A tax proposed by the Turkish government on a range of imported products from the U.S., including thermal coal, could potentially price U.S. coal out of Turkey, which could be bullish for Colombian sellers, market sources said May 31.
"This will be status quo for Colombian sellers," a European trader said, explaining that, if implemented, it will keep Colombian producers competitive in the Turkish market.
Sources said Turkish President Tayyip Erdogan has proposed a tax of 10% on thermal coal imports from the U.S. Petcoke imports would be taxed at 5%. The tax would directly impact another proposal for the sulfur cap on imported thermal coal to be lifted, which would allow an influx of high-sulfur U.S. coal into the country for utilities to burn.
Sources said the moves would be bullish for Colombian sellers as the sulfur cap change would make U.S. coal compete with Colombian for market share, but the tax could close the arbitrage for some grades of U.S. coal.
Prior to the tax proposal, sellers of Colombian coal had been wary of the upcoming hike in the sulfur cap on imported thermal coal into Turkey.
A seller of Colombian coal said the proposed tax is being discussed by the World Trade Organization.
"[Central Appalachian] coal won't be competitive," said another European trader, noting the new tax would eat into margins for U.S. sellers.
Traders said that in the current market, a 10% tax could take up to $10/tonne from sales to Turkey, which could leave grades of coal such as U.S. CAPP priced out of the market.
The source said that as a result, the European market would see an overhang of U.S. coal, leaving a wider gap between U.S. and non-U.S. coal offered to the market.
"Russian sellers will also benefit," said the source, adding that Russian coal also competed with Colombian as a low-sulfur option for utilities to blend with high-sulfur U.S. coal.
Turkey imported 7.38 million tonnes of thermal coal in the first quarter, down 3% on the year, with Colombian coal making up almost 40% of this and U.S. imports at just 23,321 tonnes for the quarter, according to customs data.
S&P Global Platts assessed the CIF Turkey 6,000 kcal/kg NAR, 90-day price at $95.50/tonne on June 1.
Despite the tax being a bullish factor for Colombian coal, high-sulfur Illinois Basin coal would still be able to price into the Turkish market.
Platts assessed f.o.b. New Orleans, 2.9% sulfur coal at $59.90/tonne Friday, on a 6,000 kcal/kg NAR basis. Platts' Panamax dry bulk freight on the U.S. East Coast to Turkey route was assessed at $11.tonne on May 30, giving a theoretical netforward price of $70.90/tonne CIF Turkey.
With a 10% import tax, the price would rise to $78/tonne CIF Turkey, $17.50/tonne cheaper than Platts' most recent CIF Turkey 6,000 kcal/kg NAR assessment of $95.50/tonne on Friday.
S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.
