- The document analyzes trends in the global coking coal, iron ore, steel scrap, and steel markets year-to-date in 2016. It discusses volatility in coking coal pricing and changes to pricing structures. - Premium hard coking coal prices have risen significantly in 2016 and shifted from annual benchmark pricing to more frequent quarterly and monthly index-linked pricing. This is placing pressure on the quarterly benchmark pricing system. - Spot market liquidity and transactions for coking coal remain robust despite large price increases, though the premium hard coking coal market structure continues to evolve. - Substantial changes are possible in 2017 as the costs of key steelmaking raw materials like iron ore and coking coal fluctu

1. THE STEEL INDEX (TSI)
Tokyo Metals and Steel Forum
Coking Coal
Tim Hard, Managing Director
www.thesteelindex.com

2. Key Ferrous Bulk Commodities Performance YTD
90.00%
140.00%
190.00%
240.00%
290.00%
Jan-2016 Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016 Jul-2016 Aug-2016 Sep-2016 Oct-2016 to-
date
Major bulk commodities index basis January 2016
TSI Premium Hard coking coal FOB Australia US$/tonne TSI Iron Ore fines 62% FE CFR China US$/tonne
TSI HMS 1&2 #80:20 Scrap CFR Turkey US$/tonne TSI ASEAN HRC [SAE] US$/tonne

3. Coking coal pricing change abrupt for quarterly buyers
$0
$50
$100
$150
$200
$250
$300
$350
Annual Benchmark Quarterly Quarterly TSI Index Linked (Q-1)

4. Monthly-linked already well over quarterly price
$0
$50
$100
$150
$200
$250
$300
$350
Annual Benchmark Quarterly Benchmark Monthly TSI Index-Linked

5. Steelmaking cost structure changes
150
200
250
300
350
400
450
0
50
100
150
200
250
Iron Ore Cost Coking Coal cost Implied Margin ASEAN HRC (RHS)
US$/t
US$/t

6. Premium Hard Market structure still evolving
0
5
10
15
20
25
30
35
40
BMA Anglo South 32 Rio Glencore Peabody
BMA Anglo South 32 Rio Glencore Peabody
Quarterly
Indexing

7. Quarterly Benchmark system pressured over 2016
-10
-5
0
5
10
15
0
0.5
1
1.5
2
Q1 2016 Q2 2016 Q3 2016 Q4 2016
Million Tonnes underlying settlement (LHS) Days before (RHS)
14 7 5
-10

8. Spot market activity remains robust through price surge
75
125
175
225
0
10
20
30
40
50
60
70
80
Transactions Platform
Bids Offers Price (RHS)
75
125
175
225
-
0.50
1.00
1.50
2.00
Transaction Platform
Bids offer Price (RHS)
Volumes per month: TSI PHCC, FOB AustraliaData points per month: TSI PHCC, FOB Australia
US$/tMMT
US$/t

9. Plenty of big potential changes in 2017

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