Crude fundamentals may support 2H US coke supply
US independent refiners' earnings fell in the second quarter on lower discounts for heavy crudes to light crudes, but they expect differentials to widen once summer winds down, encouraging refiners to run heavier crude slates, which will likely lead to higher petroleum coke output.
US independent coking refiners, including Valero, Marathon, Phillips 66, and PBF Energy, all weathered lower margins in the second quarter, partially as a result of a decline in discounts for heavy crudes compared with light crudes. Valero's refining margin fell by 48pc in the second quarter from a year earlier to $15.62/bl. And PBF Energy reported refining margins of $13.62/bl in the second quarter, down by 55pc from the second quarter of the prior year. Other US independent refiners, including Delek, HF Sinclair and LyondellBasell also reported declines in refining margins.
While Phillips 66's margins decreased mainly on weaker distillate crack spreads and thinner heavy crude differentials, lower margins also showed the "impact of losses from secondary products due to declining … coke prices," Phillips 66 chief financial officer Kevin Mitchell said. Coke sold from the company's 221,000 b/d Humber refinery in the UK "experienced lower products differentials," the company said. Humber produces anode-grade green, calcined and needle petroleum coke, which is used in specialty applications and has a higher value than most petroleum coke.
A coker unit turnaround at PBF Energy's 171,000 b/d Delaware City refinery in Delaware that was planned to take place for 35-45 days in the first quarter but extended into the second quarter "certainly impacted capture rates on the east coast," PBF Energy chief executive Matthew Lucey said. Because the Delaware City refinery is the only coke producer on the Atlantic coast, coke output in that region languished, sinking to 2,400t in May, a record low in data going back to 1993, according to the latest figures from the US Energy Information Administration.
But refiners expect that margins will widen going forward, with crude differentials becoming more favourable to coke production.
"We believe crude markets are near the peak of the narrowness," PBF Energy executive chairman Thomas Nimbley said on 3 August.
Planned refinery turnarounds, specifically in the US midcontinent and Gulf coast, will somewhat reduce crude demand, while Canadian upstream producers return from maintenance season and increase heavy crude supply, Marathon vice president Rick Hessling said. Additional Gulf of Mexico and Venezuelan supply will also help widen the heavy-light discount as barrels are shipped to the US Gulf coast, Hessling said. Valero cited the same factors, but also noted seasonal factors — high-sulphur fuel oil use in some power generation is expected to wind down as summer ends before winter brings higher natural gas prices, which can make medium and sour crude grades less attractive to process. These seasonal trends will add heavier crude barrels to the market.
Sour crude is expected to comprise 60pc of Marathon's Gulf coast throughputs in the third quarter, up from 54pc in the second quarter.
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Heidelberg to shut some plants on lower 1Q results
Heidelberg to shut some plants on lower 1Q results
Houston, 15 May (Argus) — Germany-based multinational cement maker Heidelberg Materials plans to shut two French plants in 2025 and will be closing clinker production at one of its German plants later this year after lower sales volumes weighed on results in the first quarter. Heidelberg reiterated that it will be making "adjustments to several plants" in Europe, including shutting down clinker production at its Hanover, Germany, plant in the second half of this year , a move it had first announced in January. The company will also be closing two plants in France in October 2025 , a plan it made public in early April. The adjustments come in response to a "substantial decline" in cement volumes in Europe on lower construction demand related to the economic environment, as well as the company's production of low-carbon cement with reduced clinker content. The closures will allow Heidelberg to reduce its fixed costs. Heidelberg's volumes declined in all business lines in the January-March quarter, the company said, although it did not specify exact cement sales volumes. Global economic weakness, fewer working days and poor weather conditions in North America contributed to the decrease, Heidelberg said. The lower volumes were partially offset by sales price adjustments, the company said. But Heidelberg's first-quarter revenue decreased by 8pc to €4.49bn ($4.84bn) compared with the same period last year. Volumes in general stabilised in April, the company said. And while eastern Europe and southern Europe are "clearly improving", Heidelberg is not expecting strong gains from some other parts of its European business this year. "On the volume side, we should not expect miracles in west and north Europe, including the UK," Heidelberg chief executive Dominik von Achten said. Heidelberg's costs made a double-digit percentage decrease on the year in the first quarter as prices for cement kiln fuel, including petroleum coke, softened. Argus' spot-basis 6.5pc sulphur fob US Gulf coast coke assessment fell by nearly half to an average of $65.96/t in the first quarter compared with the same three-month period in 2023. The company expects its costs will continue to ease on the year, led by decreases in fuel prices. But costs will likely decline by a smaller percentage in the second half of the year than in the first, as fuel prices had already begun to slide in the latter half of 2023, with Argus' 6.5pc sulphur coke assessment averaging $84.82/t fob in July-December 2023, down by 20pc compared with January-June 2023 prices. Heidelberg anticipates that construction demand will continue to stabilise at a low level. The cement maker confirmed its outlook for the year, guiding for revenue growth and a further slight reduction in net CO2 emissions per tonne of cement produced compared with 2023. The company did not post guidance for cement volumes. By Delaney Ramirez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Motiva shipping coke to multiple Texas terminals
Motiva shipping coke to multiple Texas terminals
Houston, 1 May (Argus) — US refiner Motiva has begun shipping petroleum coke from its Port Arthur, Texas, refinery to Corpus Christi, in addition to Kinder Morgan's Houston Bulk Terminal (HBT) and Deepwater Terminal, as it responds to an extended outage at its Pabtex terminal . Motiva has in recent weeks secured barge transportation to move some of its coke production to HBT and is using a railway close to its 626,000 b/d Port Arthur refinery to ship coke to Corpus Christi, about 300 miles south, according to multiple sources. It continues to rail some volumes to the Deepwater terminal , where it secured space in early April. The US Gulf's largest refinery, Motiva Port Arthur, produces roughly 250,000t/month of coke, requiring it to move about 10,000t/d in order to avoid filling up its on-site storage. Typically, the refinery ships this to the nearby Pabtex terminal, but storage space at that facility was already running low prior to the mid-March shiploader outage, sources said. The refiner early last month was said to have begun railing this quantity to Deepwater in Pasadena, Texas. But this is a large amount to move each day to more distant terminals by rail alone, and this seems to have prompted the refiner to seek barge transportation and the additional terminal space. The rail shipments could also be moving more slowly than anticipated. The refiner had in mid-April expected to begin loading cargoes from the Deepwater terminal on 22 April, market participants said. But by 23 April, the refiner was aiming to start loading vessels in mid-May. "We are hearing it's a slow go with the rails to get cargo built up in these terminals," a coke market participant said. Slower-than-expected shipments could potentially put the refiner in a difficult position, if its Pabtex terminal is approaching capacity, since it has little excess storage capacity at the refinery itself. This could lead Motiva to reduce run rates at its coking units. Running its cokers at lower rates would likely mean the refinery needs to sell more heavy products, such as high-sulphur fuel oil (HSFO). But sources have not yet seen excess HSFO offered in the market. "Pabtex is Motiva's single point of failure," another participant said. "If they're not going as fast as they would like, that would be a huge problem." The company did not immediately respond to a request for comment. By Delaney Ramirez and Lauren Masterson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New US rule may let some shippers swap railroads
New US rule may let some shippers swap railroads
Washington, 30 April (Argus) — US rail regulators today issued a final rule designed to help customers switch railroads in cases of poor rail service, but it is already drawing mixed reviews. Reciprocal switching, which allows freight shippers or receivers captive to a single railroad to access to an alternate carrier, has been allowed under US Surface Transportation Board (STB) rules. But shippers had not used existing STB rules to petition for reciprocal switching in 35 years, prompting regulators to revise rules to encourage shippers to pursue switching while helping resolve service problems. "The rule adopted today has broken new ground in the effort to provide competitive options in an extraordinarily consolidated rail industry," said outgoing STB chairman Martin Oberman. The five-person board unanimously approved a rule that would allow the board to order a reciprocal switching agreement if a facility's rail service falls below specified levels. Orders would be for 3-5 years. "Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," Oberman said today. STB commissioner Robert Primus voted to approve the rule, but also said it did not go far enough. The rule adopted today is "unlikely to accomplish what the board set out to do" since it does not cover freight moving under contract, he said. "I am voting for the final rule because something is better than nothing," Primus said. But he said the rule also does nothing to address competition in the rail industry. The Association of American Railroads (AAR) is reviewing the 154-page final rule, but carriers have been historically opposed to reciprocal switching proposals. "Railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention," AAR said. But the trade group was pleased that STB rejected "previous proposals that amounted to open access," which is a broad term for proposals that call for railroads to allow other carriers to operate over their tracks. The American Short Line and Regional Railroad Association declined to comment but has indicated it does not expect the rule to have an appreciable impact on shortline traffic, service or operations. Today's rule has drawn mixed reactions from some shipper groups. The National Industrial Transportation League (NITL), which filed its own reciprocal switching proposal in 2011, said it was encouraged by the collection of service metrics required under the rule. But "it is disheartened by its narrow scope as it does not appear to apply to the vast majority of freight rail traffic that moves under contracts or is subject to commodity exemptions," said NITL executive director Nancy O'Liddy, noting it was a departure from the group's original petition which sought switching as a way to facilitate railroad economic competitiveness. The Chlorine Institute said, in its initial analysis, that it does not "see significant benefit for our shipper members since it excludes contract traffic which covers the vast majority of chlorine and other relevant chemical shipments." By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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