How to Get Started in Social Media for Art League City
Andrew Pedler - Matau Advisory
1. Seaborne Coking Coal Markets
Evolution and Challenges
Australian Coal Conference
Andrew Pedler – Matau Advisory Pty Ltd
Contact:
mo 0412 122 778
em andrew@matauadvisory.com.au
Matau Advisory Pty Ltd www.matauadvisory.com.au 1
2. Disclosure & Disclaimers
— Disclosure of Interest. Matau Advisory Pty Ltd advises that at the date of this report the company and its associates have
relevant interests in securities in companies described in this report. It also advises that Matau Advisory and its associates
have received and may receive commissions or fees from companies described in this report in relation to advice or
dealings in securities. Some or all of Matau Advisory’s authorised representatives may be remunerated wholly or partly by
way of commission.
— Disclaimer. Whilst Matau Advisory Pty Ltd believes the information contained in this communication is based on reliable
information, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. To the
extent permitted by law Matau Advisory Pty Ltd disclaims all liability to any person relying on the information contained in
this communication in respect of any loss or damage (including consequential loss or damage) however caused, which may
be suffered or arise directly or indirectly in respect of such information. Any projections contained in this communication
are estimates only. Such projections are subject to market influences and contingent upon matters outside the control of
Matau Advisory Pty Ltd and therefore may not be realised in the future.
— The advice contained in this document is general advice. It has been prepared without taking account of any person’s
objectives, financial situation or needs and because of that, any person should, before acting on the advice, consider the
appropriateness of the advice, having regard to the client’s objectives, financial situation and needs. If the advice relates to
the acquisition, or possible acquisition, of a particular financial product – the client should obtain a Product Disclosure
Statement relating to the product and consider the Statement before making any decision about whether to acquire the
product.This communication is not to be disclosed in whole or part or used by any other party without Matau Advisory
Pty Ltd’s prior written consent.
Matau Advisory Pty Ltd www.matauadvisory.com.au 2
3. Drivers for Coking Coal
— Coking Coal Demand
◦ is directly proportional to steel production
— Steel production is a key component of :
◦ Industrial Production, and of GDP
◦ Chinese GDP is slowing, as its high rates expand the size of its
economy. The quantum of increases continue to expand.
— Developed world industrial production has recovered to
reasonable rates.
— Emerging economy steel production is growing quicker and
beginning to overtake the developed economy output rates.
Matau Advisory Pty Ltd www.matauadvisory.com.au 3
5. Industrial Production - USA
Matau Advisory Pty Ltd www.matauadvisory.com.au 5
Gradual improvement
and steady growth for
USA at +2.0% p.a. for
June.
The developed
economies may not
directly consume as much
raw materials as in the
past, but their
consumption (of finished
goods) matters.
56
64
72
80
88
96
104
112
120
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
USAIndustrialProductionIndex
IPYr-on-YrGrowth
USA Industrial Production
IP Y-o-Y%
Industrial Production
Source: USA FRB Matau Advisory
6. Industrial Production - Japan
Matau Advisory Pty Ltd www.matauadvisory.com.au 6
IP growth for Japan is
strengthening at +4.9%
yr-on-yr in May.
64.0
71.0
78.0
85.0
92.0
99.0
106.0
113.0
120.0
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
IPIndex
Yr-on-YrGrowth%
Japan
IndustrialProduction
Y-o-Y%
Industrial Production
Source: METI, Matau Advisory
8. Steel – Total 12 mo
Matau Advisory Pty Ltd www.matauadvisory.com.au 8
The world produced
1,640.1 Mt of steel in the
12 months to June 2017.
Almost 70% of global
steel is produced in Asia.
France
0.9%
Germany
2.6% Italy
1.4%
Spain
0.8%
Turkey
2.1%
Russia
4.3%
Ukraine
1.4%
Canada
0.8%
Mexico
1.2%USA
4.8%Brazil
2.0%
Iran
1.2%
China
50.3%
India
6.0% Japan
6.4%
South Korea
4.3%
Taiwan
1.4%
Australia
0.3%
other world
7.8%
Global Steel Production
12 mo to June 2017
(1,640.1 Mt)
Source: World Steel, Matau Advisory
9. Steel – world output
Matau Advisory Pty Ltd www.matauadvisory.com.au 9
Global steel
production is
currently
dominated by
China’s output.
China’s production
had been growing
well before it was
really noticed.
In June growth was
at +3.5% p.a.
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
000tonnes
World Crude Steel Production
Monthly
other world
Australia
Taiwan
South Korea
Japan
India
China
Brazil
USA
Mexico
Canada
Ukraine
Russia
Turkey
Spain
Italy
Germany
France
Y-o-Y%
Source: World Steel, Matau Advisory
10. Summary of Global Steel – June 2017
Matau Advisory Pty Ltd www.matauadvisory.com.au 10
Since June 2008, global steel output
has increased by 14.1%.
Only seven countries actually made
positive contributions to that
growth.
For the rest, growth was negative
over that period.
Crude Steel Production Month mo-on-mo 12 mo
Share of
Output
Avg Daily
Rate Avg Daily Rate
Jun-17 Jun-17 Jun-17 Jun-17 Jun-17 Jun-17
000t % chg % chg /yr % 000t % chg /mo
France 1,325 -7.0% +1.3% 0.9% 44.2 -3.9%
Germany 3,605 -5.1% -1.7% 2.6% 120.2 -2.0%
Italy 2,085 -1.1% +1.8% 1.5% 69.5 +2.2%
Spain 1,261 +2.4% +8.1% 0.9% 42.0 +5.8%
Turkey 3,021 -8.7% +7.1% 2.1% 100.7 -5.6%
Russia 5,341 -10.8% -8.0% 3.8% 178.0 -7.8%
Ukraine 1,593 -5.7% -13.0% 1.1% 53.1 -2.6%
Canada 970 -3.1% -11.5% 0.7% 32.3 +0.1%
Mexico 1,685 -3.2% +1.0% 1.2% 56.2 +0.0%
USA 6,707 -2.8% -1.7% 4.8% 223.6 +0.4%
Brazil 2,649 -9.6% +4.2% 1.9% 88.3 -6.6%
Iran 1,785 -0.4% +16.4% 1.3% 59.5 +2.9%
China 73,231 +1.3% +5.4% 51.9% 2,441.0 +4.7%
India 7,950 -3.2% -1.1% 5.6% 265.0 +0.1%
Japan 8,391 -6.0% -4.3% 5.9% 279.7 -2.9%
South Korea 5,906 -2.1% +7.7% 4.2% 196.9 +1.2%
Taiwan 1,930 -3.3% +5.7% 1.4% 64.3 -0.0%
Australia 449 +4.0% -16.1% 0.3% 15.0 +7.4%
other world 11,161 -2.4% +12.7% 7.9% 372.0 +0.9%
Global Steel Production 141,046 -1.5% +3.5% 100.0% 4,701.5 +1.8%
France, Germany, Italy, Spain, Turkey 11,298 -4.9% +2.6% 8.0% 376.6 -1.7%
Asia (China, India, Japan, Sth Korea, Taiwan) 98,719 -0.1% +4.9% 70.0% 3,290.6 +3.3%
North America 9,362 -2.9% -2.4% 6.6% 312.1 +0.3%
North Asia (Japan, Sth Korea, Taiwan) 16,227 -4.3% +0.9% 11.5% 540.9 -1.1%
World ex-China 67,815 -4.4% +1.4% 48.1% 2,260.5 -1.2%
Source: World Steel, Matau Advisory
11. Steel – growth from 2008
Matau Advisory Pty Ltd www.matauadvisory.com.au 11
Since June 2008, global
steel output has
increased by 14.1%.
Only seven countries
actually made positive
contributions to that
growth.
For the rest, growth was
negative over that
period.
-25.6%
-11.6%
-24.9%
-29.4%
17.8%
-5.7%
-49.8%
-8.8%
11.6%
-17.8%
-6.1%
83.7%
39.7%
100.7%
-13.8%
26.5%
3.0%
-36.2%
-6.0%
+14.3%
-60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%
France
Germany
Italy
Spain
Turkey
Russia
Ukraine
Canada
Mexico
USA
Brazil
Iran
China
India
Japan
South Korea
Taiwan
Australia
other world
Global Steel Production
Steel Production
% change by country
since June 2008
Source: World Steel, Matau Advisory
12. Steel – Key Regions – avg daily output
Matau Advisory Pty Ltd www.matauadvisory.com.au 12
China’s strong growth
to 2014 is evident.
Since 2008, its strongest
steel output has been in
the June HY.
2017 may change that
pattern.
India’s output growth is
also clear.
0
400
800
1,200
1,600
2,000
2,400 Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Steel Production
Key Regions
Avg Daily Production Rate
(000 tonnes/day)
China
North Asia (Japan, Korea Taiwan)
North America
France, Germany, Italy, Spain, Turkey
India
Source: World Steel, Matau Advisory
13. Steel – Emerging Regions – avg daily output
Matau Advisory Pty Ltd www.matauadvisory.com.au 13
India’s output growth is
clear.
Iran has strong growth.
Turkey’s & Brazil’s
growth might be
restarting.
South Korean &
Russian growth appears
to have stalled.
0
50
100
150
200
250
300
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Steel Production
(Emerging Regions)
Avg Daily Production Rate
(000 tonnes/day)
Brazil South Korea Turkey
Russia India Iran
Mexico
Source: World Steel, Matau Advisory
15. Coking Coal – Supply – contract prices
Matau Advisory Pty Ltd www.matauadvisory.com.au 15
Contract prices have
progressed from:
annual, to
Quarterly from 2010;
and trialling the Nippon
Steel-Sumitomo index-
based (for HCC) version
from the June17Qtr.
0
50
100
150
200
250
300
350
7-Jan-00
7-Jan-01
7-Jan-02
7-Jan-03
7-Jan-04
7-Jan-05
7-Jan-06
7-Jan-07
7-Jan-08
7-Jan-09
7-Jan-10
7-Jan-11
7-Jan-12
7-Jan-13
7-Jan-14
7-Jan-15
7-Jan-16
7-Jan-17
7-Jan-18
Coking Coal Contract Prices
(USD/t fob Australia)
HCC Aust (contract) USD/t
LV PCI Aust (contract) USD/t
SSCC Aust (contract) USD/t
Aust HCC spot 90 day avg USD/t
Source: IHS McCloskey, Matau Advisory
16. Coking Coal – Supply – contract prices
Matau Advisory Pty Ltd www.matauadvisory.com.au 16
Contract prices have
progressed from:
Annual, to
Quarterly, and now
trialling the NipponSteel-
Sumitomo Index-based
(for HCC) version.
LVPCI and SSCC are
having ‘none of this’ and
settled before HCC for
the Sept17Qtr.
The 90 day avg seems to
match the start of each
quarterly contract. …
Why delay it?
50
100
150
200
250
300
350
2-Apr-10
2-Oct-10
2-Apr-11
2-Oct-11
2-Apr-12
2-Oct-12
2-Apr-13
2-Oct-13
2-Apr-14
2-Oct-14
2-Apr-15
2-Oct-15
2-Apr-16
2-Oct-16
2-Apr-17
2-Oct-17
Australia
Coal Contract Prices
(USD/t)
HCC Aust (contract) USD/t
LV PCI Aust (contract) USD/t
SSCC Aust (contract) USD/t
Thermal March yr USD/t
Aust HCC spot 90 day avg USD/t
Source: IHS McCloskey, Matau Advisory
18. Hard Coking Coal Quality
Matau Advisory Pty Ltd www.matauadvisory.com.au 18
CSR vs Drum Strength.
Australian and Canadian hard coking
coals are the most sought after,
… with the highest coke strength and
drum strength.
Source:Teck presentation 20170516
19. Australia – Coking Coal Exports
Matau Advisory Pty Ltd www.matauadvisory.com.au 19
In 2016 Australia
exported 119.5 Mt of
high rank metallurgical
coal.
May 2017 shipments
were disrupted by
Cyclone Debbie, with
most resuming in June.
India and China have
grown as significant
customers, now with
larger volumes than
Japan and South Korea.
From 2013,Australia
captured market from
Canada and USA.
0
2,000
4,000
6,000
8,000
10,000
12,000
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Australia
Hard Coking Coal Exports
(000t/mo)Other
Brazil
Europe
China
Taiwan
India
Japan
Korea
Source: IHS McCloskey, Matau Advisory
20. Australia – SSCC & LVPCI Exports
Matau Advisory Pty Ltd www.matauadvisory.com.au 20
Semi-soft and LVPCI
exports totalled 67.1 Mt
in 2016.
Japan is the major
customer, followed by
South Korea, India and
China.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Australia
Semi-Soft Coking & LVPCI Exports
(000t/mo)
other
Belgium/Lux'bg
UK, Spain, Netherlands
France
Germany
China
Taiwan
Japan
South Korea
India
Source: IHS McCloskey, Matau Advisory
21. Canada – Coking Coal Exports
Matau Advisory Pty Ltd www.matauadvisory.com.au 21
In 2016 Canada
exported 28.0 Mt of
metallurgical coal
In 2013 35.3Mt was
exported.
Key customers are Japan,
China and South Korea.
From 2013 reduced
HCC coal prices drove
reduced Canadian
exports (from 2013
peaks).
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Canada
Coking Coal Exports (000t)
other
Brazil
U.S.A.
Mexico
U.K.
Turkey
Netherlands
Italy
Germany
France
South Korea
Taiwan
China
Japan
Source: IHS McCloskey, Matau Advisory
22. USA – Coking Coal Exports
Matau Advisory Pty Ltd www.matauadvisory.com.au 22
In 2016 USA exported
37.1 Mt (including 3.4 Mt
to Canada) of coking
coal.
USA exports dropped
sharply in early 2015 on
lower HCC prices.
In mid 2016, as prices
recovered, exports
recovered partially.
Recent constraints
included ability to raise
funds to restart.
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
USA
Coking Coal
Exports by Region
000t
Asia & Other
Other Europe
European Union
South America
North America
Source: IHS McCloskey, Matau Advisory
24. Japan – Coking Coal Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 24
In 2016 Japan imported
43.4 Mt of coking coal.
Japan’s coking coal
imports have been sliding
since 2000.
Japan’s steel production
however has not slipped
that much. Is Japanese
smelting becoming that
much more efficient?
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Japan
Coking Coal Imports
(000t/mo)
Other
China
Russia
Canada
Australia
Source: IHS McCloskey, Matau Advisory
26. Japan – Anthracite Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 26
In 2016 Japan imported
5.8 Mt of ‘anthracite’.
Imports fromVietnam
have almost ceased.
China’s exports have all
but ceased.
Russia has emerged as a
supplier.
0
100
200
300
400
500
600
700
800
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Japan
Anthracite Imports
(000t/mo)
other
Vietnam
Russia
China
Australia
Source: IHS McCloskey, Matau Advisory
27. South Korea – Coking Coal Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 27
In 2016 South Korea
imported 24.6 Mt of
coking coal.
Australia is its major
supplier,
followed by Canada, and
more recently Russia.
0
500
1,000
1,500
2,000
2,500
3,000
.
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
South Korea
Coking Coal Imports
other
US
Russia
China
Canada
Australia
Source: IHS McCloskey, Matau Advisory
28. South Korea – Anthracite Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 28
In 2016 South Korea
imported 9.1 Mt of
‘anthracite’.
Earlier key sources of
China andVietnam have
shrunk to minimal
amounts now.
0
200
400
600
800
1,000
1,200
.
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
000t
South Korea
Anthracite Imports
other
Vietnam
China
Australia
Source: IHS McCloskey, Matau Advisory
29. China – Hard Coking Coal Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 29
China imported 59.3 Mt
of coking coal in 2016.
China has at least some
choices: to produce
domestically or to
import. It appears to
value the imported coal
qualities, for the price.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
China
Coking Coal Imports
(000t/mo)
other
Russia
New Zealand
Mongolia
Indonesia
Canada
Australia
Source: IHS McCloskey, Matau Advisory
30. China – ‘Anthracite’ Imports
Matau Advisory Pty Ltd www.matauadvisory.com.au 30
China imported 26.4Mt
of ‘anthracite’ in 2016.
Vietnamese supply
stopped in 2015.
North Korean supply
was not accepted from
early 2017.
Now left with Russian
and a tiny bit of
Australian.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
China
'Anthracite' Imports
(000t/mo)
other
Russia
Vietnam
Korea DPR
Australia
Source: IHS McCloskey, Matau Advisory
31. Challenges
— Climate risk in key production regions. Japanese smelters indicated they would seek to
diversify geographic (climatic) risk, however most risks are at the same time of year:
◦ Australia – Qld - wet season (Dec-Feb)
– Miners had learned from the 2010-11 floods, and were producing within days to a few weeks. The infrastructure
providers took a long time (1-3 months) to repair export facilities.
◦ Canada – Winter – snow-storms / blizzards
◦ NE USA – Winter – snow storms / blizzards
◦ Alternatives:
– Eastern Russia (snow & ice in winter)
– Mozambique (Dec-April – wet season (mild?) … quality?)
— USA’s mines seeking to resume production have found difficulty in raising funds to restart.
— Russia is constructing the Elegest-Kyzyl-Kuragino rail line in central Russia.
◦ Connected to the Trans-Siberian Rail and capable of serving east coast Asia-Pacific ports,
◦ to be completed 2022.
— Suspension of USA mines has left the market short of high fluidity coking coals
Matau Advisory Pty Ltd www.matauadvisory.com.au 31
32. Outlook
— Economic growth in most regions of the world appear to finally be
shaking off issues and legacies of the 2008/09 financial crisis.
— Glencore is seeking coal acquisitions!
◦ Bid for RIO coal assets.
◦ Glencore is a very astute commodities trader. Past performance suggests
that its acquisitions in its selected commodity spaces are well chosen,
often very near bottom of cycle.
— Chinese imports of anthracite have reduced significantly with the
cancelation of imports from North Korea. Is it seeking other
sources?
— Vietnam’s exports of anthracite have effectively ceased as its own
needs grow.
Matau Advisory Pty Ltd www.matauadvisory.com.au 32
33. Commodity Review
Matau Advisory Pty Ltd www.matauadvisory.com.au 33
For further detail of global steel
production, use this link to download this
week’s Matau Advisory Commodity
Review (wk ending 21 July 17), which
includes more detail of the global steel
history and production for June for the 67
key steel producing country in the world.
Matau Advisory compiles Commodity
Review each week and distributes it on
Mondays on a single user subscription
basis.
