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Lira volatility leaves coal traders hesitant to participate in Turkish market


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Lira volatility leaves coal traders hesitant to participate in Turkish market

European thermal coal traders have been hesitant to participate in the Turkish market amid the ongoing lira/dollar depreciation, despite demand from utilities, sources said Monday, Aug. 13.

"The terms of business will change," said a European trader, explaining he would be reluctant to sell to a buyer in Turkey without credit protection.

Despite being exposed to currency fluctuations, utilities in Turkey remain in need of coal, owing to the recent period of high burn and strong gas prices.

The trader said consumption from cement plants was likely to drop as a result of the economic issues as the recent growth in Turkey's economy has been fueled by construction, which will fall as foreign investment slows, lowering the need to procure coal and petcoke.

At 5 p.m. BST on Aug. 10, the lira/dollar exchange rate stood at 0.15, falling to 0.14 during trading Aug. 13.

One of Turkey's main utilities, Eren Enerji, has been looking for three Capesize vessels recently, with other buyers such as Colakoglu seeking a Panamax vessel, sources said.

"Power generation in Turkey is OK," said a European trade analyst, highlighting the need for coal in Turkey right now. "On what terms buyers get their coal is another question."

A second analyst said small buyers are likely to remove themselves from the market due to exposure to currency volatility, with large buyers likely to look for discounts.

"You will see payment schedules and payment terms tightened," the source said. "Sellers will want prompt payment."

S&P Global Platts assessed the weekly CIF Turkey, 6,000 kcal/kg NAR, 90-day price at $102/tonne on Aug. 10.

The trader was surprised the CIF ARA market has remained buoyant despite the euro being dragged down with the lira, which he said was due to the strong need for coal in Europe, which has outweighed currency issues there.

European banks have been exposed to the economic issues in Turkey, which has been a bearish factor for Europe's most widely used currency.

"Europe needs coal," said the first analyst. "As long as the European energy complex holds up, CIF ARA will find buyers."

The Cal-19 contract traded at $88.20/tone at 4 p.m. BST on Aug. 13, after having been assessed by Platts at $87.20/mt tonne Aug. 10.

S&P Global Market Intelligence and S&P Global Platts are both owned by S&P Global Inc.