Trammo Pat Panzarino Presentation to PACE February 2017 San Diego, California GLOBAL INDEPENDENT RELIABLE

Transcription

1 Trammo Pat Panzarino Presentation to PACE February 2017 San Diego, California GLOBAL INDEPENDENT RELIABLE

2 Coal The Plight of it All! Definition of Plight derived from Middle English plight An unfortunate, difficult, or precarious situation with no means of escape 2

3 Agenda Trammo Inc. Introduction Quotes I Like Global Coal Factoids Impacts Renewables Market Drivers 2016/17 Possible Future Trends/Conclusions Sources: EIA, IHS, Argus, DTC, PACE, Biehl, UN, CoalDesk, Evolution, WSJ, Bloomberg, SGX, Mid-Ship, Marex Spectron, Goldman Sachs 3

4 Trammo Group Private company founded in 1965 with corporate head quarters in New York trading offices in major global markets Trammo ranked as one of the largest private companies in the USA One of the World's leading fertilizer and industrial commodities trading companies in both in volume and revenue Urea/Granular/ Solution Elemental Sulfur Sulfuric acid Phosphate Anhydrous Ammonia Petroleum Coke Thermal Coal 4

5 Quotes I like I never said the things I said Yogi Berra You frequently meet your fate on the road you took to avoid it _ Chinese anonymous Sometimes the road less traveled is less traveled for a reason - Jerry Seinfeld 5

6 Global Coal Production /Consumption Trend Global Coal Production approximated B MT, 7.929, 7.708, Global coal production declined for first time this century in 2014, as production fell 0.6% or 45 mm MT after 14 years of growth. In 2015 this declined accelerated to 221 mm MT or 2.8% lower Export trade of all coal types approximates B MT Declined by 4.1% in 2015 from mm MT Thermal ( -4.3%) 11.5 mm MT Coking (-3.7% ) But +22.1% increase over 2010 and +110% since 2000 Total coal consumption declined by 2.6% or 148 mm MT Lowest level since

7 Coal Production by Source Country Country 2016 mm MT Est China US India EU Australia Indonesia Russia South Africa Colombia Source IEA 7

8 Major Coal Exporters Country 2016 mm MT Est Australia Indonesia Russia Colombia South Africa US Source: IEA 8

9 Major Coal Importers Country 2016 mm MT Est India China Japan NA Korea NA Germany NA Turkey NA United Kingdom NA Source: IEA 9

10 Per Capita Coal Consumption by Country Country Population ( Millions ) MT Coal/Capita 2015 Kazakhstan India 1, Taipei Korea China 1, US Germany Japan OECD Americas OECD Asia Oceania OECD Europe Organization for Economic Co-operation and Development ( OECD ) Source:IEA 10

11 Global Coal Factoid Global Coal Production and Trade Seaborne B MT/1.0B Thermal/400mm Coking China 2015 production 3.6B MTs cuts 290 mm in 2016 and turns to 255 mm imports or % YOY US production declines by 143 mm MT or 33% YOY to 670 mm MT, exports decline from 67 mm to 54 mm in 2016 Indonesian production of 430 mm MT in 2016, exports of 320 mm, while domestic consumption grows to 92 mm Australian thermal plus coking Production 465 mm, Exports 385 mm, and +65 mm projected by 2020 SA exports record 75 mm in 2015, 59 % to non - China Asia, but <21% as of March 2016 Russian production in 2016 approximated 355 mm with exports totaling 120 mm thermal in 2014 and 22 mm coking exports have tripled over the past decade Colombia 2016 production approximated 84 mm Mt up 6.9% YOY but expected to climb to 105 mm by 2020 India 2016 Usage declines to 842 mm MTs, production climbs to 640 mm, imports decline to mm or < 18.7% YOY or USD$ 931 mm less trade deficit 11

12 Factors Influencing Volatility of Global Coal Trade CHINA!! Weather ( US Generator coal inventories DOB but down 17% vs 2016 ) Press Headlines Crude - OPEC Prices/Costs vary by producing origin Iron Ore/ Brazil and Australia vs China ( 175 mm MT /1 B MT/32 MT/sec ) China Steel production declines from 870 mm to 805 mm MT But SGX Iron Ore Futures +125% Indo sub bit and Colombian Coal vs US Currencies versus USD Exporters want Weak local currency vs USD Importers want Strong local currency vs USD Vessel Freight Rates Build vs scrap rates ( % vs 4%/ % vs 4% ) Proximity to markets Australian coking coal vs Canada + US origins Colombian moves from Atlantic Basin to Asia Impact of other bulk commodities and services Barging, Rail, Grain,Iron Ore, Coal, Bauxite, Petcoke 12

13 Factors Influencing Volatility of Global Coal Trade Governmental actions Preference /subsidies to competing products Renewable Fuels/Biomass, solar, wind hydro, LNG, <CO2 Downward trend in China and Euro coal imports but volatile China domestic iron ore and coal vs imports Currency manipulation Overt action to favor exports Import Taxes/Favored Nations China 6-8% Tax on US coal imports India /demonetization / tax reform Impacts on Cement, Residential construction and Fertilizer Trade India 4.5% tax on Import Freight component Australian + Indonesian enjoy FN status re China Possible implications of 20% tax on Mexican imports to US Domestic NG and coal prices / Bcf NG exports to Mexico! Price of WTI, Canadian SynCrude/Keystone Pipeline Crude slate to refineries altered and impact to Petcoke yield? 13

14 Global Renewable Energy Trend I d put my money on the sun and solar energy What a source of power! I hope we don t have to wait until oil and coal run out before we tackle that. Thomas Edison, 1931 Source: Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel and Charles Lindbergh, Author, James Newton The IEA has significantly increased its 5 year growth forecast for renewables due to strong policy support in key countries and sharp cost reductions in the technologies 500 K solar panels were installed globally every Day in 2015 China accounted for 40% of all renewable implementations 2 Wind Turbines installs per hour in

15 Global Renewable Energy Impact on Coal Generation Coal maintains largest single fuel case until 2040 Coal accounted for 40% of global electrical generation share in 2012 but declines to 29% in 2040 despite an increase in generation from 8.6 trillion kwh in 2012 to 10.6 in 2040 China and India account for 69% of the global increase in coal fired generation In the US, if CPP is implemented it results in a 33 % reduction in US coal fired generation Source: EIA 15

16 Market Drivers 2016/17 China unexpectedly increases thermal and coking imports off back of domestic mine closures/reduced Days of Operation to 276 and aggressive pricing action by state mining concerns appears to be a sustainable trend Favorable freight window/arbitrage opens and European Generator resellers dump un-needed coal length results in 6.3 mm MT of Colombian coal moves to India, Korea, Japan and Thailand as favorable freight window emerges API2 strengthens as Atlantic basin becomes short coal China imports of Indo sub bit and Australian surge other Asian consumers turn to Australian, Colombian NEWC coal Index surges Indonesian productions cuts, continued governmental actions and weather factors impact Indo supply Other Asian consumers are starting to look elsewhere for sub bit coal US Sub Bit November China announces return of Domestic mines to 330 DOO, NEWC Index falls $20 February announces return to 276 but some larger mechanized mines may be allowed to stay at 330 DOO 16

17 Possible Trends and Conclusions Continued growth in China coal demand in mid term, then followed by decline Continued decline in US thermal consumption and exports Continues strength in ocean freight rates Perhaps a fragile future for US coking coal exports view China s rationalization of steel production Continued decline in European coal demand Evolution of self-sufficient domestic Indian production in 2-3 years Emergence of regular Colombian coal trade route to Asia dependent upon vessel freights More Indonesian production stays home 17

18 Possible Trends and Conclusions Certainly fewer, but larger producers globally Fewer Traders Companies stick to their knitting ie. Producer coking coal focus, Generators sell trading operations Hard rock + Coal companies ( Anglo, BHP ) focus on core strength in Iron Ore Private Equity displaces public ownership in US and perhaps globally Globally, voters opt for fiscal responsibility and reject renewable subsidies? probably not as both EIA&IEA predict strong renewable growth While coal absolute volume continues to grow, generation share drops from 40% to 29% Shall gas continues to erode US coal consumption LNG continues to penetrate global energy markets

19 Thank you! 19