt FOB, and the coke was likely destined for the glass industry, according to market sources.
On the supply side, a refinery source said there was too much emphasis placed on YPF 's cargoes. But the first calciner source said YPF gave clear direction. "YPF is absolutely leading the anode-grade green coke market," the source said. "People can complain about that, but it's a fact; they're regular sellers just about every month, and it's the most visible and provides the most real data points."
Other sources have argued the export market is more attractive for YPF than selling within South America .
However, by the end of March, another YPF cargo was reported to have traded to India at $220/mt CFR, which one source netted back to about $140/mt FOB basis. But a calciner source heard the cargo may have gone to the US Gulf, but also netted back to the equivalent of $140/mt FOB.
US Gulf green coke pricing appeared to be under pressure, with reports of 2.0-3.5% sulfur GPC being offered at around $10-$20/dst less compared with February. Market sources said last month these grades were around $150/dst FOB.