Mines and Money Australia    International Coal Markets       Bernard Guarnera, Chairman         Behre Dolbear Group Inc. ...
The Current State of the        International Coal Markets• “Russias Severstal sets sights on U.S. coal market ”  Marketwa...
Metallurgical Coal Price TrendsSource: Platts, Citi Investment Research and Analysis                                      ...
Current “Contract” Coal Prices               Remain Resilient 1                                                           ...
The Long-Term Outlook             BEHRE DOLBEAR             founded 1911 MINERALS INDUSTRY ADVISORS
More Consumers in Asia Need More   Energy and Coal Especially                    BEHRE DOLBEAR                    founded ...
Coal Use Outside the OECDSource: International Energy Statistics Database, UN Statistics Division                         ...
China and India Will Account for Bulk       of Metallurgical Coal DemandSource: BHP Billiton                           BEH...
Asia Forecast to Dominate   Future Energy Demand Scenarios• Thermal and metallurgical coal demand and imports in  Asia are...
Southeast Asian Coal Imports                               Are Trending Higher                    6                    5  ...
China• Still moving 20 million people a year into    cities (over the next 15 years)•   Average GDP growth of +/-6% per ye...
China’s Mining Acquisitions        By Commodity – Coal is Target #1Source: Ernst & Young’s Global Mining & Metals Center*I...
India Plans to Build Power Plants and      Ports to Import More Coal     India’s Power Plant Expansion Forecasts          ...
India Will Be (Is?) The            World’s Largest Coal Importer         India          Coal        ImportsSource: Peabody...
Global Thermal Coal Demand                BEHRE DOLBEAR                founded 1911 MINERALS INDUSTRY ADVISORS
Coal Demand Will Outpace Other            Fuel SourcesSource: International Energy Agency World Energy Outlook 2009, Energ...
Major New Global-Fuel Generation        Build-Out Under WayData and Estimates Based on Platts Worldwide Power PlantDatabas...
Global Metallurgical Coal Demand                    BEHRE DOLBEAR                    founded 1911 MINERALS INDUSTRY ADVISORS
Global Steel Production Drives Met       Coal Demand in China, India, etc.      Global Met Coal Use Likely to Increase by ...
Global Coal Production Overview                   BEHRE DOLBEAR                   founded 1911 MINERALS INDUSTRY ADVISORS
1      Six Largest Producing Nations 2010    (Million Tonnes) and % Change from 2009    •   China                         ...
Metallurgical Coal Cost Curve – Well              Below Current PricesSource: Macquarie Research, September 2010          ...
Global Coal Trade Overview                 BEHRE DOLBEAR                 founded 1911 MINERALS INDUSTRY ADVISORS
Thermal Coal Trade Flows 2010Source: GTIS, Macquarie Research, September 2010                                             ...
Indonesia and Australia Forecast to      Increase Coal Exports SignificantlySource: Wood McKenzie       BEHRE DOLBEAR     ...
Indonesia and Australia’s Transportation Costs:                  Key Suppliers to Asia       Transportation Routes        ...
Greatest Metallurgical Coal Import        Regions (Million Tonnes – 2011e)  • Japan                                       ...
Greatest Metallurgical Coal Export        Regions (Million Tonnes – 2011e)  • Australia                                   ...
Conclusions and Challenges• Outlook for Coal in Australia and Southeast Asia    Robust•   Social Opposition to Mining Deve...
Coal Mine Cost Inflation 2010Source: UBS                       BEHRE DOLBEAR                       founded 1911 MINERALS I...
BEHRE DOLBEARfounded 1911 MINERALS INDUSTRY ADVISORS
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Investing in coal: market opportunities and competitive threats - presented at www.minesandmoney.com

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Assessing key demand and pricing trends for thermal coal: China, India and beyond

Impact of inbound investment from India and China on the Australian coal industry

Assessing the threat of emerging overseas coal producers on domestic coal projects

Impact of carbon tax on the development of domestic coal projects

Infrastructure bottlenecks: threat to the industry or opportunity for the investor

Bernard J Guarnera, president & CEO, Behre Dolbear & Company

Presented at www.minesandmoney.com

Published in: Technology, Business
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Investing in coal: market opportunities and competitive threats - presented at www.minesandmoney.com

  1. 1. Mines and Money Australia International Coal Markets Bernard Guarnera, Chairman Behre Dolbear Group Inc. and Tim Alch, Vice President Behre Dolbear & Company (USA), Inc.
  2. 2. The Current State of the International Coal Markets• “Russias Severstal sets sights on U.S. coal market ” Marketwatch, Sept. 29, 2011• “India 2011/12 coal import needs may jump to 114 mln T; Demand-supply gap may touch 200 mln T by 2017-min” Reuters, Sept 27 , 2011• “Australia cuts coal output forecasts as recovery drags– lowering forecast for the production of met coal by 6% to 161 million tonnes” Reuters, Sept 19 , 2011• “Coal shortage begins to bite: At the end of Aug, 22 power plants across India had a supply of less than 7 days of coal” Livemint, Sept 20, 2011• “SKs Posco to form iron ore, coal joint ventures in Colombia” Platts, 15 Sep , 2011 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  3. 3. Metallurgical Coal Price TrendsSource: Platts, Citi Investment Research and Analysis BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  4. 4. Current “Contract” Coal Prices Remain Resilient 1 2 • Hard Coking Coal: US$320 to US$350 per T 2 • Soft Coking Coal: US$240 to US$265 per T • Thermal Coal: US$130 to US$140 per T (Forecasts made in December 2010 have gone bust)1”Quarterly” Australian Benchmark2±35% to 45% increase QoQ BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  5. 5. The Long-Term Outlook BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  6. 6. More Consumers in Asia Need More Energy and Coal Especially BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  7. 7. Coal Use Outside the OECDSource: International Energy Statistics Database, UN Statistics Division BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  8. 8. China and India Will Account for Bulk of Metallurgical Coal DemandSource: BHP Billiton BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  9. 9. Asia Forecast to Dominate Future Energy Demand Scenarios• Thermal and metallurgical coal demand and imports in Asia are surging to record levels• A steady (sporadic) increase in coal prices is forecast over the next several years• Production may struggle to meet future demand• China, India and Korea buying coal resources BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  10. 10. Southeast Asian Coal Imports Are Trending Higher 6 5 4 Million Tonnes 3 2 1 0 1995 1997 1999 2001 2003 2005 2007 2009 2011Source: GTIS; Trade Data, Credit Suisse Estimates BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  11. 11. China• Still moving 20 million people a year into cities (over the next 15 years)• Average GDP growth of +/-6% per year• A power grid the size of that in the UK each year for the next 15 years• Largest consumer and producer of coal• Switched from being a coal exporter to coal importer three years ago BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  12. 12. China’s Mining Acquisitions By Commodity – Coal is Target #1Source: Ernst & Young’s Global Mining & Metals Center*Includes domestic deals within sector BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  13. 13. India Plans to Build Power Plants and Ports to Import More Coal India’s Power Plant Expansion Forecasts Indian Port Expansions 25 350 20 300 250 15 mn tonnes 200GW 10 150 100 5 50 0 0 2009 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-20 India - East India - West Source: CEA; Credit Suisse Estimates Source: Credit Suisse Estimates BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  14. 14. India Will Be (Is?) The World’s Largest Coal Importer India Coal ImportsSource: Peabody BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  15. 15. Global Thermal Coal Demand BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  16. 16. Coal Demand Will Outpace Other Fuel SourcesSource: International Energy Agency World Energy Outlook 2009, EnergyInformation Administration Annual Energy Outlook and Peabody Analysis BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  17. 17. Major New Global-Fuel Generation Build-Out Under WayData and Estimates Based on Platts Worldwide Power PlantDatabase and Peabody Analysis BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  18. 18. Global Metallurgical Coal Demand BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  19. 19. Global Steel Production Drives Met Coal Demand in China, India, etc. Global Met Coal Use Likely to Increase by 50%Source: World Steel Association; Third Party Data and PeabodyAnalysis BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  20. 20. Global Coal Production Overview BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  21. 21. 1 Six Largest Producing Nations 2010 (Million Tonnes) and % Change from 2009 • China 3,680; Up 9% • USA 1,000; Up 2.1% • India 580; Up 2.5% • Australia 410; Up 3% • Indonesia 350; Up 19% • Russian Federation 3001Approximations – Various Sources (±2% or 3%) BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  22. 22. Metallurgical Coal Cost Curve – Well Below Current PricesSource: Macquarie Research, September 2010 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  23. 23. Global Coal Trade Overview BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  24. 24. Thermal Coal Trade Flows 2010Source: GTIS, Macquarie Research, September 2010 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  25. 25. Indonesia and Australia Forecast to Increase Coal Exports SignificantlySource: Wood McKenzie BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  26. 26. Indonesia and Australia’s Transportation Costs: Key Suppliers to Asia Transportation Routes Origin Destination Estimated Time Estimated Cost to Destination per Tonne (Days) (US$/t) Indonesia Japan 7-9 8 - 10 Korea Japan China ea an d Ar China 8 - 10 9 - 11 Dem Taiwan India ain Hong Kong M Thailand Australia Japan 10 - 13 11 - 17 Philippines 150M Tons in 2009 Malaysia China 12 - 15 13 - 19 Indonesia Canada Japan 14 - 16 15 - 18 (East Coast)130M Tons in 2009 China 15 - 18 17 - 20 Australia USA Japan 27 - 33 16 - 20 (West Coast) China 29 - 35 18 - 21 Main Supply Areas
  27. 27. Greatest Metallurgical Coal Import Regions (Million Tonnes – 2011e) • Japan 59 • India 49 • European Union 35 • China 35 • South Korea 25Source: Citigroup BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  28. 28. Greatest Metallurgical Coal Export Regions (Million Tonnes – 2011e) • Australia 140 • USA 53 • Canada 26 • Russia 14 • Mozambique 4Source: Citigroup BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  29. 29. Conclusions and Challenges• Outlook for Coal in Australia and Southeast Asia Robust• Social Opposition to Mining Development• Higher Taxes• Increased Regulations• Replacing Production from Existing Coal Mines• Shortage of Skilled Laborers and Experienced (or any) Professionals• Mine Cost Inflation BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  30. 30. Coal Mine Cost Inflation 2010Source: UBS BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  31. 31. BEHRE DOLBEARfounded 1911 MINERALS INDUSTRY ADVISORS

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