ICCC wrap up review and learnings Dr Neil J. Bristow ICCC 24 Hong Kong 16th November 2016 H & W Worldwide Consulting neil.j.bristow@hwworldwideconsult.com

Wrap Up and Learnings Overall economic outlook China It’s a China story - again Major change not GDP but manufacturing and IP Delayed interest rate rises China Large liquidity injections Major boost to infrastructure and housing starts Leading to much higher steel demand and production Steel/pig iron in 2016 > 2015; will be >800Mt Power consumption much higher than forecast H & W Worldwide Consulting

Wrap Up and Learnings Met Coal Thermal Coal It’s a China story – again Cuts to production as demand improved, rising imports Major inventory drawdown, now shortages ROW lack of inventories, and supply factors = tightness Remaining tight into mid late 2017 Thermal Coal It’s a China story - again Restated production improve conditions into 2017 H & W Worldwide Consulting

Outlook and Learnings Future Outlook Learnings Rising uncertainty with “The Donald” but pro coal 2017 concerns re inflation China strong until elections; steel >800Mt, power up Costs likely to rise as probably at trough Learnings Don’t count China out Don’t believe forecasters! Understand the inventory position Lets not get carried away with current prices! H & W Worldwide Consulting

Shipping A bad year with signs of recovery Much more scrapping needed to gain a recovery China – now not building bulk carriers, except Valemax Significant latent capacity remains Significant possible issues regarding ballast water New regulations has potential to lift scraping if fully implemented Recovery in 2018? H & W Worldwide Consulting

India Growth in occurring but slower then predicted Suffering at current coal prices CIL unlikely to meet targets – 200Mt import gap by 2020 Can’t make money with imported coal Outlook for thermal coal weaker 2017-8 then up Sponge iron recovering – BF closures costs of coal Modi likely to be re-elected Summary, targets pushed further out, will not replace China into 2020 or to 2024 H & W Worldwide Consulting

Steel and Met Coal session China Deep China review – continued trends to late 2017 China not finished yet, much more to build Continued rationalisation and consolidation Likely to be a sustained ongoing met coal importer Indices and Derivatives Usual debate – not the cause of current prices Is the benchmark in its death throes, 2017 the end? Still missing derivatives and liquidity H & W Worldwide Consulting

Steel and Met Coal session Supply summary No major expansions in 2017, generally recovery, restarts Concerns about sustainability, lack of investment, pre- strip and maintenance Problems post 2018 – lack of new mine capacity Quality Some concerns regarding lack of fluidity in the market Long term prices Question as to LT prices – far too low, will not allow investment H & W Worldwide Consulting

Power and Thermal Coal session Demand and Supply summary Massive de-stocking in 2016 Major moves 2017 to restock CIL failed to perform 2016 after strong 2015 India 120-200Mt, China supply now rising, tight to Q1 Quality Indonesian mainly low cv – yet to see response Other US and Australia supply risks 2017 Competitiveness vs LNG Europe higher 2017 (nuclear, restocking etc.) Rising Chinese prices December now 740-780Rmb H & W Worldwide Consulting