1. Coal in the CIS – Surprising change and opportunity
Prepared for:
Astana Mining & Metals
June 2016
Prepared by:
Lloyd Hain   

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3. Contents The global context Where has CIS coal traditionally gone?
Future of demand
Outlook
Good afternoon delegates. Firstly I would like to thank the AMM for the opportunity to speak to you all this afternoon.
Today I will be giving an overview of coal mining in the CIS, its place in the global context and where we will see future demand growth the may lead to the opportunity for the industry to increase its exports.

4. The global production Mix
If we first start by looking at where production in the three main producing countries in the CIS sits in the overall global production mix. 10 years ago they represented 455 Mt of coal which accounted for 9.5% of global production. Over the intervening period we saw a very respectable growth of over 14 % from these three producers, however globally we saw global coal production balloon by over 40% driven by growth of 174% in China and 160% in India, as these two countries begun their modernisation driven growth paths fuelled by coal. These countries were already large producers of coal in their own right in 2006, so such large growth has the ability to swamp growth elsewhere.

5. Global production mix excluding China and India
If we then exclude india and china from the equation, production in the rest of the world grew by a far more modest 9.5%. So in this group, the CIS managed to grow their production share slightly from 21% to 22%. However, even in the group we saw spectacular growth from to export focused producers to feed these growing demand markets, where we saw production in indonesia and Australia increase by 85% and 53% respectively.

6. Looking closer at the CIS
Now focusing on the three CIS producers, we can see that apart from ukraine, we can see that apart from a slump in 2009, attributed to a drop in demands due to the GFC, we can see that the coal inductry in Russia and Kazakhstan has grown. Ukraine was also on this same growth path prior to the conflict impacting the key coal mining region of the donbas basin

7. Russia vies with Australia to be the world’s fifth largest coal producer
Russia in its own right is a significant producer and export of both thermal and coking coal. It is important to note that Russia was one of the few coal producers to grow production in and the only producer to increase exports. Year to date it is growing again year on year and is already up 5% to April y/y. But it should be noted that peak russian coal production actually occurred in 1990, when it produced 395 Mt.

8. Kazakhstan is a significant producer
Production in Kazakhstan peaked in 2012 at 112 Mt, also a peak year for non russian exports. After the subsequent fall in production in 2013, we have seen slight growth

9. From a net exporter to a net importer
Ukraine production was growing from the GFC to 2013 as the private sector mining was increasing productivity as the state owned sector was slowly shrinking. When the conflict impacted on production in 2014, it effected the mines in the donbas basin, impacting the mines that produce most of the countries coking coal and anthracite production. This has particularly impacted the vertically integrated steel and power producers who also had their other assets in the region effected.

10. Where has CIS coal traditionally gone?
Contents
The global context
Where has CIS coal traditionally gone?
Future of demand
Outlook
So where does the coal go?

11. Where have Russian exports being going?
Over the past 5 years, we have seen russian exports grow in most markets, however there has been a distinct change in the direction of the exports from European markets in the west towards the growing markets of asia in the east. This has seen the proportion of coal going to Europe reducing from 70% in 2011 to 55% in 2015, and to 50% year to date.

12. Ukraine & Kazakhstan exports look local
The exports from Ukraine and Kazakhstan have focused on supplying coal to their neighbours, with smaller amounts going further afield.

13. Future of demand Contents The global context
Where has CIS coal traditionally gone?
Future of demand
Outlook

14. There are two parts to determining future demand for coal, overall demand…..

15. … and coal’s part of the mix
Power generation mix 15

16. Where is future demand for traded thermal coal

17. Changes in Met Demand

18. Outlook Contents The global context
Where has CIS coal traditionally gone?
Future of demand
Outlook

19. Thermal coal Metallurgical coal
Business Costs Seaborne Tonnages real 2015 US$
Metallurgical coal
Business Costs FOB HCC - Seaborne Tonnages real 2015 US$
2011
2011
2015
2015
Data: CRU.

20. What about costs

21. Shape of future production

22. Please address any questions or comments relating to this presentation to:
Lloyd Hain
Senior Consultant – Steel Raw Materials
T: +61 (2) E:

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