Turkey coal imports from Russia rise as rouble slides

Turkey has been receiving more coal cargoes from Russia over the last couple of weeks due to the depreciation of the Russian rouble against the US dollar and the reduction of South African coal export offers, coal market participants said.

Data from the Turkish grid operator TEIAS shows electricity generation from imported coal has increased four percentage points year on year to 17% of the generation mix, since the beginning of the year.

And sources from the coal and power markets said Russian coal supply has contributed to the increase in generation using imported coal.

The Russian rouble’s slide against the US dollar, has let Russian mining companies reduce their coal prices for export in US dollars, because their local costs are in the Russian currency.

“Russia has been mining as much coal as possible since they’re not losing money by doing this. They need the cash as they have limited access to credit,” a physical coal trader said.

Russian companies as a whole have found it harder to get access to credit since the EU and US introduced sanctions against certain Russian companies and individuals last year, brought in because of geopolitical tensions with Ukraine.

The result of the falling currency and limited access to credit is Russian companies ‘pumping out the coal’ to sell to the export market including Turkey and other neighbouring countries in Europe, a second physical coal trader said.

Turkey has traditionally been a net importer of thermal coal from Ukraine too. But exports from Ukraine stopped in the fourth quarter of last year when the government imposed an export ban due to domestic shortages related to geopolitical tensions in the country.

Turkey was forced to source more low-volatile coal from Russia and South Africa in the second half of last year, as a result.

South African mining companies have concluded deals with Turkish buyers over the last couple of months, but FOB Richards Bay coal prices increased at the end of January and are now too expensive to price into Europe and Turkey, market participants said.

A FOB Richards Bay cargo for March ’15 loading was sold at $61.50/tonne on 30 January up $3.25/tonne from 15 January, ICIS data shows.

Offers on the South African coal market have dried up too, further pushing Turkish buyers to the Russian market. Stacy Irish