Study Predicts Lower Price, Growing Demand for Petcoke

Issue 10 and Volume 105.

Sparked by growing supply and increased market interest, petroleum coke is shedding its historic status as a niche fuel and is emerging as a major fuel option for fuel buyers and strategic energy planners, according to a new industry study.

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The study asserts that a growing market for petcoke is being driven by a growing demand for affordable electric generation and the rapidly expanding installation of new technologies such as fluidized bed units capable of fully taking advantage of the fuel. The report concludes that “As refineries ramp up their production of this byproduct, suppliers and traders will be aggressively marketing this high Btu energy source to gain a solid foothold in a power industry rocked over the past year by high prices for coal and natural gas. Petroleum coke prices have peaked and will continue to slide from their recent highs through 2005.”

The study predicts prices will stabilize over the longer term in real dollars, in the $15-17/metric ton for 4 percent sulfur, 50 HGI Gulf Coast petcoke, as significant increases in capacity are met in large part by growth in global demand. “DRI*WEFA expects a further decline in price, driven by scheduled expansions of refinery coking capacity,” says John Dean, consulting vice president for coal markets at DRI*WEFA, who directed the market assessment. “Refinery coking capacity is set to skyrocket over the next five years as refiners work to get higher volumes of lighter distillates out of increasingly heavy crudes. As a result, petroleum coke output should increase as well, keeping a lid on prices as this additional supply seeks markets.

The report also assumes that growing stringency for SO2 stendards worldwide will favor the use of desulfurization equipment. As desulfurization equipment is installed, petroleum coke’s usage will increase due to its higher heat rate and its price competitiveness with coal. “This cumulative impact on demand will begin to reach a significant level sometime close to 2007 and extend well into the future, says Dean.