CORRECTED: Turkish 2013 coal imports on the rise as power sector grows
Correction: The introduction to the TEHD/CSD article headlined "Turkish 2013 coal imports on the rise as power sector grows" has been corrected to explain that the projected 25% year-on-year growth in Turkish thermal coal imports applies only to 2013, not 2013 and 2014.
Turkish thermal coal imports could grow by up to 25% year on year in 2013 and continue to rise in 2014 as the country expands its power generation fleet, market participants told ICIS.
According to sources, Turkish power and cement industries imported a total of 20m tonnes of thermal coal in 2012, and although the weak Turkish lira masked the global coal price decline earlier this year ( see sister publication EDEM 3 October 2013 ), imports for 2013 are likely to rise to 22m-25m tonnes.
Around 12m tonnes of that will be imported by the power sector, while the rest will be used by the cement industry and for domestic heating.
A new 600MW coal-fired power plant Atlas, owned by Diler Holding, will be commissioned in June 2014, which could increase import demand by an additional 2m to 2.5m tonnes in 2014, one Swiss-based trader said.
Cement industry demand plateaus
However, the growth of the power sector could be offset by a potential stagnation or decline of demand from the cement industry in coming years.
The Turkish cement sector is not expected to grow further and its existing demand for coal could fall, as thermal coal is increasingly substituted with other fuels, a cement industry source said. The cement sector is already able to alternate between using thermal coal or petroleum coke also known as petcoke – a byproduct of oil refining – depending on which is cheaper.
“The only growth that Turkish coal imports could see is going to have to come from the power sector,” the source said. “There are no new cement kilns planned and we are already seeing an increased use of alternative fuels in the cement industry such as RDF, which makes use of municipal waste, or even in some cases old tires,” he added.
In addition, the cement industry is only able to use a specific type of thermal coal, with a maximum sulphur content of 1.1%, usually sourced from Russia. Ukrainian coal – which is generally cheaper and not traded in the European DES ARA coal market – can also be used and can drive down the costs. However, it must be blended with Russian coal, as its sulphur content is otherwise too high.
The Russian coal is usually priced FOB (the price of coal without the cost of shipping) at around $3-5/tonne below the DES ARA value, while the cheaper Ukrainian coal trades $6-7/tonne below DES ARA on an FOB basis, one trader said.
On Thursday, coal for delivery into the ports of Amsterdam, Rotterdam and Antwerp in December (a DES ARA December ‘13 contract) dealt at $85.00/tonne.
Power generation and domestic heating
Most coal imports used in the power sector come from either Russia or Colombia, because other types of coal are not suitable. Power utilities tend to prefer Colombian coal because of its high volatile matter, while large Russian coal is mainly used for domestic heating, sources said.
In 2012, Turkey imported 7.0m tonnes of Russian coal and 7.4m tonnes of Colombian coal. And while Russian coal tends to be expensive – with power companies paying above $80.00/tonne plus delivery costs – its low sulphur content makes it desirable, despite the difficulty of shipping across the Black Sea, particularly in the winter.
In the first five months of 2013, Turkey’s imports of Colombian coal nearly halved year on year as strikes at producer Cerrejon’s mines cut Colombian output, but this could change in 2014 when the Iskenderun port will be able to take Panamax-sized vessels, able to haul up to 75,000 tonnes of coal. Manca Vitorino
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