Global Coal Services. Prepared by: Dan Watkins 1 February Copyright 2002 Global Insight, Inc.

Transcription

1 Global Coal Services Prepared by: Dan Watkins 1 February

2 Build a Better Strategic Plan Copyright 2002 Global Insight, Inc. Understand Coal Prices, Risks, and Competition Plan Future Freight Requirements Analyze the Impact of New Environmental Policies Anticipate Structural Changes within the Industry Receive an Independent Value-at-Risk Benchmark 2

3 Drawing Upon our Strengths 3

4 Global Coal Services 4

5 Coal Trade Services Global Coal Market Quarterly A detailed quarterly assessment of coal market fundamentals, providing: An in-depth analysis of recent coal and freight spot price developments A look at key factors driving short-term market dynamics and how they relate to underlying long-term trends Quarterly FOB, freight and CIF price forecasts out to 2007 Comparison of forecasts versus TFS and Global Coal forward curves 5

6 Coal Trade Services Global Steam Coal Trade and Price Review A comprehensive long-term view of coal market fundamentals, including: 20-year forecasts of coal demand across 40 countries Base case and alternative scenario forecasts Projections of coal supply costs from all existing and potential major coal exporters Detailed analysis of future risks to the forecasts and the impact of structural changes on the industry 6

7 Coal Trade Services Global Coal Monthly Monitors This service tracks FOB and freight prices for South Africa, Colombia, and Australia covering a rolling two year period. Subscribers also receive Global Insight s custom index which is comprised of a basket of coals made up of 60% South African, 30% Colombian, and 10% Australian. Conferences Each year, Global Insight's Coal Industry Perspective conference provides an opportunity to hear our views of the market and to exchange view with a broad range of industry peers. Custom Presentations Global Insight's international team of coal experts are available to answer questions regarding the industry or deliver customized presentations on the industry. 7

8 Country Coverage 8

9 Building a Better Forecast Coal Price Forecasting Methodology Price (indicative data) Mine Cost Rail & Port Port & Barge Return + Profit Ocean Freight Delivered price CIF ARA price FOB price Supply Chain Approach : We analyze each component of the supply chain separately in order to create a more robust topline number Netherlands Germany 9

10 Copyright 2002 Global Insight, Inc. 10

11 ARA CIF Coal Price year average ( ) = US$/tce C&F ARA EU Historical Linear ( C&F ARA EU Historical ) Historical Trend Line Global Insight Forecast C&F ARA Real coal prices have been on the decline for some time due to productivity gains and exchange rate movements Global Insight predicted a large market inflection point for

12 Mine-mouth Cost Analysis Coal Production Costs Costs Poland Russia Colombia China South Africa Indonesia Australia Geology, exchange rates, and productivity all contribute to relative cost differences. In China, people substitute for technology, making coal production more expensive Production in Million tonnes We produce coal supply curves for all price setting countries 12

13 Mine Cost / Port & Rail Cost Production Costs in Australia 40 Mine Wages Other Mine Costs Productivity gains reduce the wage cost element 30 R & R Charge Port & Rail Haulage Royalty Other mine costs become a higher percentage of mine cost 20 Port and haulage account for almost 50% of total cost Royalty assumed flat in nominal terms

14 How the Market Works A Review of 2003 Atlantic Demand /8 26/ Pacific Demand South Africa sets the price in the Atlantic in the first instant but price is capped by competition from the Pacific. Australia is the price driver in the Pacific and so ultimately becomes the World price driver. In this price setting international ocean sea freight rates play a significant role. In 2003 & into 2004 market failed to operate correctly due to high freight. 14

15 Producer Return and Profit Demand for Coal in Power Generation - by type in % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% USA JP DE UK FR IT SP NL Nuclear Coal Lignite Gas Oil Renewables Coal in the fuel mix for power generation varies from around 50% in the U.S.A. to less than 10% in France 15

16 Producer Return and Profit Medium-term supply/demand balances 16

17 Producer Power Shares 2000 & % 90% Anglo Coal BHP Billiton Glencore Rio Tinto Xstrata 80% 70% 60% 50% 40% 30% 20% The 5 major producers do not have as high a share of production on a global basis as is often thought 10% 0% South Africa Australia Colombia Venezuela Indonesia 17

18 Producer Return and Profit Producer Market Power in Fob Cash Cost Capital Cost Contract Prices High Spot Price 2003 Low Spot Price US$/t basis 6000 nar Fob Fob Fob Fob Fob Fob Fob Fob Fob Fob Fob Fob Australia South Africa Colombia 18

19 Freight trends S. Africa to ARA US$/t 10 5 Average Annual voyage Rates - RBCT to ARA RBCT- ARA Average Average plus 25% Average minus 25% Average Jan-May 2004 High - January 2004 Exceptional conditions in caused the freight market to break out of the long term US$ 7+/- 25% band

20 Ocean Freight China s Contribution to a Strong Market 300, ,000 China Bulk Imports/Exports Coal Exp Ore Imports Steel Imp Coal Import CSP Million Tonnes 260, , , , , , , , ,000 80,000 60,000 40,000 20,000 0 Steel Imp Ore Imports Coal Exp

21 Freight Market Fleet Additions Bulk Carrier Scheduled Newbuildings For Delivery 2004 Dwt For Delivery 2005 Dwt For Delivery 2006 Dwt For Delivery 2007 Dwt For Delivery Dwt 7.0 Million Dwt Handysize Handymax Panamax +80 Capesize 21

22 For Additional Information, Dan Watkins XXX-XXX-XXXX 22