2017 Ferrous Derivatives Round Up

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Houston
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Santiago
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Singapore
Beijing
Tokyo
Sydney
Dubai
Moscow
Astana
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Porto
Johannesburg
Riga
Market Reporting
Consulting
Events
2017 Ferrous Derivatives Round Up:
Steelmaking Raw Materials
January 2018

Market Reporting
Consulting
Events
2
Iron Ore

3
• Breaking a seven year growth streak
2017: Internationally-traded iron ore derivative volumes fell
for the first year, ever
Copyright © 2017 Argus Media Ltd. All rights reserved.
-50%
0%
50%
100%
150%
200%
250%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2009 2010 2011 2012 2013 2014 2015 2016 2017
Year-on-yearGrowth
BillionTonnes
Source: SGX & CME

4
• This year-on-year pullback continues a well-established trend. Half
yearly volumes have been in retreat since H2, 2016
The pattern is a sustained one..
0
200
400
600
800
1000
H1-09
H2-09
H1-10
H2-10
H1-11
H2-11
H1-12
H2-12
H1-13
H2-13
H1-14
H2-14
H1-15
H2-15
H1-16
H2-16
H1-17
H2-17
MillionTonnes
International Iron Ore Derivative Volumes
Source: SGX & CME

5
• Quarterly volumes peaked in Q4 2016
Of quarterly volumes flattening out..
0
100
200
300
400
500
600
MillionTonnes
International Iron Ore Derivative Volumes
Source: SGX & CME

6
• Lowest monthly volumes in over a year (October 2016)
• Sharp year-on-year contractions in November and December 2017
2017 ended on a particularly weak monthly volume note
-100%
-50%
0%
50%
100%
150%
200%
0
50
100
150
200
250
Year-on-yeargrowth
MillionTonnes
Source: SGX & CME

7
• There have been eight negative y-on-y monthly comparisons since April
2010. Seven occurred since September 2016.
Negative y-on-y comparisons no longer unusual
-50%
0%
50%
100%
150%
200%
Year-on-year changes
Source: SGX & CME

8
2017: However, ‘onshore’ (Chinese traded) iron ore derivative
volumes at DCE also fell for the first year, ever
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
5
10
15
20
25
30
35
40
2013 2014 2015 2016 2017
Year-on-yearGrowth
BillionTonnes
• So, perhaps the story is one of consolidation after years of huge growth.
• The scale of Chinese volume is immense. More than 15x international.
Source: DCE

Market Reporting
Consulting
Events
9
Coking Coal

10
• Having struggled to achieve critical mass, 2017 saw a large rise in
trading volumes.
2017: Coking Coal derivative volumes grew meaningfully
-100%
-50%
0%
50%
100%
150%
200%
0
5
10
15
20
2014 2015 2016 2017
MillionTonnes
Coking Coal Derivative Volumes
Coking Coal Volumes y-o-y growth
Source: SGX & CME

11
0
1
2
3
4
5
6
7
8
9
10
H1
2014
H2
2014
H1
2015
H2
2015
H1
2016
H2
2016
H1
2017
H2
2017
MillionTonnes
SGX Options
SGX
CME
Although take off was confined to the first half…
• Volumes in the second half fell by -31.2%
Source: SGX & CME

12
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
MillionTonnes
SGX Option
SGX
CME
Or more specifically, the first quarter
• But the addition of options in Q4 broke the trend of derivatives volumes
falling for consecutive quarters
Source: SGX & CME

13
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
MillionTonnes
SGX Options
SGX
CME
December was the worst month since Dec 2016
• Again, December was a particularly weak month.
Source: SGX & CME

Market Reporting
Consulting
Events
14
Scrap

15
0
1
2
3
4
2016 2017
MillionTonnes
Turkish Scrap
Ferrous scrap volumes established themselves in 2017
Source: LME

16
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
H1 2016 H2 2016 H1 2017 H1 2018
Tonnes
Half yearly volumes growing strongly and consistently
Source: LME

17
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Tonnes
Quarterly Scrap Volumes - LME
Quarterly volumes growing for seven consecutive periods
Source: LME

18
Monthly volumes trend line strongly upwards
• Again, December was a particularly weak month.
0
100,000
200,000
300,000
400,000
500,000
600,000
Tonnes
Monthly Scrap Volumes - LME
Source: LME

Market Reporting
Consulting
Events
19
Argus Physical Round Up 2017

20
Physical Market 2017 at-a-glance: iron ore
Source: ARGUS
US$/t
CNY/wt
$cents/dmtu
US$/t
$40
$50
$60
$70
$80
$90
$100
$110
Iron ore fines 58% Fe cfr Qingdao
Iron ore fines 62% Fe (ICX) cfr Qingdao
Iron ore fines 65% Fe cfr Qingdao
400.000
450.000
500.000
550.000
600.000
650.000
700.000
750.000
BRBF portside NHGF portside PBF portside
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Iron ore lump premium 63% Fe cfr Qingdao
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
PCX/ICX - portside/seaborne spread
*Portside pricing launched in 2014
* Daily portside pricing launched daily in September 2017

21
100.00
150.00
200.00
250.00
300.00
350.00
Prem low-vol, fob Aus Hard mid-vol, fob Aus
Physical Market 2017 at-a-glance: coking coal
100.00
120.00
140.00
160.00
180.00
200.00
PCI mid-vol, fob Aus PCI low-vol, fob Aus
110.00
115.00
120.00
125.00
130.00
135.00
140.00
01Dec2017
03Dec2017
05Dec2017
07Dec2017
09Dec2017
11Dec2017
13Dec2017
15Dec2017
17Dec2017
19Dec2017
21Dec2017
23Dec2017
25Dec2017
27Dec2017
29Dec2017
Semi Soft mid-vol, fob Aus Semi Soft high-vol, fob Aus
250.00
270.00
290.00
310.00
330.00
350.00
370.00
390.00
62CSR coke FOB China 65CSR coke FOB China
Source: ARGUS
US$/t
US$/t
US$/t
US$/t
*PCI launched daily in September.
*Semi-soft launched daily in December.
*Coke launched daily in December.

22
225
245
265
285
305
325
345
365
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
80:20 cfr Turkey
Physical Market 2017 at-a-glance: scrap
225
245
265
285
305
325
345
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
80:20 cfr taiwan
Source: ARGUS
US$/t
US$/t
265
275
285
295
305
315
325
335
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
US Midwest Shred
US$/t

23
400.00
450.00
500.00
550.00
Steel rebar fob China Steel rebar cfr ASEAN
Physical Market 2017 at-a-glance: steel
400.00
450.00
500.00
550.00
600.00
HRC FOB China HRC CFR ASEAN
540.00
550.00
560.00
570.00
580.00
590.00
600.00
610.00
620.00
08 Sep 2017 08 Oct 2017 08 Nov 2017 08 Dec 2017
Wire Rod fob N. China
Source: ARGUS
US$/t
US$/t
US$/t
US$/t
*Argus FOB and CFR HRC launched daily in September.
*Argus Billet launched daily in September. *Argus Wire rod launched daily in December.
* Argus FOB and CFR rebar launched daily in September.
3,400.00
3,500.00
3,600.00
3,700.00
3,800.00
3,900.00
4,000.00
04 Sep 2017 04 Oct 2017 04 Nov 2017 04 Dec 2017
Tangshan billet CNY/t

24
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2017 Ferrous Derivatives Round Up

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