Petcoke booms as cement makers try to replace coal

* Cement makers led by Asia chase petcoke to replace coal

* Petcoke prices up $10/T Feb-Jun, set to rise further

* Domestic U.S. petcoke demand may cut exports from Q3

By Jackie Cowhig and Bruce Nichols

LONDON/HOUSTON, July 1 (Reuters) - Cement makers worldwide are buying petroleum coke or petcoke wherever possible to replace more expensive steam coal as a fuel and raw material, cement industry sources and traders say.

As a result petcoke prices have risen $10.00 a tonne to $35.00 during the past month and are likely to reach parity with coal prices later in the year.

"What we're seeing worldwide is an overall reduction in demand for cement with some spots improving, but demand for petcoke is still pretty good because of reduced production and because petcoke prices are still attractive compared to coal," said Bill Day, spokesman for refiner Valero (VLO.N), the largest petcoke producer in the United States.

Total global demand for cement has fallen due to the economic slowdown but there are pockets of continued strong demand such as China and India. For a factbox click on [ID:nL1361390]

Even where cement demand has fallen in Europe, cement makers are trying to replace coal with cheaper petcoke.

"Definitely for the past six months and noticeably for the past three months there has been a push in Europe for cement plants to take more petcoke, if they can get it," said a senior cement source who asked not to be named.

"They are taking petcoke mostly on long-term contracts but the spot price is attractive at $30.00-$35.00 a tonne FOB. Because of petcoke's higher energy content it works out cheaper than coal even at the same price per tonne, but there is little spot to buy," he said.

At FOB prices of around $35.00 FOB U.S. Gulf with freight of $45.00-$55.00 the delivered cost of petcoke is higher than coal on the face of it but the real cost due to petcoke's energy content is lower, traders said.

Up to 2004 cement makers and many European power plants were taking as much petcoke as they could instead of coal on grounds of price, despite petcoke's high sulphur content.

PARITY