International Coal Markets Outlook The end of the boom

Transcription

1 International Coal Markets Outlook The end of the boom December 28 Coal Trading Conference NYC Agenda 1 Historic pricing 2 Price drivers for thermal and metallurgical coal 3 Supply demand outlook 4 Outlook for prices 2 1

2 Contract prices have risen dramatically across all coal types Historical Thermal and Metallurgical FOB Coal Prices US$/t FOB (Nominal) Hard coking coal (HCC) Semi-soft coking coal (SSCC) Thermal coal (basis 6322kcal/kg gar) BHPB reported settlements with JSM s Xstrata reported settlements with Chubu EPC (p) 3 Historical CIF coal prices in Europe Europe Spot Market Index (CIF ARA) Has the market peaked yet? Colombia South Africa 12 US$/t 1 8 Surge in Asian demand Avg. ~$7 6 4 LT range <$4 2 Source: Barlow Jonker 4 2

3 Thermal coal spot prices have risen sharply in 28 with supply constraints Recent Australian Export Thermal Coal Spot Prices (FOB 6,322 kcal/kg) Newcastle spot coal index US$/t FOB (BJI) 18 BJI as A$/t FOB $/t 12 6 Jan 7 Apr 7 Aug 7 Dec 7 Mar 8 Jul 8 Oct 8 5 US coal exports increased significantly in 28 resulting in record high prices for domestic consumers 9 Total US Exports (2-28) 8 7 Million tons

4 Coking coal exports to the seaborne market forecast to increase by 12 million tons in Million tons Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Overseas - 27 Canada - 27 Overseas - 28 Canada A similar story applies to steam coal export levels up 9 million tons over 27 levels Million tons Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Overseas - 27 Canada - 27 Overseas - 28 Canada

5 A host of factors are driving coal market dynamics Supply & Demand Balance And Market Price 9 Global Thermal Coal Trade Flows (28-225) Pacific Trade Mt Atlantic Trade Mt Mt Mt Indonesia, Australia & China dominate the Pacific seaborne thermal coal trade South Africa, Colombia and Russia dominate the Atlantic trade Aggregate Supply >4Bt 2-4Bt 1-2Bt 5Mt-1Mt 2-5Mt 1-2Mt 5-1Mt 1-5Mt <1Mt Source: Wood Mackenzie 1 5

6 Chinese & Indian Economic Growth The China and India growth story remains intact. The Coal Market Service International Trade has always factored in occasional short downturns in the overall growth story. Our long term forecasts remain intact t despite the current recession. 11 Asia drives global growth Growth in coal demand to 225 is driven by burgeoning power-sector demand in Asia with increasing power generation capacity and higher utilisation rates. The position of thermal coal in the global fuel mix will decline slightly overall but coal is expected to remain an important fuel well beyond the forecast period. Import Coal demand is expected to increase from 7Mt in 27 to 921Mt in 22 and 1,2 Mt in 225. A total of 16.5Bt of thermal coal (14.9Bt Seaborne, 1.6Bt Landborne) is expected to be imported globally between 28 and 225. Sustained demand for thermal coal in Europe is forecast despite the tighter emissions legislation, carbon trading and competition from gas. Prices for thermal coals are forecast to remain at higher levels than the long term historical average, supported by continued strong demand, higher production costs and in the short term to 212, infrastructure capacity constraints in key supply countries. 12 6

7 Asia and the EU are the leading importers of thermal coal, but Asia s demand is expected to rise significantly out to 225. Global Thermal Coal Forecast Demand (28 225) India, 1 Million Tonnes th Korea, 27.2 Sout am, 23.3 Vietna ysia, 22.4 Malay nd, 2.4 Thailan 17.2 China, y, 16. German 4.8 USA, 14.4 Taiwan, 1 s, 9.8 Philippines 7 Turkey, Mexico, 5.4 Brazil, 5. Chile, Sri Lanka, 4 Source: Wood Mackenzie 13 International Thermal Coal Markets - Demand Seaborne Thermal Coal Demand Million Tonnes 1,2 1, Europe + Japan Rest Of World 14 7

8 New thermal coal supply will come mainly from the Pacific Basin, but there are some apparent infrastructure and political constraints. New Thermal Coal Supply Sources Russia - Large resource, strong prices encourage export growth. Colombia Continued growth driven by USA demand. Canada/US-No significant growth. Africa Only modest growth from South Africa but growing interest on Mozambique, Botswana and Madagascar. Bangladesh - Large potential but political issues of concern. China Exports declining and imports increasing, but potential to upset balance. Venezuela Infrastructure/politic al limitations, no significant growth. Indonesia-Continued growth, mainly sub-bituminous coals. Not port capacity constrained but may need rail longer term? Australia Will grow, but infrastructure constraint in short term. New areas Surat and Gunnedah basins. Source: Coal Market Service Thermal Trade 15 Change in level of exports by country 28 and 225 China USA Vietnam Poland UK Canada Czech Rep. Ukraine Norway Germany New Zealand Kazakhstan Myanmar Laos India Mozambique Madagascar Bangladesh Venezuela South Africa Mongolia Colombia Russia Australia Indonesia Million Tonnes Source: Wood Mackenzie 16 8

9 High Indonesian Growth Potential 6 9% (Mt) % 7% 6% 5% 4% 3% 2% 1% Percentage of Total Production Export Domestic % Domestic % Export % Year 17 The seaborne thermal coal market is highly concentrated. Major seaborne thermal coal trade participants 26 (Mt) 7 6 Australia South Africa Indonesia Colombia Venezuela China Vietnam Russia Xstrata Bumi BHPB Anglo Rio Tinto Vinocomin China Shenhua Adaro Drummond Suek Krutrade Banpu Kideco Idemitsu Peabody Coal These participants accounted for approximately 75% of the seaborne thermal coal trade in 26 Source: Wood Mackenzie 18 9

10 Lower coking coal demand will shift marginal met coal back to the steam market Source: Coal Americas 19 China will be back 2 1

11 Wood Mackenzie thermal coal price forecast (October 28) A B C US$/t FOB (Nominal) ) Period of pricing uncertainty due to the financial crisis Spread is US$85 to US$1 JFY 23 JFY 27 JFY 211 JFY 215 JFY Wood Mackenzie thermal coal price forecast (October 28) A B C US$/t FOB (Nominal) ) JFY 23 JFY 27 JFY 211 JFY 215 JFY

12 Wood Mackenzie thermal coal price forecast (October 28) A B C US$/t FOB (Nominal) ) JFY 23 JFY 27 JFY 211 JFY 215 JFY Wood Mackenzie Disclaimer Strictly Private & Confidential This presentation and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie s prior written permission. The information upon which this report is based comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them

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