Turkey to offer protection against strong coal prices

Spanish Market: Coal
17/03/22

Turkish energy regulator EDPK is planning to launch a scheme that will partially offset the power sector's energy import costs — including those faced by coal and gas plants — as high prices in the wider commodity complex threaten the country's energy supply security.

This could improve Turkey's power sector coal demand outlook significantly, given that some plants have been reducing their output amid unfavourable economics.

"The increases in costs stemming from higher fuel and raw material costs might also translate to unacceptable levels of increases in [power] prices … [EPDK] will offer assistance for up to six months to keep power prices from rising to unacceptable levels and to allow utilities which are not able to contribute to energy supply security because of high fuel costs," EPDK said in an announcement today.

"[EPDK] and the energy ministry will continue to monitor domestic and global energy markets and will take precautions as needed."

Details of the scheme could not be immediately confirmed, but some market participants expect the mechanism to provide a floor and ceiling price for renewable generators, domestic coal, imported coal and gas plants. The price range is expected to be a fixed price for generators that rely on domestic fuels such as lignite, while the range for imported coal and gas-fired plants will be calculated using a formula based on their fuel costs.

The support mechanism formula for imported coal-fired plants is expected to be linked to the API 2 index, which is widely used for indexation purposes in the country, to keep utilities from idling their plants when the grid needs a higher level of baseload generation.

Low-price tax offset by protection

The mechanism should offer some financial relief to Turkish imported-coal plants as they were not able to build equity to buffer for high fuel prices when coal prices were low. This was because they must pay top-up tax for coal imports when European coal prices fall below $70/t.

The recent steep increase in European coal prices has led generation costs for Turkish power plants to rise well above power prices.

Some plants were expected to idle their plants and postpone or divert their cargoes from their annual supply agreements amid unfavourable margins. But Turkish buyers might become active again in the seaborne market when the new power market mechanism comes into force, as they will be able to recoup their high fuel costs.

The country's imported coal-fired output declined to 5.6GW in 1-17 March down from 6.7GW during the same period earlier, implying a 166,000t drop in NAR 5,800kcal/kg coal consumption on the year.

Higher demand to weigh on seaborne availability

Re-emerging demand from the Turkish power sector might increase competition for limited supply availability in the seaborne market, as other buyers in Europe and the wider Mediterranean are also looking to source coal cargoes from non-Russian origins, which could offer some upside support to the European coal market.

Some traders were heard offering coal into Turkey and Europe with three-digit premiums against the API 2 index in recent weeks, but some Australian and South African supply was heard being offered at levels close to the API 2 index this week.

Turkish buyers are not looking to source Russian and Colombian supply as availability for both origins is extremely tight.

By Firat Ergene

Turkey coal, gas generation costs $/MWh

Turkey coal vs gas fuel switching levels $/MWh

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

18/12/24

Alabama lock expected to reopen late April

Houston, 18 December (Argus) — The main chamber of the Wilson Lock in Alabama along the Tennessee River is tentatively scheduled to reopen in four months, according to the US Army Corps of Engineers (Corps). The Corps expects to finish phase two of dewatering repairs on the lock on 20 April, after which navigation can resume through the main chamber of the lock. The timeline for reopening may shift depending on final assessments, the Corps said. Delays at the lock average around 12 days through the auxiliary chamber, according to the Lock Status Report by the Corps. Delays at the lock should wane during year-end holidays but pick up as spring approaches, barge carriers said. The main chamber of the Wilson Lock will have been closed for nearly seven months by the April reopening after closing on 25 September . By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Alabama lock to remain closed until spring

17/12/24

Alabama lock to remain closed until spring

Houston, 17 December (Argus) — The US Army Corps of Engineers (Corps) has determined that the main chamber of the Wilson Lock on the Tennessee River near Florence, Alabama, will remain closed until spring 2025 as repairs continue. The Wilson Lock, the first lock on the Tennessee River, closed on 25 September after cracks in the lock gates on both the land and river sides were discovered. The main lock was closed to prevent further damage in the main chamber, although the auxiliary chamber was kept open for navigation. The Corps had been eyeing an earlier opening date for the main chamber since the start of November. Although months of repairs have taken place, the Corps resolved to keep the main chamber closed to preserve the lock and maintain personnel safety. The Corps, in partnership with the Tennessee Valley Authority (TVA), is still assessing the root cause of the cracking. A second de-watering of the gate is scheduled for the first three months of 2025 to repairs. No official date has been set for the lock reopening, although some barge carriers have heard of a late April opening date. A regular 15 barge tow has endured 5-6 days of delay through the lock on average, according to carriers. The Corps' Lock Status Report on the Wilson Lock reported a nearly two-week delay for tows navigating through the lock. This has been costly for shippers by forcing them to pay delay fees. Wilson Lock is the second lock in Alabama to undergo a lengthy closure this year. Most lock and dams along the US river system are over 70 years old, likely resulting in more closures in the coming year. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US river lock closures may delay product deliveries

13/12/24

US river lock closures may delay product deliveries

Houston, 13 December (Argus) — Mid-Mississippi River and Illinois River locks are expected to undergo long-term closures starting next month, slowing down some commodity deliveries. Three locks around the St Louis, Missouri, and Granite City, Illinois, region will be closed for repairs for up to three months starting 1 January, according to the US Army Corps of Engineers. The Mel Price Main Lock, where the Illinois River flows into the Mississippi River, and Lock 27's main lock, where the Missouri flows into the Mississippi, will also be closed from 1 January through 1 April. The Mel Price Main Lock will commence the final phase of replacement for its upstream lift-gate. Replacement of embedded metals will occur during the closure for Lock 27's main lock. Lock 25 will have a shorter closure date for a sill beam and guide-wall concrete installment from 1 January through 2 March. This is the first lock on the upper Mississippi River, after the Illinois River. These closures are expected to be more of a nuisance than a deterrent for commodity traffic, according to barge carriers. Ice in the river is likely to have melted by mid-March, which may cause barge carriers to wait in the St Louis harbor for the locks to open. Two other lengthy closures are anticipated on the Illinois River beginning on 28 January. The Lockport Lock — the second to last lock on the Illinois River — will be fully closed from 28 January through 25 March for full repairs to the sill and seal of the lock. The prior lock, Brandon Road Lock, will be closed during weekdays over the same time period, but traffic can pass through over the weekend. The lock closures and repairs are expected to delay some barge shipments, specifically to the Great Lakes and Burns Harbor. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

New Zealand boosts coal-fired generation in Jul-Sep

13/12/24

New Zealand boosts coal-fired generation in Jul-Sep

Sydney, 13 December (Argus) — New Zealand's power providers ramped up coal-fired generation during the July-September quarter, according to data from the Ministry of Business Innovation and Employment (MBIE), because of weaker hydroelectric generation. New Zealand's energy producers generated more coal-fired power between July-September compared to the same period of last year as hydropower storage levels slid across the country to a low of approximately 1,600GWh in August. Producers generated 884GWh of coal-fired power during the quarter, more than doubling on the year. This accounted for 8pc of the country's electricity generation during the quarter. In comparison, coal accounted for 3pc of the power mix in the same quarter a year earlier. The country's electricity authority in July reported that New Zealand's coal stockpile was relatively low at 140,000t, but producers had used 363,513t to generate electricity by September, indicating that imports were supporting the increased demand. New Zealand's coal imports increased by more than fourfold on the year in July-September, with importers shipping over 477,379t of sub-bituminous coal into the country, according to data from the MBIE. In comparison, the country imported 240,305t of coal over the whole of 2023. Some power providers started preparing to increase their use of coal generators early this year. New Zealand's largest utility Genesis Energy in May announced it plans to import coal into the country for the first time since 2022 , following a drop in gas and hydroelectric production. Major utility Meridian Energy reported in October that water levels at the Lake Pūkaki – New Zealand's largest hydroelectric storage lake – hovered below 91-year averages between May-August. But "all the rain [Lake Pūkaki] missed from April to August finally arrived in September," the company's general manager of wholesale, Chris Ewers, said. New Zealand's state-owned transmission provider, Transpower, has recorded increases in hydropower storage levels since late August, limiting the need for further coal generation. Storage levels in both the North Island and South Island currently exceed January levels. The country's appetite for coal has grown alongside a loosening of fossil fuel restrictions. New Zealand's current government decided to weaken coal mine consenting rules during its first round of planning reforms in late 2023, in an attempt to boost production. The government amended the Resource Management Act to allow miners to construct coal mines that affect wetlands, when previously mines affecting wetlands were banned. Resources minister Shane Jones in June introduced legislation to restart offshore oil and gas exploration across the country, reversing the previous government's ban. "Natural gas is critical to keeping our lights on… especially during peak electricity demand and when generation [from intermittent sources] dips," he said. By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US rail group optimistic about 2025 rail demand

12/12/24

US rail group optimistic about 2025 rail demand

Washington, 12 December (Argus) — US rail volume is likely to start strong in 2025, but railroads will need to navigate changing federal policies, the Association of American Railroads (AAR) said. Volume next year hinges on a few key factors, including the resilience of consumer spending, strength in the labor market, and the trajectory of inflation and interest rates, the group said. Railroads will need to remain vigilant as these economic indicators will be critical in helping assess rail traffic and broader economic health in the months ahead, AAR said. "Strong intermodal growth and stable consumer demand offers reasons for optimism," AAR said. "But railroads and the economy alike must navigate evolving policies and potential disruptions" as the US enters 2025 under a new administration, the group said. The AAR'S optimism comes as rail traffic in November "while by no means stellar, suggests that the broader economy remains on stable footing", AAR said. US intermodal rail volume set new records in November. The increase reflected strong consumer demand following job gains that pushed increased spending, AAR said. Intermodal traffic is made up primarily of consumer goods shipped in containers between different modes of transportation, although some scrap metal and specialty agriculture products ship this way. US railroads loaded an average of 282,000 intermodal containers and trailers per week, up by 11pc from a year earlier. That was the highest weekly average for any November since AAR began tracking intermodal data in 1989. Carload traffic fell by 3.8pc compared with November 2023. Carload traffic is primarily made up of commodities. Coal was the "biggest problem", AAR said. US railroads loaded 15pc less coal last month compared with a year earlier, while year-to-date loadings were down by 14pc from the same 11 months in 2023. If coal were excluded, monthly US carload traffic in November would have notched a 10th consecutive year-on-year increase. Industrial products volume was down by 1pc from a year earlier. Manufacturing is a major driver of US carload traffic, and that sector remains sluggish, AAR said. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more