Coal market a makro trend Wendelin Knauss Flensburg, März 2016 not to be copied or distributed without written consent Slide 0
HMS Bergbau AG Dry Bulk Trading from Berlin with Subsidiaries in South Africa, Singapore, Indonesia, Poland Headquarters Subsidiary Rep Office not to be copied or distributed without written consent Slide 1
Usage of Coal 2013 Estimation Cement industry 3% Others 12% Power generation 70% Steel industry 15% Note: It is assumed that cement consumed about 400 Million tons in 2014 Sources: Author s estimates based on own research and analysis; Schernikau 2010; VDKI 2006-2015; Ritschel/Schiffer 2007; IEA Energy Outlook 2007-2014, i200 not to be copied or distributed without written consent Slide 2
1.128 TWh, 5% 100 80 5.033 TWh 22% (1) 4.291 TWh 19% (1) 1.071 TWh, 5% (1) Russia Japan Canada Germany France Brazil Korea 2013 Top 10 Electricity Producers Account for 68% of Global Electricity Production Share of energy source worldwide in % 1.034 TWh, 5% (1) 634 TWh, 3% (1) 630 TWh, 3% (1) 564 TWh, 2% (1) 552 TWh, 2% (1) 535 TWh, 2% (1) 7.910 TWh 35% = ~22.750 TWh Electricity generation +3,2% p.a. (2) Other (22%) 60 40 20 p.a. +9,7% (2) Nuclear (11%) Petroleum (5%) Gas (22%) Coal (40%) p.a. +7,6% (2) Coal p.a. +3,2% (2) World 0 China USA Other (1) Electricity production share of respective country; (2) CAGR 2005-2012 in % Sources: IEA-Statistics 2014; author s analysis; i234 not to be copied or distributed without written consent Slide 3
Japan Russia Canada Germany France Brazil UK Russia Japan Canada Germany France Brazil Korea Coal and Electricity Generation 2005 vs. 2013 Electricity generation in % share of energy source worldwide % 2005 = ~18.300 TWh % 100 100 2013 = ~22.750 TWh 80 80 60 60 40 20 0 World average coal share China USA Other 40 20 0 World average coal share China USA Other Coal (40%) Gas (20%) Petroleum (7%) Nuclear (15%) Other (18%) Coal (40%) Gas (22%) Petroleum (5%) Nuclear (11%) Other (22%) Sources: IEA-Statistics 2004 to 2014; author s analysis, i236 not to be copied or distributed without written consent Slide 4
Energy Demand Will Grow Until 2035: OECD vs. Non-OECD World Energy Demand Will Continue to Increase, Driven by Non-OECD Demand Primary energy consumption growth by region (in Billion toe) x% China Non-OECD excl. China & OECD Avg. growth p.a. (CAGR) 8.118 8% 33% 2,2% 4.612 9% 47% 24% 20% 43% (Non-OECD) 81% 12.730 5% 22% 30% 4.724 16% 36% 44% 57% (Non-OECD) 96% 4% 17.455 8% 26% 33% 3,8% 2,2% 67% 2,0% 57% 43% 33% 0,1% World 1990 Growth 1990-2013 (23 years) World 2013 Growth 2013-2035 (22 years) World 2035 2,0% 1.4% Note: Percentages may not add to 100 due to rounding Sources: BP Energy Outlook 2015; s695 and S154; IEA (what, year?); author s analysis; i202 not to be copied or distributed without written consent Slide 5
2013 Coal s Remaining Potential is Huge Static range of energy fuels worldwide (production ratios) in 2013 Years 4.500 1600 4.000 1400 3.500 1200 3.000 1000 2.500 800 2.000 600 400 200 0 265 4.436 Lignite Left column: reserve/production ratio Right column: remaining potential/production ratio 2.658 244 245 100 132 58 52 20 Hard coal Gas Uranium Oil Note: 2013 data; reserves + resources = remaining potential; oil and gas include non-conventional reserves and resources Sources: BGR 2014; author s analysis; i254b not to be copied or distributed without written consent Slide 6
So, what s the macro-trend for coal? Coal: 30% primary energy share Coal: +40% electricity share (China ~75%, ~70%, Asia +60%) 1,5 Bln people have no electricity 2 Bln people have only access to erratic power 3,5 Bln people lack electricity today! population will grow from 7,3 Bln people today to about ~8,5 Bln by 2035 World electricity (today) World electricity (in 20 years) +40% coal +45% coal? Absolute and relative growth of coal for power is inevitable until an energy revolution! Source: Author s research and analysis based on Schernikau 2010; IEA-Statistics 2012 and 2014; Forbes 2014; VDKI 2006 to 2015; ixxx not to be copied or distributed without written consent Slide 7
Powering the African Continent African Population without access to electricity Electricity generation in selected African countries (in TWh) Western Sahara (under UN mandate) Cap Verde 33% Morocco 1% Senegal 43% Gambia 69% Guinea-B. 43% Guinea 79% S. Leone 88% Liberia 96% Mauritania 82% Mali 83% Ghana 39% Niger 91% Nigeria 52% Côte d'ivoire 41% Togo 72% Benin 72% Equatorial Guinea 71% 90-100% 80-89,9% 60-79,9% 40,0-59,9% Less than 40% B. Faso 87% Algeria 1% Cameroon 46% Gabon 18% Rep. of Congo 63% Tunisia 0% Libya 0% Chad 96% C. African Rep. 90% Dem. Rep. Congo 85% Rwanda 89% Angola 65% Namibia 56% Burundi 95% Sudan 71% Uganda 85% Zambia 81% Zimbabwe 63% Botswana 57% South Africa 17% Egypt 0% Eritrea 67% Djibouti 52% Ethiopia 77% Kenya 81% Tanzania 85% Malawi 91% Mozambique 85% Swaziland 65% Lesotho 83% Seychelles 70% Comoros 52% Madagaskar 86% Mauritius 0% South Africa 239.166 Egypt 152.914 Algeria 53.795 Libya 27.908 Morocco 26.101 Nigeria 26.065 Mozambique 17.762 Tunisia 16.022 Zambia 12.047 Ghana 11.401 DRC (Congo) 8.310 Kenya 7.909 Zimbabwe 7.456 Sudan 7.334 Cameroon 6.145 Côte d Ivoire 5.986 Angola 5.774 Ethiopia 5.442 Tansania 5.286 Senegal 2.818 Malawi 1.929 Gabon 1.755 Namibia 1.687 Uganda 1.536 Rep. Congo 1.307 Réunion 0,923 Lesotho 0,746 Madagascar 0,736 Mauritius 0,584 Guinea 0,554 Botswana 0,350 Coal Gas Hydroelectricity Oil Nuclear Wind Geothermal Biomass & waste Solar Source: Renewable Energy 2015; Renewable Energy World Magazine crediting AEEP Status Report 2014 and The Shift Projects, s746, i284 not to be copied or distributed without written consent Slide 8
Coal Receives Only Minimal Resource Investment Share World Energy Investments Cumulative Between 2014 and 2035 (New Policies Scenario) Energy resource investments: Coal resource investments: ~23,8 Trillion US$ (1) ~1,0 Trillion US$ (1) Other & Shipping Oil 58,2% Gas 37,4% 4,4% Coal 71% 29% Mining (sustaining and new) Shipping & ports Russia & South Africa US, Canada & Colombia 17% 8% 14% 13% 17% 9% China Australia & Indonesia 13% Coal receives only 1.034 Billion US$ or 4% of resource investments (1) Global cumulative investment in Energy 40 Trillion US$, of which 40% or 16,4 Trillion US$ are investments in electricity generation (of which 9,6 Trillion power generation); 23,8 Trillion US$ investments in energy resources Note: IEA New Policy Scenario assumed, US$ of year 2012 Sources: IEA World Energy Investment Outlook 2014; Dissertation Lars Schernikau 2009, s683, p101, p103; i221b not to be copied or distributed without written consent Slide 9
939 Mt International Traded Steam Coal Σ = 7,2 Bt 5,9 Bt local consumption Global coal volumes in 2014 Σ = 1,3 Mt 85 Mt green border trade 1.241 Mt seaborne trade Σ = 1,2 Mt 309 Mt coking coal 939 Mt steam coal (1) 1,3 Bt internationally traded Production International trade Seaborne trade (1) The author added 61 Mt of subbituminous coal supplied to in 2014 to the seaborne trade numbers; Perret estimates 985 Mln tonnes Sources: VDKI 2014-2015; author s analysis; i206b not to be copied or distributed without written consent Slide 10
2014 Global Seaborne Coking Coal Trade Flows 22 Mt Canada 30 Mt USA 53 MT 7 Mt 3 Mt 1 Mt 32 Mt Europe 59 Mt 2 Mt 49 Mt Russia 13 Mt 2 Mt China 61 Mt Korea 33 Mt Taiwan 11 Mt Japan 55 Mt Colombia 6 MT Indonesia 1 MT Major exporter Brazil 19 Mt Mozambique 40 Mt 2 Mt Australia 19 Mt 186 Mt Major importer Note: 2014 full-year data, making assumptions for land-borne trade Source: MacQuarie 2015 (s754) based on Customs data, Macquarie Research, September 2015, i227 not to be copied or distributed without written consent Slide 11
985 Mio. Tons Steam Coal Traded in 2014 (Perret) Coal movements in 2014 in Mio t 97 USA Europe Russia Canada 166 (3) 50 Vietnam 8 604 (1) (South-) East Asia 56 21 Other 76 Colombia/ Venezuela 32 Latin America South Africa 79 9 ME & Africa 40 % Coal 152 405 (2) Indonesia 214 Australia Export Import 1) Includes China (222 incl 60 lignite), Japan (114), Korea (107), Taiwan (68), Thailand (25), Malaysia (22) Hong Kong (13), other (South East) Asia (35) 2) Including low CV/lignite steam coal exports 3) Including Mediterranean and North Africa Source: Author s research and analysis, based on Perret not to be copied or distributed without written consent Slide 12
2014 Asian Steam Coal Trading Distribution (Perret) Pacific Market: coal movements in 2014 in Mio t ~ 51 Mio t Russia 97 ~ 46 Mio t South Korea ~ 33 Mio t (to DE+NL: 12 Mio) (to Turkey: 4 Mio) (to Med/N.Afr.: 3 Mio) (to UK: 1 Mio) South Africa ~ 3 Pakistan 4 153 ~ 116 107 China 222 (1) ~ 106 405 (2) xx SEA 67 ~ 1 Taiwan Indonesia 145 ~ 14 Mio t Japan US, Canada, Colombia Hong Kong, imported 13 Mio t Export Import 79 ~ 46 Mio t (to China: 5 Mio) (to : 29 Mio) (to Africa/ME: 8 Mio) Indo s Exports (approx) 116 China 106 South Korea 36 Taiwan 27 Japan 15 214 Australia Australia s Exports (approx) Japan 80 China 62 South Korea 35 Taiwan 20 1) Inc lignite coal from Indonesia 2) Inc lignite coal Source: Author s research and analysis, based on Perret; Chinese Customs Data; RBCT Export Data; and various market research not to be copied or distributed without written consent Slide 13
Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jul 14 Sep 14 Nov 14 Jan 15 Mrz 15 Mai 15 Jul 15 Sep 15 Nov 15 Jan 16 Mrz 16 Mai 16 Coal Indices 2002-2015 (as per November 2015) Prices today at 8-year low US$/t Jul 08: 210 US$/t 225 200 175 85 80 75 70 65 60 55 50 45 40 (2014 historic and forward) Per Nov 2015 150 125 100 75 50 25 0 API-2 (US$/t) API-4 (US$/t) Mar 09: 62 US$/t? Note: API2 = coal price CIF Europe; API4 = coal price FOB South Africa Source: Author s Analysis; McCloskey Coal Price Index, author s analysis Coal will be around for decades to come and coal prices will definitely recover (only when?) not to be copied or distributed without written consent Slide 14