1. Global Steel and Met Coal
Current situation and Outlook for 2016

2. 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

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

4. 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

5. 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

6. 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

7. 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,

8. 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

9. 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

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

11. Supply/Demand summary- improving but risks and uncertainties ahead,
Met Coal Demand (mt)
2012
2013
2014
2015F
2016F
2017F
2018F
2019F
2020F
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

12. 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