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DTE Energy: US faces shortage of met coke in 2019

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Argus Media is reporting that rising US metallurgical coke consumption and tightened production capacity could lead to the country developing a structural shortage of met coke next year.

Mike Nobis, US firm DTE Energy's Director of coal trading, said at this week's MetCoke World Summit in Pittsburgh, US: "Looking out to 2019 there's a chance that the US will go, for the first time in years, from being coke long to slightly coke short. "He added that the US will probably need to import at times.

The impact of US Steel restarting two blast furnaces at its Granite City plant in the first half of this year has tightened the domestic met coke market. Nobis said that US coke production capacity has tightened since steel capacity utilisation rates previously touched 80%, such as during the 2016 closure of DTE's Shenango coke plant on Neville Island — a casualty of the last market downturn.

Just last month, the Tonawanda foundry coke plant in North Buffalo was shut down. "It was announced overnight and took a lot of us by surprise," a coking coal producer said on the sidelines of the conference. Tonawanda Coke had been caught up in legal disputes surrounding pollution concerns and air toxicity, and has since filed for Chapter 11 bankruptcy protection.

There is some scope for product replacement to offset particular tightness in certain parts of the coke market, such as using more nut coke when there are shortages of furnace coke, Nobis said. But there are limits to how far the balance can be adjusted, and this will vary depending on the facility.

Market participants see little potential for construction of new met coke facilities for now, citing lengthy permitting processes and reluctance on the investment side.

But conference delegates are cautious about the longer-term outlook for US steel production growth and met coke demand, with several expecting the market to balance out and numerous metrics to return in the medium term to levels seen before implementation of the US' Section 232 tariffs on steel and aluminium imports.

Consultancy Wood Mackenzie's director for global metallurgical coal markets, Jim Truman, said the company had initially thought the Section 232 tariffs would remove around 10.6 million tpy of US steel imports, to be replaced with domestic production and equating to a 3.8 million tpy rise in US coking coal requirements. But the reality has been more muted, with imports so far in 2018 down by around 5.2 million t compared with a year earlier, and steel production expected to be up by 4.5 million t, according to Wood Mackenzie estimates.

"In the long term, we think things will balance out and steel imports will return to their previous level," Truman said, noting that the 25% steel import tariff has resulted in a rise of around 50% in local steel prices.

There are also constraints to US steel production growth at an equipment level, a domestic coking coal supplier said. "A lot of facilities start running into trouble and have problems if you push [capacity utilisation] rates much above say 84%," he said.

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