Long Term Price Forecast

Transcription

1 Long Term Price Forecast Steam Coal and Freight April 2017

2 About this report Long Term Price Forecast Steam Coal And Freight is the sixth annual edition of the Long Term Price Forecast, published by Perret Associates. In the production of this report Perret Associates has drawn on its extensive knowledge of the coal and shipping market, accumulated since 2000, as well as its large network of independent analysts, specialising in particular countries and products. In this edition, our external collaborator Gareth Griffiths has helped us to develop a detailed analysis of the South African market (see his short biography below). In each report and update, we examine those countries and products which we think are particularly relevant at that time. Each quarterly publication contains: Fully updated world seaborne steam coal supply/demand (imports and exports) forecasts for more than 50 countries up to 20 years ahead. Fully recalibrated top-down supply/demand models for China, India and most relevant countries. Detailed steam coal demand / exports forecasts for up to 50 countries. Coking coal imports forecasts for China and India up to 20 years ahead. Fully updated cost of production curves for the 6 main exporting countries (Indonesia, Australia, South Africa, Russia, Colombia and the US), based on our comprehensive database of all the main mines in the world. Price forecast the next 4 quarters and up to 20 years ahead. Price forecasts for high quality steam coal with sensitivity analysis: o FOB Newcastle o FOB Richards Bay o FOB Colombia o FOB Russia Murmansk and o DES ARA. Price forecasts for medium and low quality steam coal with sensitivity analysis: o FOB Newcastle 5,500 o FOB Richards Bay 5,500 o FOB Indonesia 5,900 and 4,900 o CFR China 5,500. Price forecasts for the main dry bulk freight routes with sensitivity analysis: o Capesize 5TC o Capesize C4 o Capesize C7 and o Panamax 4TC. Section 1 includes all our main conclusions and assumptions, as well as our world supply/demand balance sheet and price forecasts for the various coal and freight products. Section 2 examines the main importing countries. Section 3 examines the main exporting countries Perret Associates Page 2

3 About Perret Associates Perret Associates is a London-based consultancy, specialising in the coal, freight, iron ore and steel markets. The company offers a wide range of services in market analysis and forecasting, business development, strategy and risk management. Guillaume Perret, the founder and director of Perret Associates, has been influential in the development of today s coal trading market, having traded the first API2 swaps with a few other pioneers when developing the risk management desk of RWE Trading back in 2000 in London. This report reflects Perret s hands-on trading background, with an emphasis on facts and data. Other Perret Associates publications include: The International Coal Trading Market : An in-depth analysis of the physical and financial coal markets and how they could evolve Trading Iron Ore: An in-depth and independent analysis of the iron ore trading market and how it could evolve (2012, published by Metal Bulletin) The International Coal Trading Market Trading Iron Ore: A full feasibility study for a new derivatives contract (2008, published by Metal Bulletin) Steel futures: A turning point for the industry? (2008, published by Metal Bulletin). The International Coal Trading Market 2007 The International Dry Freight Market Perret Associates Page 3

4 Authors of the report Gareth Griffiths Gareth is a senior marketing and trading specialist with 30 years experience in the mining / extraction sector, predominantly in the thermal and metallurgical coal market. He worked in numerous senior positions with the large international mining company Anglo-American during Gareth started and developed his career at the coal division of Shell International Petroleum between 1985 and Gareth holds a Materials Science BSc 2:1 degree from Sheffield University in the UK. Guillaume Perret Guillaume Perret is the founder and director of Perret Associates. He has more than 20 years of extensive experience in commodities trading. Before establishing his own consulting business, Mr Perret set up and developed the coal and freight trading desk for the German utility RWE in London and traded grains for the international trading house Louis Dreyfus. Drawing on his extensive hands-on experience in front offices, Perret s consultancy provides a very comprehensive and unique to our knowledge portfolio of analysis and forecast of the coal and freight markets, covering the entire curve. Adam Burdess Adam been working with Perret Associates since the launch of the company in Adam is involved in the production of our various market reports as well as consultancy projects. Prior to this Adam has built up a large working experience in particular with consultancies and banks. Adam has an MBA from the London Business School, and a BA in Modern History from Oxford University. He is also an Associate at the Chartered Institute of Bankers in London. Ozgur Keskin Ozgur has been working with Perret Associates since 2010, mainly on analytical and modelling projects. Ozgur holds an engineering Masters degree from Cambridge University and an MBA from London Business School. He has worked with many Blue Chip clients globally on key projects as part of management consulting teams. Whilst at Morgan Stanley he worked on the quantitative research desk within their Commodities business unit developing specialised models and analytical tools for traders and sales people. Dariusz Sedzicki Dariusz has been working as an analyst with Perret Associates since Dariusz is mainly involved in the production of our various market reports and analysis as well as data gathering. Dariusz has obtained a BA degree in History and Archaeology (2011) and LLM degree in International Economic Law, Justice and Development (2013) from Birkbeck College, University of London Perret Associates Page 4

5 Table of Contents 1 Summary: supply/demand continues to tighten 9 2 Imports China Slowing GDP growth Coal-fired generation on the rise again Coal-fired generation stable, despite the cap on new capacity Industrial production still growing but more slowly Structural decline in coal production Chinese steam coal imports supported India Slight decrease in GDP growth forecast New record for total and coal-fired generation Cap on new coal-fired capacity after Robust demand from other sectors Further growth in domestic crude coal production Indian steam coal imports forecast to erode Japan South Korea Other countries Taiwan Thailand Malaysia Vietnam Philippines Pakistan EU 15 imports forecast Germany UK Netherlands Perret Associates Page 5

6 2.6.4 Italy Spain Turkey Egypt Other countries: Atlantic Israel Others 66 Morocco 66 Jordan 67 3 Exports South Africa Production highly concentrated Structural decline in coal quality but pricing still on API The dominance of Richards Bay vs. other terminals South African exports disappoint again Eskom the largest coal-fired utility in the world, but output flattening Coal demand from the industrial sector: switching to higher quality Investment challenges in South Africa Investment strategies of the main players Waterberg Mine Developments South African cost of production marginally higher Forecast South African exports: flat to slight increase Indonesia Decline in exports Domestic coal demand forecast revised downwards Stabilisation of Indonesian exports Indonesian cost of production curve Australia Exports decline Diversification and divestment in the Australian mining sector Average cost of production stable Perret Associates Page 6

7 3.4 Russia Russian cost of production Colombia Shift in exports Rebalancing between the main exporters Colombian cost of production US coal responds to Trump presidency Exports bottom out Rebalancing of the generation mix Crude coal production stabilising US cost curve of production 101 Table of Exhibits Exhibit 1 Seaborne steam coal supply/demand, , m tonnes, April Exhibit 2 Coal inventories, main locations, April 2017, m tonnes 12 Exhibit 3 Russian Rouble vs. US dollar 13 Exhibit 4 Main coal currencies forecast, Exhibit 5 Brent spot price forecast, $/barrel 14 Exhibit 6 Spot vs. cost of production, main origins, December 2016, April Exhibit 7 Base Case FOB price forecast, US$/t, nominal 16 Exhibit 8 FOB NEWC., price forecast, sensitivity analysis, US$/t, nominal 19 Exhibit 9 FOB R.Bay 6,000 NAR price forecast, sensitivity analysis, $/t, nominal 19 Exhibit 10 FOB P. Bolivar 6,000 NAR price forecast, sensitivity analysis, $/t, nominal 19 Exhibit 11 FOB Russia Murmansk, 6,000 NAR, sensitivity analysis, $/t, nominal 20 Exhibit 12 FOB NEWC, 5,500 NAR, price forecast, sensitivity analysis, $/t, nominal 21 Exhibit 13 FOB R.Bay 5,500 NAR, price forecast, sensitivity analysis, $/t, nominal 21 Exhibit 14 FOB Indo. 5,900 GAR, price forecast, sensitivity analysis, $/t, nominal 21 Exhibit 15 FOB Indo 4,900 NAR, price forecast, sensitivity analysis, $/t, nominal 21 Exhibit 16 CFR China, 5,500 NAR, price forecast, sensitivity analysis, $/t nominal 22 Exhibit 17 Capes 5TC index, price forecast, Sensitivity Analysis, $/day, nominal Perret Associates Page 7

8 Exhibit 18 Capes C4 index, price forecast, Sensitivity Analysis, $/t, nominal 22 Exhibit 19 Capes C7 index, price forecast, Sensitivity Analysis, $/tonne, nominal 22 Exhibit 20 Panamax 4TC index, price forecast, Sensitivity Analysis, $/day, nominal 23 Exhibit 21 DES ARA price forecast, based on Colombia, $/tonne, nominal 23 Exhibit 22 DES ARA forecast based on Russia, $/tonne, nominal 24 Exhibit 23 Comparison BCase DES ARA based on Colombian and Russian coal, $/t 24 Exhibit 24 China GDP growth forecast, % 25 Exhibit 25 Chinese electricity mix, TWh 26 Exhibit 26 Coal s share of total Chinese electricity generation 27 Exhibit 27 China: forecast electricity mix, TWh 28 Exhibit 28 Chinese coal-fired generation and capacity forecast 30 Exhibit 29 Chinese steam and coking coal demand, forecast 30 Exhibit 30 Chinese crude coal production forecast, steam and coking coal, m tonnes 32 Exhibit 31 Chinese steam and coking coal imports forecast, m tonnes 33 Exhibit 32 India GDP growth, historical and forecasts, % 34 Exhibit 33 Coal, share of total electricity generation, % 34 Exhibit 34 Indian electricity mix, TWh 35 Exhibit 35 Indian capacity forecast, GW 36 Exhibit 36 Indian steam coal demand for electricity generation, forecast, m tonnes 37 Exhibit 37 Indian cement production, m tonnes 37 Exhibit 38 Indian steam and coking coal demand, forecast, m tonnes 38 Exhibit 39 Forecast Indian steam and coking coal production, m tonnes 39 Exhibit 40 Indian steam and coking coal imports, m tonnes 39 Exhibit 41 Japanese steam coal imports with split per origin, m tonnes 40 Exhibit 42 South Korean electricity generation per source, TWh 42 Exhibit 43 South Korean steam coal imports, m tonnes 43 Exhibit 44 South Korean tax system table 44 Exhibit 45 Taiwanese steam coal imports, m tonnes 46 Exhibit 46 Thailand electricity generation, per source, TWh 47 Exhibit 47 Thailand steam coal imports, m tonnes, split by origin % 48 Exhibit 48 Malaysian steam coal imports, m tonnes Perret Associates Page 8

9 Exhibit 49 EU 15 seaborne imports steam coal imports, m tonnes 53 Exhibit 50 German electricity generation per source, TWh 53 Exhibit 51 German steam coal imports per origin, m tonnes 55 Exhibit 52 Netherlands coal usage for power generation, m tonnes 59 Exhibit 53 Spanish electricity generation by fuel, TWh 61 Exhibit 54 Turkey, electricity generation per source, TWh 62 Exhibit 55 Turkish steam coal imports m tonnes, and Colombia s share % 64 Exhibit 56 South African coal mines location 68 Exhibit 57 South African reserves and resources, bn tonnes 69 Exhibit 58 globalcoal RB1 specifications 70 Exhibit 59 Spread FOB R.Bay 6,000 5,500 NAR, $/tonne 71 Exhibit 60 Richards Bay and other terminals exports, m tonnes 72 Exhibit 61 RBCT shareholders, phase V, % 72 Exhibit 62 Richards Bay coal inventories, m tonnes 73 Exhibit 63 South African exports by destinations, m tonnes 75 Exhibit 64 South African cost curve, FOB, not adjusted for CV, April Exhibit 65 Indonesian steam coal exports, by destination, m tonnes 85 Exhibit 66 Indonesian cost curve, FOB, not adjusted for CV, April Exhibit 67 Australian steam coal exports by destination, m tonnes 89 Exhibit 68 Japan s share of Australian exports, % 89 Exhibit 69 Australian cost curve, FOB, US$/tonne, not adjusted for CV, April Exhibit 70 Russia, seaborne steam coal exports, m tonnes 91 Exhibit 71 Russian cost curve, FOB, US$/t, not adjusted for CV, April Exhibit 72 Colombian exports by destination, m tonnes 94 Exhibit 73 Colombian cost curve, FOB, not normalised, April Exhibit 74 Colombian Peso vs. US dollar 98 Exhibit 75 US steam coal exports, per destination, m tonnes 98 Exhibit 76 Capacity utilisation at US coal-fired power plants, % 99 Exhibit 77 US coal- and gas-fired generation, by month, TWh 100 Exhibit 78 US crude coal production, m tonnes 100 Exhibit 79 US cost curve, FOB, not adjusted for CV, $/tonne, April Perret Associates Page 9