Global Steel and Met Coal Current situation and Outlook for 2016

Economics – a disappointing year getting steadily worse World GDP growth, USD nominal, % YoY US dollar v other currencies, 1yr ago = 100 Source: IMF, Macquarie Research, November 2015 Source: Bloomberg, Macquarie Research, November 2015

China – we have become too dependent on it Growth in global IP by region, cumulative from 2011, % Source: National data, Macquarie Research, November 2015

China’s GDP – is it really 6.9%? Can it keep >6%? Nominal change in value add by sector Source: Gavekal, CEIC, Macquarie Research, November 2015

Disinflationary pressures much worse in upstream sectors China in perspective- domestic production lower cost, but further growth remains Disinflationary pressures much worse in upstream sectors Only 36% of population has urban “Hukou” Source: CEIC, Macquarie Research, November 2015

Steel - weaker and falling; 2015<<2014 1,400 1,450 1,500 1,550 1,600 1,650 1,700 1,750 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec mtpa Global steel output 2012 2013 2014 2015 Source: worldsteel, NBS, Macquarie Research

Steel outlook- demand falling, has China peaked?   2014 2015 2016 old new change (Mt) change (%) EU 27 146.8 148 149.9 149.8 -0.1 -0.1% 154.1 153.1 -1 -0.6% Other Europe 37 36.9 38 40.1 -2.1 38.5 40.6 CIS 56.5 56.1 52.4 49.9 -2.5 -4.8% 52.2 -2.3 -4.4% NAFTA 144.6 144.8 143.3 140.8 -1.7% 145.1 143.7 -1.4 -1.0% Cenral & South America 48.1 48.8 46.5 45.2 -1.3 -2.8% 46.1 -2 -4.2% Africa 36.6 39.6 -1.1 41.5 40.9 -0.6 -1.4% Middle East 51.9 53.3 53.9 0.6 1.1% 55.6 56.3 0.7 1.3% Asia & Oceania 1015.6 1016.8 1021.5 995.1 -26.4 -2.6% 1030.4 992.8 -37.6 -3.6% World 1537.3 1539.9 1544.4 1513.4 -31 -2.0% 1565.5 1523.4 -42.1 -2.7% Developed Economies 411.9 413 412.6 404.2 -8.4 420.3 411.6 -8.7 -2.1% Emerging Economies 1125.5 1126.9 1131.4 1109.2 -22.2 1145.2 1111.8 -33.4 -2.9% China 710.8 707.2 685.9 -21.3 -3.0% 703.7 672.9 -30.8 MENA 70.1 72.9 73.3 0.4 0.5% 76.3 77.2 0.9 1.2% Emerging & Developing Economies ex China 414.7 416.1 424.5 423.3 -1.2 -0.3% 441.5 439.6 -1.9 -0.4% World ex China 805 829.1 826.6 827.5 0.1% 837.2 851.3 14.1 1.7% Source: worldsteel,

Steel problems- China’s steel exports are harming global steel and coal industries, and could continue Chinese steel exports, crude steel basis 140 120 100 million tonnes 80 60 40 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F Source: China Customs, WSD, Macquarie Research, November 2015

Seaborne met coal- the treat from China as steel, merchant coke and lower met coal imports Chinese metallurgical coke exports Mtpa 30 25 20 15 10 5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Customs Data, Macquarie Research, September 2015

Demand and Supply- India the key but what about Chinese imports? Source: Macquarie Research, H&W Worldwide Consulting

Supply/Demand summary- improving but risks and uncertainties ahead, Met Coal Demand (mt) 2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 2014-2020 Europe 54 53 56 55 57 1 Japan -2 Korea 28 31 33 34 35 36 3 Taiwan 9 10 11 12 China 52 73 62 50 39 30 -34 India 38 40 47 51 59 63 67 72 25 Brazil 15 19 20 21 22 Other 5 13 14 4 - Total Demand 258 288 294 284 276 283 289 295 Demand ex-China 206 215 232 234 238 246 255 261 267 Growth Met Coal Supply (mt) Australia 145 170 186 189 187 190 Canada 27 26 32 2 US 24 -29 Russia 16 18 Indonesia 6 Mozambique 7 8 Total Supply 285 274 273 277 293 Notional Balance -0 -3 -6  

Summary- is there a light at the end of the tunnel or another train coming? China is causing major hurt to met coal, with steel & coke exports, reduced imports hit ~24Mt this year Global steel will remain weak in 2016 Further reduction in Chinese coal imports are forecast, with small reductions in steel exports India is the only real growth hope – but will it disappoint? US supply will fall further, but how much is viable at low prices/high US dollar Could things get worse – potentially yes However, steel is vital for modern life as its met coal