Weak Turkish Lira lowers coal import expectations

A surprise year-on-year fall in Turkish coal imports in 2013 and the weak Turkish Lira against the US dollar have prompted market participants to revise their previously bullish forecasts for this year’s Turkish coal imports.

In November, market participants polled by ICIS agreed that Turkish coal imports would be 25% higher year on year in 2013 at around 22m-25m tonnes. They also predicted import demand would grow a further 10% in 2014 ( see sister publication CSD 21 November 2013 ).

However, Turkish Statistical Institute data recently showed that Turkish thermal coal imports totalled just 20.9m tonnes last year – down 12% year on year – with sources now expecting imports this year to remain flat at that level.

Last year’s decline was attributed mainly to a steep fall in the Turkish Lira against the US dollar which, despite the decline in international thermal coal prices, made the dollar-denominated imported coal less attractive compared to Turkey’s own domestic production. And this trend is likely to continue this year, with demand depending largely on whether international coal prices out-turn above or below the price of Turkish domestic coal production.

Last week, Director of Emerging Markets Strategy at investment bank Societe Generale Phoenix Kalen told ICIS that the medium-term outlook for the Turkish Lira (TL) is still weak, because the country remains exposed to policies in the US which it cannot influence through monetary policy. The investment bank said it expects the US dollar to rise to TL2.40 by the end of March, surpassing the TL2.33 high that was hit on 26 January ( see sister publication EDEM 06 February 2014 ).

This means that unless international coal prices fall much faster than the Lira depreciates, any increase in demand caused by the commissioning of the 600MW coal-fired Atlas power plant in June would be covered by domestic coal production. “I doubt overall coal-fired electricity generation would grow this year in Turkey. Coal plants are not as attractive to run as it once appeared so I no longer expect any growth in coal imports from the electricity sector,” a coal trader said.

It is also still unlikely that the Turkish cement industry would significantly increase its demand for imported coal. While the country’s cement output is rising, sources said the industry is using mainly petcoke which, despite a 25% price premium over CIF ARA coal prices, also has a much higher heat output. Manca Vitorino