The document discusses coking coal, which is a type of coal used in steelmaking. It provides an overview of the coking coal market, including that China is the largest importer and Australia is the largest exporter. The document also notes that the coking coal market has experienced volatility driven by factors in China and weather events. Additionally, it describes the growth of coking coal futures trading on exchanges in China and opportunities for trading coking coal futures on other exchanges going forward.

1. Coking Coal
Jarek Mlodziejewski
Business Development Manager
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2. Agenda
• Introduction to the coking coal market
• Summary of changes, challenges and opportunities in the physical
market
• A look at the swaps market
• What we expect the future to bring to coking coal
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3. Coking Coal…just coal?
The world as we know it would simply not exist without coking coal…it,
together with iron ore, form the backbone of the developed and
developing world
And yet, there is no single universally accepted test for its quality and
value
In a nutshell, coking coal is a specific type of coal that when burned at a
high temperature in an airless environment, forms a strong porous material
with high levels of carbon. When combined with iron ore in a blast furnace
it forms pig iron, a key step in the steelmaking process
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4. Market Size
Coking Coal Imports
12%
25%
China
Japan
India
South Korea
Taiwan
Germany
UK
Rest of the World
18%
13%
2% 3%
2%
25%
Source: World Coal Association
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Top ten coking coal producers
54%
4% 2% 2%
4%
8%
16%
8%
1%
1%
China
Australia
USA
Russa
India
Canada
Mongolia
Ukraine

5. $350
$300
$250
$200
$150
$100
$50
$0
400
350
300
250
200
150
100
50
0
China, the global financial crisis and the weather have warped what
has been a steadily growing market, with Australia at the forefront of
expansion
Australian Met Coal Exports Rest of the World Exports
FOB Australia US$/mt
Million tonnes
Source: BREE
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6. Evolution of the Market
500
450
400
350
300
250
200
150
100
50
0
Atlantic Pacific
Million tonnes
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450
400
350
300
250
200
150
100
50
0
Rest of the World China India
Pacific Basin will account
for 75% of growth
India & China = 85% of
Pacific Growth
Source: Wood Mackenzie Coal Markets
Million tonnes
Met coal demand will remain bullish long term, though much of this relies on China and India

7. China still matters most to seaborne pricing
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The Three V’s: Volume
Coking coal…the next iron ore?
The Three V’s: Volume

8. FIS VIRTUAL STEEL MILL TOUR 2014
The Three V’s: Volatility
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
$200
14-Jan-13
14-Feb-13
14-Mar-13
14-Apr-13
14-May-13
14-Jun-13
14-Jul-13
14-Aug-13
14-Sep-13
14-Oct-13
14-Nov-13
14-Dec-13
14-Jan-14
14-Feb-14
14-Mar-14
14-Apr-14
14-May-14
14-Jun-14
14-Jul-14
14-Aug-14
14-Sep-14
14-Oct-14
14-Nov-14
TSI JM25 CFR China US$/tonne
Platts PLV FOB Australia US$/tonne
$186.50
$116.50
$173.00
$105.75
US$/t
Coking coal…the next iron ore?
The Three V’s: Volatility

9. The Three V’s: Value
Coking coal…the next iron ore?
The Three V’s: Value
With a growing proportion of the approx. 1 Billion total global production (seaborne
and captive) moving to index-linked and spot, risk management is becoming a high
priority for many physical players. This is evidenced by the high number of Asian
buyers activating their index fall-back clauses with BMA
80%
70%
60%
50%
40%
30%
20%
10%
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• Definition of spot. Here spot is
defined as a bilaterally negotiated
price and no price mechanism has
been used (but may be referred to)
• Term contract: Monthly, quarterly
and annual contract tonnes
0%
Iron Ore Coking Coal
Spot
Index-linked
Term Contract

10. FIS VIRTUAL STEEL MILL TOUR 2014
Coking coal – the
missing piece...

11. The launch of the TSI coking coal contract in August has allowed for some
interesting trading opportunities to develop, though liquidity is focused on CME
Coking Coal Swaps – Market Update
The launch of the TSI coking coal contract in August has allowed for some
interesting trading opportunities to develop, though liquidity is focused on CME
Source: TSI
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
CME volumes SGX FOB SGX CFR
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12. 100
90
80
70
60
50
40
30
20
10
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Coking Coal Swaps – Market Update
0
Current open interest CME
Lots (1000 tonnes per lot)
Liquidity has focused on the front-month of the curve, but trades throughout
Cal15, Cal16 and interest in Cal17 show some hedging activity
Liquidity has focused on the front-month of the curve, but trades throughout
Cal15, Cal16 and interest in Cal17 show some hedging activity
$150
$145
$140
$135
$130
$125
$120
$115
$110
$105
$100
CME Platts FOB (Aug 1) TSI SGX CFR (Aug 1)
CME Platts FOB (Nov 26) TSI SGX CFR (Nov 26)

13. Market Update
• Number of counterparties involved keeps expanding
• Volume growth almost month-on-month, and annualized 4mt+ market already
• Already bigger than offshore steel swaps
• Five of top ten counterparties on iron ore are already trading coking coal, and another four
considering it
Why trade it?
1. Huge arbitrage potential with other ferrous products
2. Near record low price, large contango into Cal15, and spread between Cal15 Iron ore and
Cal15 CC SGX launched TSI FOB and CFR contracts in August. Market growing rapidly and
the focus on the product is increasing.
3. Correlation with other coking coal qualities (Mid vol, PCI) is 89-95%.
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14. FIS VIRTUAL STEEL MILL TOUR 2014

15. Dalian Coking Coal Contracts
DCE Coking Coal Trade Volume (unit: metric tonnes)
2013 2,924,417,640
2013 YTD 2,047,821,300
2014 YTD 1,528,856,340+
Where once raw materials prices were negotiated once a year, the new reality is that we now live
in an increasingly volatile market. China has certainly embraced futures trading as has been
evidenced by the growth in coking coal futures on the Dalian Exchange
Could CME/SGX Coking Coal be next?
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New Opportunities

16. Get our free steel/coking coal market reports and forward price curves
Jarek Mlodziejewski by email | jarekm@freightinvestor.com
online | http://bit.ly/steel-reports
Contact Singapore for a telephone or personal consultation
in person | 6 Battery Road, #24-04 Singapore 049909
by telephone | +65 6535 5189
online | http://bit.ly/steel-swaps
1st
2nd
Thank you for your time.
We look forward to hearing from you soon.
FIS – Brokers of Steel Swaps
Leading the way in commodity derivatives.
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17. Thank you
U.K. Tel: +44 (0) 20 7090 1126
Singapore Tel: +65 6535 5189
E-mail: hollym@freightinvestor.com
jarekm@freightinvestor.com
neilg@freightinvestor.com
www.freightinvestor.com
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