London — New import taxes announced Wednesday by the Turkish government on a range of imported products from the US, including thermal coal, could be bullish for Russian sellers leaving US coal potentially priced out of the market, sources said.
The new tax on US thermal coal would be 13.7%, up from the 5% announced in June, with petcoke remaining unchanged at 4%, sources said.
The increased taxes, which were introduced in response to a doubling of tariffs on Turkish steel exports to the US, will not have an immediate impact on US imports into Turkey given their low current volumes. But the new taxes would appear to give Russian sellers the upper hand should the Turkish government lift sulfur limits later this year, as expected, a Turkish consumer said. High sulfur (3%) US coal would likely be priced out of the market, a Turkish coal buyer said.
"Maybe the Russian market will use this as a way to increase their prices," the buyer said.
Colombian sellers also stand to benefit, but only when selling to utilities as the high volatility of Colombian coal does not allow it to be used in cement production.
Russian coal, however, can be used for cement production and by utilities.
"This means the sulfur cap discussion largely becomes irrelevant as the economics no longer work," said a European trade analyst. The source said the ongoing discussions within the Turkish government to increase the sulfur cap on imported thermal coal to 3% would have allowed cheaper high sulfur US coal to flow into the Turkish market; however, a 13.7% import duty on US coal could negate this decision.
The Turkish consumer said the new tax will be effective for new shipments, leaving vessels already en route to Turkey unaffected by the tariffs.
Turkey imported 14.34 million mt of coal in H1, an increase of 6% on year, with Russian coal comprising just over 5 million mt of this volume, according to customs data. Turkey took delivery of just shy of 130,000 mt of US thermal coal during this period, Turkish census data showed.
ILLINOIS BASIN ARB CLOSING
A higher tariff on US coal would effectively leave Central Appalachian and Northern Appalachian coal out of the money when delivered to Turkey; however, high sulfur Illinois Basin coal would still theoretically price in should the government raise the sulphur limit to 3%, but not as comfortably as it used to.
S&P Global Platts assessed the CIF Turkey 6,000 kcal/kg NAR, 90-day price at $102/mt Friday.
Platts assessed FOB New Orleans, 2.9% sulphur coal at $66.50/mt Friday, on a 6,000 kcal/kg NAR basis. Platts' Panamax dry bulk freight on the US East Coast to Turkey route was assessed at $13.50/mt Tuesday, giving a theoretical net forward price of $80/mt CIF Turkey.
With a 13.7% import tax, the price would rise to $91/mt, $11 cheaper than Platts' most recent CIF Turkey 6,000 kcal/kg NAR assessment.
