TSI looks back over 2016 in coking coal to tease out trends of larger average spot volumes, reduced trade of partial shipments,

1. THE STEEL INDEX (TSI)
TSI Coking Coal
Tim Hard
Jarek Mlodziejewski
Jing Zhi Ng
www.thesteelindex.com

2. Methodology – key points
• TSI methodology designed to maximise participation, minimise opportunities for manipulation and
remove subjectivity from the process of index creation. Same as used for iron ore and Turkish Scrap.
• TSI uses physical market transactions to produce “daily spot value” reflective prices.
• Mathematical methodology – minimising human input/subjectivity.
• Regardless of market size/position, all data providers are capped at 40% should they be greater than
that of the daily volume weighted average.
• No single data provider has exceeded 25% weighting over the lifetime of price publications.
• Non-Disclosure Agreements signed with index participants, enabling price data to be reported
confidentially with no fear of disclosure to the wider market.
Please contact us if you have any more methodology questions

3. Setting the scene
-$10
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$0
$2
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$0
$50
$100
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US$/tonne
FOB PHCC Monthly Index Average
Spread to CFR PHCC (RHS)
On the first working day of 2016,
Premium Hard coking coal (PHCC)
exchanged hands for around
US$77/tonne. Fast forward 11
months and the last traded PHCC
cargo concluded at US$315/t on
8.11.16 on the globalCOAL platform.
This year, the CFR China price has
been below the FOB price for the
first time, for three months.

4. Setting the scene
A key driver behind the surge in
prices have been supply
disruptions in Australia.
This was boosted by increased
Chinese demand as local
weather disruptions conspired
with the policy dictations of
reducing the number of working
days at collieries.
In China, total coking coal
imports in 2016 so far (with two
more reporting months to go)
have far surpassed those of all of
2015, standing a touch over 51
million tonnes.
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14
1
2
3
4
5
6
7
Milliontonnes
Milliontonnes
Cumulative 2016 tonnes over 2015 (RHS) 2015 2016
Chinese coking coal imports: China Customs Data

5. $70
$120
$170
$220
$270
$320
$370
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
FOB Australia Bid Offer Transaction
April 18, 2016:
To solve its excess production and
efficiency issues, China cuts the
number of statutory working days
at coal mines from 330 to 276.
July 8, 2016:
Recent roof fall events after a
longwall movement leads to a
declaration of force majeure for
Vale's Carborough Downs HCC.
July, 2016:
Flooding in China impacts coal
logistics. Coastal mills finding
it difficult to source coal from
domestic mines.
August, 2016:
Rail outage in Mozambique,
affecting Vale’s coal
shipments.
Sept 7, 2016:
Some of South32’s customers are
served force majeure notices due to
geological problems at the Appin mine.
Setting the scene
Oct 3, 2016:
Anglo American declares force majeure at
its Grasstree longwall, affecting production
of its premium German Greek Coal brand.
August, 2016:
Indian and European buyers enter the
coking coal spot market in force,
scrambling to pick up tonnage in an effort
to stay ahead of rising prices.
Nov, 2016:
Chinese NDRC states that
some mines can resume
producing at 330 days.

6. Trade Volatility
July 2016 marked a significant
month with FOB prices crossing
US$100/t. They ploughed on
through September, with some
fixed price deals over 10% higher
(on a normalised index basis) than
the one before.
From July onwards, the average
fixed price trade volatility (spread
between two successive fixed price
trades) was +2% whilst for the
preceding 7 months it was +0.3%.
The high was 22% in early
September, followed by a trade 15%
higher and then another 5% after
that as the market price for coking
coal soared.
-15%
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-5%
0%
5%
10%
15%
20%
25%
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
Premium HCC FOB market volatility
Index volatility (RHS)
% movement for successive fixed price trades submitted to TSI (Post normalisation)

7. Trade Volume
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100,000
200,000
300,000
400,000
500,000
600,000
700,000
06-Nov-15
27-Nov-15
18-Dec-15
08-Jan-16
29-Jan16
19-Feb16
11-Mar16
01-Apr16
22-Apr16
13-May16
03-Jun16
24-Jun16
15-Jul-16
05-Aug-16
26-Aug-16
16-Sep-16
7-Oct-16
28-Oct-16
18-Nov-16
US$/tonne
Tonnes
Submitted FOB trades Submitted FOB bids/offers Price
Following the first sharp index
movement in early September,
there was a slight pause as
market levels consolidated,
however this soon changed as
low inventory levels coupled
with shortage of both Chinese
domestic and seaborne
material forced the hand of the
market participants.
Unfortunately for buyers,
prices were already above
US$250/tonne, and successive
deal-making pushed the index
over US$300/tonne.
Volumes Used in Index Calculation

8. Trade Size
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160
180
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1
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9
10
2014 2015 2016 annualised
Milliontonnes
Volume Number of trades (RHS)
Overall FOB-based spot sales volumes stabilised over 2016 after the 2015 surge, as have the numbers of trades. TSI
has so far recorded 153 trades FOB PHCC trades as of the 25th of November. This compares to 168 trades done in
2015 as a whole, and thus we should therefore see a similar value for 2016 on an annualised basis.

9. Trade Size
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1
2
3
4
5
6
7
8
9
10
2014 2015 2016 YTD
Milliontonnes
Mean
54kt
Mean
55kt
Mean
67kt
Spot FOB PHCC cargo sizes of have been trending upwards, although the appetite for ‘big shipments’ i.e. full
capesize vessels appears heavily reduced. The trend is towards 70-85kt spot purchases as a norm.

10. Trade Size
0
5
10
15
20
25
30
Spot transaction in excess of 75kt Spot transaction less than 30kt
2014 2015 2016
Average sales sizes have trended up since 2014.
Conversely, ‘top-up tonnes’ (less than 30kt in size) have all but evaporated in 2016.

11. PHCC Seaborne Spot Market
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
50
100
150
200
250
2014 2015 2016 Annualised
FOB CFR CFR % of total PHCC spot trade
Total PHCC seaborne spot trade (including CFR trades ) is trending upwards.
China has imported more in 2016 than 2015, breaking a multi-year decline of imported volumes and increasing its
share of total trade from 21% to 28%.

12. Spot market activity remains robust through price surge
$75
$125
$175
$225
$275
0
10
20
30
40
50
60
70
80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Transactions Platform Bids Offers Price (RHS)
Data points per month: TSI PHCC, FOB Australia
$75
$125
$175
$225
$275
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0.20
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0.80
1.00
1.20
1.40
1.60
1.80
2.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Millionmetrictonnes
Transaction Platform Bids offer Price (RHS)
Volumes per month: TSI PHCC, FOB Australia
An average of a little over 16 physical market transactions per month underpin the FOB Premium Hard Coking Coal
index over 2016. The year had an average 21 working days per month. Double-counting of trades excluded.

13. Market maker makes a splash on SGX.
0%
10%
20%
30%
40%
50%
60%
70%
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100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Oct-16 Nov-16 12th December 2016
%oftotalnon-ChinaPHCCderivativestrade
CME SGX SGX Share of total (RHS)
Tonnes
Physical producer market maker begins trading exclusively on TSI (SGX). SGX share of total
Derivatives market rising quickly.

14. Open interest on a growth path.
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200,000
400,000
600,000
800,000
1,000,000
1,200,000
Aug-16 Sep-16 Oct-16 Nov-16 12th Dec 2016
Open Interest SGX Open Interest CME
Tonnes
%oftotalcokingcoalderivativestrade
Open Interest (a proxy for levels of hedging, rather than speculative activity) has seen a rapid build on SGX.

15. Coking Coal – a long runway
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Yr.1 Yr.2 Yr.3 Yr.4 Yr.5 Yr.6 Yr.7 Yr.8
COKING COAL
COKING COAL
The physical size of global coking coal markets are far smaller than iron ore. Using the same growth path of iron ore
shows the next annual volume milestone should be 11 million tonnes traded (2017). The large pool of iron ore
hedgers and speculators at SGX can offset margins on opposing positions in coking coal.
MillionTonnes
0.01x 0.02x 0.04x 0.09x 0.20x 0.39x
0.75x
1.21x

16. Forward markets pricing ‘upside-story’ behind us
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280
Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
SGX Forward Curve
US$/t
Forward market at SGX now firmly backwardated.
Q1 2017 now at US$233: already US$52/t below the recently agreed ‘quarterly benchmark’ agreed at US$285/t.

17. Questions? Please contact us
Jarek Mlodziejewski
Jing Zhi Ng
Tim Hard
12 Marina Boulevard | Level 23 MBFC Tower 3
Singapore 018982
T: +65 6530 6412
M: +65 9108 4257
E: Jarekm@thesteelindex.com
Reuters Eikon: jarekm@thesteelindex.com
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Wechat: jarekm
www.thesteelindex.com