Russia in January-August became the largest supplier of coal to Turkey due to discounts
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Russia in January-August became by far the largest coal supplier to the Turkish market, providing about 70% of all Turkish imports. The growth in deliveries is achieved through the provision of discounts, due to which Russian coal displaces more expensive Colombian fuel. The increase in exports to Turkey offsets the drop in supplies to Morocco, where there are difficulties with payments and customs clearance. According to analysts, if discounts are maintained, Russian coal will continue to dominate the Turkish market.
Russia in January-August increased coal exports to the Mediterranean countries. Mostly, deliveries are increasing at the expense of Turkey, while Moroccan buyers have ceased to show an active interest in Russian coal. According to Kpler, in January-August 2023, Russian coal exports to Turkey increased by 55%, to 14.6 million tons. According to Argus, Turkish power plants are replacing more expensive Colombian coal with Russian fuel. In addition, in generation, coal displaces more expensive gas, including gas from Russia. As a result, Russian coal accounted for almost 70% of Turkish imports in August against one-third a year earlier. SUEK, Kuzbassrazrezugol, SDS-ugol and Taltek are increasing deliveries to this country.
Russian coal suppliers are using dumping tactics, which are being used less and less in the Far East, but are still effective in deliveries to the south (see Kommersant of August 8).
Exports to Egypt in January-August increased by 60%, to 464 thousand tons of coal. This year, SUEK and the Kuzbass-based Taldin Mining Company sent goods to the country. However, payment difficulties caused by economic problems in Egypt have prevented Russian suppliers from boosting sales in the country, a source at a Russian mining company told Argus.
The growth in supplies to Turkey and Egypt compensates for the drop in exports to Morocco by 58%, to 945 thousand tons, in the first eight months of 2023, follows from Kpler data. Argus, in its review of Mediterranean coal exports, notes that exports to Morocco are experiencing freight payment disruptions and customs clearance issues. The country’s utilities prefer to order South African and Colombian coal.
By the end of 2023, the Ministry of Energy expects an increase in coal production in Russia by 1.5%, and exports by 2%.
In 2022, production increased slightly, to 443.6 million tons, while coal exports decreased by 7.5%, to 210.9 million tons.
According to the consulting company Neft Research, discounts for Russian coal delivered through southern ports peaked in June 2023. The discount was 21-24% from the API 2 benchmark. According to Neft Research analysts, Turkish consumers have become the main beneficiaries of the embargo on Russian coal imports to Europe. Due to discounts, they save by minimizing the purchase of expensive Colombian fuel: the cost of coal in the ports of Colombia is noticeably higher than the price of Russian coal already delivered to Turkish ports.
At the same time, large Russian coal companies, although they are ready to offer a discount for deliveries to Turkey, are still trying to limit its size. According to Neft Research, at the end of May, SUEK signed a contract with the Turkish power plant Eren Enerji to supply 900,000 tons of 6,000 NAR coal to Zonguldak by the end of this year. According to market participants, the deal uses formulaic pricing with a discount (estimated at 2–10%) to the API 2 index, which allows SUEK to earn $8–12 per ton from the current spot price level on this deal when supplying Russian coal to Turkey. According to analysts, provided that significant discounts for Russian coal remain, the structure of Turkish coal imports will not fundamentally change, and suppliers from Russia will retain their leadership.
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