MinAxis Presentation CT London 2009

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Export metallurgical coal supply response under future demand and price scenarios.

Export metallurgical coal supply response under future demand and price scenarios.

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  • 1. Graham Wailes, MinAxis Pty LtdExport metallurgical coal supply responseunder future demand and price scenarios OCTOBER 2009
  • 2. Steel – Price Fall from Sept/Oct 2008 MinAxis Signals Demand Slide Hot Rolled Coil Prices11001000 North Europe Dom. Ex Works €/t 900 N. Amer Midwest Domestic FOB US$/st 800 Far East Import CFR/t 700 600 500 400 300 Source: MinAxis 200 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 May-03 May-04 May-05 May-06 May-07 May-08 May-09 OCTOBER 2009
  • 3. H1-2009 Export Metallurgical Coal MinAxis Production Cut-backs as Demand Collapses 35 SSCC + PCI Lehman Brothers ~40Mtpy 30 Collapse Production Cuts HCC H1-09Import Demand Mt 25 Demand 20 Halved 15 10 5 0 Ju 8 Ju 9 Se 8 D 8 Ja 8 Ap 8 Ap 9 O 8 M 8 N 8 M 9 08 08 Fe 9 M 9 08 09 Au 8 -0 -0 -0 0 -0 -0 -0 0 0 0 r -0 -0 r -0 l-0 g- p- n- n- n- b- n- b- ay ay ar ar ov ec ct Ju Ja Fe M OCTOBER 2009
  • 4. MinAxis H1-2009 Export Metallurgical Coal Production Cut-backs ~25Mtpy reduction in Australian H1-09 export capacity Others make up balance ~15Mtpy cuts CapacityCompany Country Announced cut-back Cut (Mtpy)BHP Billiton 10.0 Australia 21 Jan09 10-15% reduction H1-09 BMA productionXstrata Coal 3.5 Australia 16 Dec08 suspends operation at Oaky Creek No.1 mineTeck Cominco 3.0 Canada 8 Jan09 3Mt prodn cut from 23Mt to 20Mt. Dismisses 1400 workersCliffs Natural Res. 3.0 USA Idles Green Ridge No.1, closes Pinnacle for 2 months from Feb09Consol 3.0 USA Idled Buchanan LV HCC mine in MarchWestern Canadian 1.7 Canada End Nov08 stops prodn at recently restarted Willow Creek LVPCI mine. 6 Jan09 Brule cut from 1.3Mtpy to 0.75Mtpy.Serves notice of closing Wolverine 1.6Mtpy mine subject market conditions.Peabody Energy 2.0 Australia Lowers Aust 2009 prodn target from 20-22Mt to 18-21MtAnglo Coal 1.5 Australia Stops prodn Aquila mine at German Creek complex, and Dawson mine north pit. In March, dismisses 650 mine workers in Aust.Patriot Coal Corp. 1.3 USA Idles Black Oak and one other mineAlpha Natural Res. 1.2 USA 3 Dec08 closes Whitetail mine, adjusts mine prodn Q4-08 down by 0.5Mt, reduces third party contractors, defers expansion small minesSource: Company reports, MinAxis OCTOBER 2009
  • 5. MinAxis H1-2009 Export Metallurgical Coal Production Cut-backs (cont.) CapacityCompany Country Announced cut-back Cut (Mtpy)Massey Energy 1.2 USA Adjusts mine prodn down from late Q4-08Macarthur Coal 1.1 Australia 16 Dec08 reduces prodn. at Coppabella and Moorvale LVPCI mines. Cuts sales target FY08/09 from 5.0Mt to 3.9Mt. Q1-09 sales ratio thermal increases from 10% to 50%Mechel 1.1 Russia Feb09 operating at 25% capacity. H1-09 coking coal prodn down by 4.2mtRadspadskaya 1.0 Russia Jan09 cuts prodn to ~30% of capacity. Cuts investment by two- thirdsFoundation 0.9 USA Idles 1Mstpy Laurel Creek complex from Feb09Exxaro 0.8 RSA Grootegeluk mine prodn cut, H1-09 coking coal sales down by 0.8MtRio Tinto 0.5 Australia Jan09 cuts prodn at Kestrel 3.6Mtpy mine by 15% - bulk of redn in Q1-09Caledon Res. 0.5 Australia Jan09 halves Metcoal prodn plan from 0.9Mtpy to 0.4MtGrande Cache 0.3 Canada 11Feb09 25% prodn cut for 6mos starting Mar09ICG 0.3 USA 0.3Mtpy LV HCC production deferredSource: Company reports, MinAxis OCTOBER 2009
  • 6. H1-2009 Export Metallurgical MinAxis Coal Project Deferrals included: Western Canadian Coal’s 1Mtpy Willow Creek mine closed end November 2008 following start up mid-October. WCCC defers expansion at Brule and Wolverine Rehabilitation of ArcelorMittal’s Pervomayskaya and Anzherskoye operations in the Kemerovo, acquired in January 2009, delayed Q1-09 10Mtpy Maruwai Project, Indonesia – June 2009, BHPB Billiton halts development after US$100m investment. Asset reportedly for sale BHP Billiton Queensland capacity expansion – 21Mtpy new coking coal capacity roll-out Queensland, announced August 2008, delayed:• 5.5Mtpy Caval Ridge project delayed from 2011 to 2013• 4Mtpy Daunia project, originally earmarked for start up 2009, under review• 8Mtpy Stage 3 Goonyella Riverside brownfield expansion delayed OCTOBER 2009
  • 7. Potential Country Sources of MinAxis Supply Growth Canada-established Russia-huge reserves.Elga & other major port infra. Large projects. Port expansion. Capacity to service, and reserves. Higher USA-mostly very competitive landed basis Chinese market. prices required to service Atlantic service distant markets. Higher markets such as India Mongolia-landlocked. prices required to Mostly service China service distant Indian market China-ytd Aug net coking coal imports 21Mt. Expanding long-term market Indonesia-infrastructure constraintsColombia-growth Central Kalimantan. Limitedpotential. Service medium term expansion prospectsBrazil and Atlantic NZ +2Mtpymarkets Mozambique-large Moatize resource to be developed. Well placed to service Indian market. First exports targeted 2011 Australia-major mine project & 2009 OCTOBER South Africa-Mostly SSCC+HVPCI infra. growth projects. Competitive
  • 8. MinAxis Country MetCoal Supplier Landed Cost Competitiveness in Major Growth Markets China India Brazil South Korea MozambiqueDecreasing competitiveness Mongolia USA Russia South Africa Australia Australia Russia Indonesia Colombia Indonesia Australia Canada Canada Canada Indonesia Canada USA Mozambique Mozambique Mozambique Russia Australia USA USA OCTOBER 2009
  • 9. Metallurgical Coal MinAxis Export Growth Scenarios Demand Growth Low Base Case High LT Price Premium HCC US$/t FOB $110 $125 $150 Real 2009 Terms Country 2008 2020 2008 2020 2008 2020 Forecast Exports (Million Tonnes)Australia 135 180 135 186 135 195Mozambique 0 14 0 14 0 15Russia 16 25 16 26 16 30Canada 27 27 27 33 27 35Mongolia 4 11 4 11 4 12China 5 3 5 8 5 8Indonesia 6 7 6 9 6 9New Zealand 2 4 2 4 2 4Colombia 2 2 2 4 2 5Venezuela 2 2 2 3 2 3Ukraine 0 2 0 2 0 2South Africa 2 3 2 3 2 3Poland 1 1 1 1 1 1United States 39 25 39 30 39 40Intl. traded figures are seaborne + overland across-border import deliveriesMetcoal estimates include coking and PCI coal. NA = not applicableSources incl. Country stats. agencies, IEA, EIA, WSA MinAxis estimates OCTOBER 2009
  • 10. Metallurgical Coal MinAxis Export Growth Scenarios (cont.) MetC Exports Mt (Base Case) Demand 200 Low Base Case High Growth 2008 LT Price 180Prem. HCC 2020US$/t FOB $110 $125 $150 160Real 2009 Incremental Change (Million Tonnes) / CAGR 2008-2020 140 Country Mt CAGR Mt CAGR Mt CAGR AustraliaAustralia 45 2.5% 52 2.7% 60 3.1% 120Mozambique 14 NA 14 NA 15 NARussiaCanada 9 0 4% 0% 10 6 4% 2% 14 8 6% 2% 100Mongolia 8 10% 8 10% 8 11%China -2 -4% 3 5% 3 5% 80 MozambiqueIndonesia 2 2% 3 4% 4 4% USANew Zealand 2 6% 2 6% 2 6% 60 CanadaColombia 0 -2% 2 4% 3 6%Venezuela 1 2% 1 6% 2 6% 40 RussiaUkraine 1 12% 1 12% 2 14% MongoliaSouth AfricaPoland 1 1 3% 6% 1 1 3% 6% 1 0 2% 3% 20United States -14 -4% -9 -2% 1 0% 0 Australia USA Canada Russia Indonesia China Czech Mongolia South Africa Colombia Mozambique OCTOBER 2009
  • 11. Hard Coking Coal MinAxis Export Growth – Base Case 140 Hard Coking Coal – Demand Growth Base Case 120 2008 LT Price Premium Hard Coking Coal US125$/t FOB 2020 Real 2009 Terms 100 Country 2008 2020 Increase Mt CAGR Forecast Exports (Million Tonnes) 80Australia 84 124 40 3%Mozambique 0 7 7 na 60Russia 11 18 7 4%Canada 24 30 6 2%Mongolia 0 3 3 20% 40China 2 4 2 5%New Zealand 2 4 2 5% 20Indonesia 0 1 1 naColombia 0 1 1 13%Ukraine 0 1 1 na 0South Africa 0 1 1 na Ca A M ea a Ne C ia er Ru a lia e am ndPoland 0 1 0 6% w hin d US qu ss th ra na oz la OCzech 1 1 0 -1% bi st Au ZUnited States 33 29 -4 -1%Intl. traded figures are seaborne + overland across-border import deliveriesHCC estimates include semi-hard coking coal. na = not applicableSources incl country stats, IEA, WSA, industry sources, MinAxis estimates OCTOBER 2009
  • 12. Outlook for Emerging and MinAxis Potential Country Suppliers MongoliaVenezuelaColombia Mozambique Indonesia NZ South Africa OCTOBER 2009
  • 13. MinAxisExport Metallurgical Coal Mine Projects Planned or Underway 2009-2020 Australia – 90Mtpy metallurgical coal capacity committed or planned 68Mtpy HCC plus 22Mtpy SSCC+PCI. >220Mtpy additional port capacity 2017 Canada – 13Mtpy (incl. 11Mtpy HCC) Russia – 30Mtpy + metallurgical coal export capacity build. Far East port expansion at Vanino (+15Mtpy), Posiet (+3Mtpy), Vostochny (+2Mtpy) Mozambique – 16Mtpy HCC capacity by 2015 Ukraine – Lubel HCC mine starts 2014 2Mtpy increasing to 4Mtpy Other – Indonesia (MGM, Suparbari +1.5Mtpy SSCC), (South Africa (+2-5Mtpy CoAL’s Vele, Makhado projects), NZ (Pike River), Mongolia (Tavan Tolgoi, Ovot Tolgoi, UHG ), Colombia (Ciafil) OCTOBER 2009
  • 14. MinAxis Australian Metallurgical Coal Projects 90Mtpy Potential Capacity Increase Australian Export Metallurgical Coal – Incremental Capacity MtpyMine Company Start Date MetCoal HCCCaval Ridge BMA 2013 5.5 4.2Daunia BMA Under review 4.0 3.2Goonyella/Riverside exp. BMA Under review 9.5 9.5Peak Downs BMA Under review 2.5 2.5Total BMA mines BMA 21.5 19.4Lake Vermont QCMM 2009 3.9 2.7Lake Lindsay Anglo 2009 1.4 0.7Carborough Downs Vale 2009 2.3 0.7Yarrabee Felix 2010 1.1Middlemount Macarthur 2010 3.5 2.4Grosvenor Anglo 2011 4.0 4.0Dawson Complex Anglo 2011 3.6 3.2Moranbah South Exxaro 2011 6.0 6.0Maryborough NEC 2011 0.5 0.5Source: Company reports, MinAxis OCTOBER 2009
  • 15. MinAxis Australian Metallurgical Coal Projects 90Mtpy Potential Capacity Increase (cont.) Australian Export Metallurgical Coal – Incremental Capacity MtpyMine Company Start Date MetCoal HCCKestrel Rio Tinto 2012 2.0 2.0Millenium Peabody 2012 2.0Ellensfield Vale 2012 2.5 2.5Washpool Aquila 2012 1.6 1.6Eagle Downs Aquila/Vale 2013 6.4 6.4Wonbindi Cockatoo 2013 2.1Gujarat NRE Ops. Gujarat 2013 3.3 1.5Metropolitan Peabody 2014 0.9 0.9Burton Peabody 2014 2.5 2.5Denham Peabody 2015 4.0 4.0Ravensworth North Xstrata 2015 2.1Belvedere Vale Under review 9.0 6.7Codrilla Macarthur Under review 1.6Total Incremental Capacity Mtpy 90 68Source: Company reports, MinAxis OCTOBER 2009
  • 16. Australian Port Expansion220Mtpy capacity increase 2017 MinAxis Capacity Mtpy Wiggins Island Coal Terminal – Gladstone 600 600 NSW 557 25Mtpy June 2012 50Mtpy 2016 70Mtpy 2020 Qld 500 500 400 400 333 300 300 200 200 100 100 0 08 09 10 11 12 13 14 15 16 17 20 20 20 20 20 20 20 20 20 20 2008 2013 2017 OCTOBER 2009
  • 17. Canadian Metallurgical Coal Projects MinAxis Potential 18Mtpy Capacity Increase Canadian Export Metallurgical Coal – Incremental Capacity MtpyMine Company Start Date MetCoal HCCWillow Creek Western Coal 2010 1.8 0.7Brule Western Coal 2010 0.7Perry Creek (Wolverine) Western Coal 2013 1.4 1.4Fording Teck Resources 2011 2.0 2.0ElkviewQuintette Teck Resources 2012 5.0 5.0Horizon Peace River 2011 2.0 1.7Trend Peace River Under review 2.0 1.5Grande Cache Grand Cache Under review 0.5 0.5Lossan Cline Mining Under review 1.0Lodgepole Cline Mining Under review 2.0 0.5 Committed 13 11Total Incremental Capacity Mtpy Under review 5 2 Total 18 13Source: Company reports, MinAxis OCTOBER 2009
  • 18. MinAxis Russia – Export Metallurgical Coal Mine Expansion Projects30Mtpy + export production capacity build committed includes: Mechel – Developing Elga project, stage 1 24Mtpy incl. 8Mtpy metallurgical coal, mostly HCC. First production 2011. Sept 09 secures US$1.4bn Russian government guarantees to complete construction of Ulak-Elga rail link to Baikal- Amur line by Sept 2010. Raspadskaya – 3.6Mtpy (HCC and SHCC) expansion incl. construction of Raspadskaya-Koksovaya mine targeted 2010/2011. Koksovaya to produce K and KO HCC grades Russian United Industrial Corp – Developing Elegest HCC mine to 12Mtpy by 2014. Cooperative agreements with Mitsui and Chinese government in support of Elegest development JSC Siberian Anthracite – Expanding capacity from 3Mtpy to 10Mtpy at three O/C anthracite mines in the Gorlovsky coal basin, Novosibirsk region Langfeld Enterprises (Korea) – Restart Lapichevskaya coking coal mine, Kemerovo region. Production 1Mtpy by 2010/2011 to be sold to POSCO OCTOBER 2009
  • 19. MinAxis Russia – Export Metallurgical Coal Related Infrastructure Expansion Initiatives Far East ports• Vanino – Mechel’s coal terminal, dedicated to Elga and other projects, scheduled completion 2012 at 12Mtpy, increasing to 15Mtpy by 2015, then ultimately 25Mtpy• Posiet – Mechel promoting expansion from 2.5Mtpy to 5Mtpy by 2010• Vostochny – 16Mtpy upgrade and modernization underway Rail capacity• Chinese and Russian government investment to upgrade and expand rail capacity under review• China’s Inner Mongolia and Russia’s Transbaikal provincial governments jointly rebuilding of Karymskaya-Zabaikalsk railroad, linking Trans-Siberian railroad with the Transbaikal- Manchuria border crossing. Completion 2010/2011. Initial 10Mtpy imports planned OCTOBER 2009
  • 20. MinAxis Mozambique – 16Mtpy Export Hard Coking Coal Capacity by 2015 Vale’s Moatize Project• Phase 1 first production late 2011, lifting to 18Mtpy incl. 12.7Mtpy HCC by 2015. Railed 575km to port of Beira via Sena railway• Rehabilitation Sena railway to 8Mtpy capacity completed Q1-10 at total cost US$1.3bn. Additional investment required to lift Sena capacity to 18Mtpy• Phase 2 production transported via future Nacala-Malawi railway line to deep water port of Nacala, 1000km distant• Mozambique government recently secured US$500m to build Nacala-Malawi railway commencing 2015 Riversdale Mining’s Benga Project (35% Tata Steel)• Stage 1 Saleable production 2Mtpy incl. 1.7Mtpy HCC by Q2-2011. Transport via Sena/Beira rail corridor. Also reviewing optional barge Zambezi river to Chinde• Stage 2 – 10.6Mtpy by 2014 incl. 3.3Mtpy HCC. Ultimate HCC capacity 6Mtpy OCTOBER 2009
  • 21. Other Export Metallurgical Coal MinAxis Mine Projects Ukraine• Lubel Coal Company targeting 2Mtpy HCC production by 2014 at Lubel mine, lifting to 4Mtpy by 2015 Indonesia• PT Marunda GrahaMinerals expanding SSCC capacity MGM (+0.3Mtpy) and new Suprabari mine (+1.5Mtpy)• 10Mtpy Maruwai Project reportedly up for sale South Africa• CoAL’s Vele and Makhado projects planned production 5-7.5Mtpy HCC + SSCC, with 2.5Mtpy domestic offtake agreement (import replacement) ArcelorMittal Colombia• Brazilian steelmaker Ciafil resuming redevelopment of its coking coal mine USA• Limited export growth potential. Appalachian growth potential limited. Mountaintop mining (supplies 6% of US demand) under renewed scrutiny – 79 surface mine projects placed on hold in September 2009 due environment, health and water quality issues OCTOBER 2009
  • 22. MinAxis In Summary Export Metallurgical Coal SupplyApproximately 160Mtpy planned export metallurgical coal mine capacityadditions identifiedExpansion dominated by Australian suppliers. US expansion potentiallimitedChinese support and participation in Russian capacity development –direct rail links upgraded and expandedMozambique major emerging producer – within close proximity to majorimport growth market IndiaPort capacity expansion in step with mine expansionPotential for rail and other inland transportation infrastructure capacity tolag mine development, subject to quantum of demandMarginal producer mine cash costs currently ~US$120/t FOB OCTOBER 2009