Carlos Fernández Alvarez. Senior Coal Analyst

Carlos Fernández Alvarez. Senior Coal Analyst

AGENDA BACKGROUND What is coal, how is coal mined, where is coal used for COAL ATTRIBUTES Coal is cheap, abundant and diversified SUPPLY AND DEMAND TRENDS China leads the way COAL TRADE Well working, secure market A PRACTICAL CASE Blending coal CLEANING COAL Clean coal technologies

1 st Quarter BACKGROUND What is coal How is coal mined What is coal used for

What is coal?

How is coal mined?

What is coal used for? PEOPLE'S REPUBLIC OF CHINA UNITED STATES 70.3 180.1 11.4 26.90 1.2 356.9 1166 368.9 628.1 INDIA OECD EUROPE Electricity and heat gen. 46.7 4.1 32.8 23.6 21.8 15.1 Industry(Iron and steel) Industry(Others) 36.9 41.3 Residential Others 283.3 301.6

2 st Quarter COAL ATTRIBUTES Coal is abundant Coal is cheap Coal is diversified

Coal is abundant 3 050 years Total remaining recoverable resources Proven reserves Cumulative production to date 142 years 233 years 178 years 61 years 54 years Coal Natural gas Oil

Coal is low cost

Coal is cheap Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 25.00 20.00 15.00 $/Mbtu 10.00 5.00 - HH GB Brent PRB ARA

Coal is diversified

3 rd Quarter SUPPLY AND DEMAND TRENDS

Long term dominance of non-oecd countries Mtce 6 000 5 000 4 000 3 000 2 000 1 000 0 Coal demand. Historical trends and projections OECD non-oecd OECD projections non-oecd projections

Projection of metallurgical coal demand for non- OECD economies Mtce 900 800 700 600 500 400 300 200 100 0 2011 2012* 2014 2016 2018 China India Eastern Europe/Eurasia Other developing Asia Other non-oecd

OECD countries are not reducing coal use COAL DEMAND PROJECTIONS

Projection of thermal coal and lignite supply Mtce 5 000 4 000 3 000 2 000 1 000 0 2011 2012* 2014 2016 2018 OECD Americas OECD Europe OECD Asia Oceania China Non-OECD Europe/Eurasia Other developing Asia Others

Projection of metallurgical coal supply Mtce 1 000 800 600 400 200 0 2011 2012* 2014 2016 2018 OECD Americas OECD Europe OECD Asia Oceania China Non-OECD Europe/Eurasia Other developing Asia Others

4 th Quarter COAL TRADE

Coal trade: working well, no supply security issues 97 51 113 383 74 160 Global thermal seaborne trade 887 Mt (2012)

Paper trade still is in the Atlantic COAL DERIVATIVES TRADE Mt 3 000 2 500 2 000 1 500 1 000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 API2 API4 Other

Few potential game changers USD/t 120 100 80 60 40 20 0 0 100 200 300 400 500 600 700 800 900 Short term demand Supply cost curve with PRB Supply cost curve w/o PRB Mt

Local pollution: public enemy number one

South China: the great arbitrager Heilongjiang Jilin Xinjiang Beijing Qinhuangdao Hebei Ningxia Qinghai Henan Sichuan Hubei Anhui Shanghai Hunan 3-Xi, Ningxia, Gansu and Xinjiang Yun-Gui Jing-Jin-Ji Northeast East China Chuan-Yu-Qing-Zang Central South Imports Yunnan Chinese coal transport Guizhou Guangxi Hainan

5 th Quarter A PRACTICAL CASE Blending coal

Case 1. Thermal coal We need 1 mt coal for our power plant, which only accepts coal of 6000 kcal/kg Origin Calorific value (kcal/kg) FOB price ($/t) Freight ($/t) A Newcastle 6700 120 16 B Colombia 5800 96 9 C Indonesia 5500 65 12 We have been offered 1mt of coal A, 1 mt of coal B and 500 000 tonnes of coal C. How much A B C coal you would buy?

Case 2. Coking coal We need 1 mt coal for our blast furnace, which only accepts coal of 20 % VM and ash < 10 % Origin VM (%) Ash (%) FOB price ($/t) Freight ($/t) A Queensland 12 8 205 16 B Baltimore 28 9 175 10 C Mozambique 35 15 130 9 We have been offered 1mt of coal A, 1 mt of coal B and 1 mt of coal C. How much A B C coal you would buy?

6 th Quarter CLEANING COAL World class coal mining Low emissions Carbon Capture and Storage

The full chain of coal power generation

Mission: clean-up coal power sector

A good reclamation is essential

The challenge of advanced USC Boiler tube/piping 700-760 C 700 C/ 30-35MPa 700-760 C Steam turbine rotor/shaft Boiler Steam turbine ~ Generator - Nickel-based super-alloys - Ferrite/Austenitic alloys requires the development of nickel-based super-alloys that will enable plant components to withstand temperatures of 700ºC and beyond.

Local pollution: we know how to do it

CCS on efficient plants

Questions and comments are welcome and should be addressed to: Carlos.Fernandez@iea.org