US Coal Export Market and Terminal

Transcription

1 US Coal Export Market and Terminal Saurabh Pandey Director of Business Development SunCoke Energy Platts Coal Marketing Days Sept 22-23, 2014

2 SXC and SXCP 2

3 Our Operations Operations are strategically located to serve customers in the steel and power industries KRT 3 Terminals (Coal Logistics) Lake Terminal (Coal Logistics) Indiana Harbor Middletown SunCoke entered Coal Logistics Business with acquisition of Kanahwa River Terminals (KRT) and Lakeshore in 2013 Haverhill 1 Haverhill 2 Vitoria, Brazil Jewell Coke Coal Mining* 114M tons of reserves Odisha, India SXCP SXC Granite City * Segment classified as discontinued operations in Q pending expected potential sale and closing by year-end

4 SXC/SXCP Organizational Structure SXC owns: 2% GP interest 54% LP interest 100% IDRs Coal Logistics Cokemaking SXC provides via Omnibus Agreement: Commercial contract support; 5 yrs from IPO Preferential rights to coke growth in U.S. & Canada First rights to SXC coke assets, if divested Domestic Coke Middletown (2% interest) Haverhill (2% interest) Coal Mining* (~114M tons reserves) Int l Coke KRT Middletown (98% interest) Granite City Lake Terminal Haverhill (98% interest) Indiana Harbor Jewell Coke * Segment classified as discontinued operations in Q pending expected potential sale and closing by year-end

5 Growth Strategy Area of focus Cokemaking Coal Logistics Iron Ore Processing Strategy Greenfield development and/or acquisition of existing cokemaking facilities with long-term off-take agreements Production ramp-up at Indiana Harbor Received permit for new plant in May 2014 Acquisition or development of selective coal handling & processing assets, with long-term off-take arrangements and limited commodity exposure Exploring greenfield development opportunities Investment in ferrous side of steel value chain, such as in concentrating, pelletizing and transport/handling of iron ore Evaluating potential greenfield DRI opportunities Preferential rights to cokemaking growth opportunities Two acquisitions completed Evaluating targeted opportunities Received favorable rulings on qualifying income status of concentrating & pelletizing and DRI 5

6 SunCoke Coal Logistics - KRT Access to all U.S. East Coast, Gulf Coast and Great Lakes ports; Two railroads at Ceredo CSX and NS Serves 2 SunCoke facilities as well as steel, coal and utility companies Provides precision blending services Acquired for $86M Ceredo Coal Terminal Throughput Capacity: 18M tons/year Storage Capacity: 425K tons Rail/Barge in; Rail/Barge out Kentucky Coal Terminal Throughput Capacity: 6M tons/year Storage Capacity: 250K tons Truck in; Barge out Ceredo Liquids Terminal Three 250K gallon finished prod tanks Four heated 1M gallon raw storage tanks Truck, Barge, Rail in/out Quincy Coal Terminal Throughput Capacity: 6M tons/year Storage Capacity: 250K tons Truck in; Rail/Barge out 6

7 SunCoke Coal Logistics - Lakeshore Asset Coal blending site adjacent to SunCoke s Indiana Harbor facility 10-year contract to provide services to Indiana Harbor Location Acquisition Price East Chicago, Indiana $29.4 million 7

8 US Coal Logistics Market Size Rail Barge Truck Terminals (1) Tonnage (tons) 600M-800M 150M-350M 100M-200M 350M-550M Per Ton Rate (2) $16-$19 $5-$8 $4-$7 $3-$8 EBIT Margin (3) 25%-30% 15%-20% 5%-10% 20%-30% Profit Pool (EBIT) $2.4B-$4.6B $100M-$600M Up to $100M $200M-$1.3B Capital Intensity High Medium Low Medium Fragmentation Low Medium High High Note: tonnage estimates reflect primary mode of transportation for any multi-modal shipping (1) Per ton rates represent all in service offerings (e.g., any combination of blending, storage, sampling, crushing, transloading, etc.) (2) Rates sourced from internal analysis and EIA & STB reports; barge and truck transportation rates reflect coal transported to electric power plants (3) EBIT margins derived from internal analysis, logistics company financials and industry-wide estimates 8

9 Global Seaborne Coal Trade - Thermal Seaborne thermal coal exports represent three quarters of total global coal supply Indonesia supply growth of 9.6% 09-15E; total exports nearing 400Mt while Australia growth of 6.4% and projected exports to 200Mt+ in 15E Export increases to be met by productivity growth rather than increased mine development/investments (M Tons) 1,200 1, Seaborne Thermal Coal Exports Indonesia Australia Russia Colombia South America US Other CAGR 9.1% CAGR 2.4% E 2015E Source: World Coal Association, Wood Mackenzie 9

10 Global Seaborne Coal Trade - Metallurgical Australia to remain dominant supplier of metallurgical coal globally; 2013 exports totaling 150M+ tons or 55% of total seaborne metallurgical coal (M Tons) Seaborne Metallurgical Coal Exports Australia US Canada Russia Indonesia Other CAGR 4.9% CAGR 4.9% US exports expected to fall slightly to below 50M tons as APP mines remain disadvantaged vs. lower cost mines E 2015E Source: World Coal Association, Wood Mackenzie 10

11 US Coal Exports Europe is the largest importer of thermal coal from the US Europe and Asia followed by S. America are the largest importers of US Met coal China s import growth expected to slow as domestic production increases, steel production growth slows, new environmental regulations implemented Slight European decline in Met imports in 2013 driven primarily by decreased steel production (M Tons) Thermal Coal Exports by Destination Americas Europe Asia Other (M Tons) Met Coal Exports by Destination Americas Europe Asia Other Source: EIA short-term energy outlook 11

12 Mil Short tons Mil Short tons TM East Coast Export Volume Export from the five major E. Coast terminals has grown significantly adding both steam and met exports to Europe, Brazil, and Asia; expected to drop-off in 14 & 15 Coal Exports from Baltimore, MD Coal Exports from Norfolk, VA '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 - '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Source: EIA Steam Met Steam Met 12

13 East Coast Terminal Comparison Downside analysis suggests that Hampton Roads exports (NS, DTA, KM) has historically been less impacted by declines in export volumes 9,000 8,000 DTA CNX Baltimore CSX Curtis Bay NS Lambert's Point KM Pier IX σ/µ = 25% σ/µ = 32% σ/µ = 48% σ/µ = 21% σ/µ = 27% 7,000 6,000 5,000 4,000 3,000 2,000 1, Variability in throughput in relation to the average throughput over the last 3-4 years is less for Hampton Roads terminals compared to Baltimore Analysis suggests that Lambert s Point sees the least variation Source: T. Parker Host East Coast Coal Export Report 13

14 Summary The global seaborne coal trade remains healthy and will be a vital part of the global economy for the foreseeable future After peaking in 2012, US coal export volumes are forecast to decline for the next months Weakness in Europe, slower growth in Asia, and increased seaborne coal supply from low cost Australian producers will impact the three primary export areas of the US (West Coast, Gulf Coast, and East Coast) Despite Appalachian coals being marginally competitive on a global cash cost basis, US East Coast exports are primarily driven by European and South American demand two areas where the US is logistically advantaged 14

15 US Coal Export Market and Terminal - Appendix Saurabh Pandey Director of Business Development SunCoke Energy Platts Coal Marketing Days Sept 22-23, 2014

16 Asian Demand India is now forecast to become the largest single market for seaborne thermal coal, helping to offset muted import demand growth in China Thermal - Coal Fired Boiler Utilities Share of Coal in Fuel Mix (2012) Seaborne Thermal Coal Import by Region Source: World Steel Dynamics, Goldman Sachs The Thermal Coal Paradox Although China has been the key driver in thermal seaborne demand as of late, it faces headwinds from oversupply, environmental regulations, and a more diverse fuel mix shifting towards renewable energy India forecasted to become the biggest single market for seaborne thermal coal, as domestic production falls behind demand of the country s highly coal-dependent power sector (~70% coal share of overall fuel mix) (M tons) 2,750 2,000 1, (M tons) 2,750 2,000 1, (M tons) Met. Steel Production Total Steel Production '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Crude Steel Production - BF/BOF '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Met Coal Consumption CAGR 1.35% '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E 16

17 European Demand Thermal coal headwinds from heightened regs. and increased renewable energy use; Steel production expected to rebound and drive greater European met consumption Thermal - Coal Fired Boiler Utilities 1 Met Steel Production (% Power Generation from Coal) (% Total EU Power Generation) (M tons) 500 Total Steel Production 100% 20% % 60% 40% 20% 0% 15% 10% 5% 0% (M tons) 500 '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Crude Steel Production - BF/BOF Main European US export markets include the UK, Netherlands, Italy, and Germany, whose power generation collectively represents a large share of total EU production Headwinds from strict environmental regulations., greater dependence on renewable energy, availability of Russian natural gas, and US LNG exports threaten coal s share of power generation mix Source: World Steel Dynamics, European Association for Coal & Lignite, Platts 0 (M tons) '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Met Coal Consumption 2 CAGR 1.46% '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E 1. Based on power generation structure in EU-28 in Recently announced planned AM Liege Coke Plant closure has potential to reduce met. coal demand by 0.5Mtpa 17

18 South American Demand South American met coal demand is expected to grow steadily on increased steel production Met Steel Production (M tons) 200 Total Steel Production (M tons) 200 '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Crude Steel Production - BF/BOF (M tons) '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Total Met. Coal Consumption CAGR 2.34% 20 0 '09 '10 '11 '12 '13 '14E '15E '16E '17E '18E '19E '20E Source: World Steel Dynamics 18