1. International Perspective
US$ / Nickel / Coal
ANDI - Colombia Genera
February 2015   
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2. Preface
This report is supplied on a private and confidential basis to the customer. It must not be disclosed in whole or in part, directly or indirectly or in any other format to any other company, organisation or individual without the prior written permission of CRU International Limited.
Permission is given for the disclosure of this report to a company’s majority owned subsidiaries and its parent organisation. However, where the report is supplied to a client in his capacity as a manager of a joint venture or partnership, it may not be disclosed to the other participants without further permission.
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3. Who is CRU? CRU Analysis CRU Consulting CRU Events Pittsburgh London
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Sydney
Beijing

4. Presentation topics US$ - Continued dollar strength
Nickel – Indonesia export ban & NPI
Coal – China still key; Colombia a competitive producer

5. CRU believes nickel has the best short term prospects
2015 annual average price forecast (nominal $ or benchmark) versus 2013 average actual prices
Hot
> 15%
Warm
5% to 15%
Cold
-5% to 15%
Freezing
< -15%
Mild
0% to 5%
Cool
0% to -5%
Nickel,
Sulphuric Acid, Tin, Palladium, Bauxite, Sulphur, Cobalt
Zinc, Silicon, Molybdenum,
Chrome Ore, Alumina, Aluminium, Phosphate DAP,
Ferrochrome, Metalics Scrap, Silico-Manganese,
Lead, Platinum,
Ammonia, Thermal Coal, Oil,
Met Coal, Urea, Phosphate Rock, Copper, Potash,
Manganese, Gold,
Iron Ore Silver

6. Global economic performance is diverging
USA’s upswing and China’s slowdown are causing currencies to realign
Plunging oil prices are net positive for the outlook
Modest economic recovery in 2015 – US is key
The $ is going from strength-to- strength
Significant uncertainty and risk
Upside: Oil prices low, US take- off, Indian strength
Downside: China crash, Eurzone woes & ‘Grexit’, Geo-politics: Russia, Mid-East, oil stress 6

7. The US dollar and commodity prices have moved inversely over the years
‘As US dollar soars, commodities get crushed’ – CNBC
‘Copper slumps to 5-1/2-year low on strong dollar’ – Reuters
‘Strong U.S. Dollar to challenge global fertilizer demand’ – Capital Press
‘Dollar rally only just getting started...expect more downward pressure on commodity prices’ – FT
Dollar Strengthens
CRU CONSULTING 7

8. Why might prices and the USD move inversely?
SUPPLY FACTORS
Strong dollar makes revenues look even better against local costs
Greater profit margin
Producers see incentive to increase supply where possible
DEMAND FACTORS
Foreign demand for commodities down when USD is strong
USD-denominated assets more expensive
‘Imported inflation’ may lead to tighter monetary policy
CRU CONSULTING 8

9. Dollar moves are just one factor pushing prices around
Market dynamics differ for each commodity. Dollar impacts on a commodity’s price will vary.
CRU CONSULTING 9

10. Dollar strength to continue
By broadest measure, US dollar up by > 9% since last summer
CRU CONSULTING 10

11. Nickel outlook

12. Nickel market deficits: Stainless steel growth to outpace nickel supply
Apparent consumption stainless steel flat products, million tonnes
Global Ni balance
‘000 t
CAGR 3.4%
CAGR 15.2% 12
CRU CONSULTING
Data: CRU, LME

13. Philippine exports increase
Will Indonesian ore ban bring NPI boom to an end?
Background
NPI industry emerges
RKEFs emerge as lowest cost producers using high-grade laterite from Indonesia
2013 Imports >40Mt ore from Indonesia
January 2014 Indonesia banned export unprocessed nickel products (<4% Ni)
The Future
New ore sources
NPI costs rise in China ; plant closures
Indonesian NPI – lower cost; can volumes be sustained?
Can Philippines sustain current ore output?
How has the industry responded?
Philippine exports increase 13
CRU CONSULTING
Data: CRU, LME

14. Ore key driver of NPI costs
Business cost breakdown by technology type, 2014, %
Data: CRU

15. Ore prices have risen with the ban; NPI prices have not
Monthly average prices, September 2012 = 100 15
Data: CRU, LME

16. Cumulative production, ‘000 tonnes
Chinese NPI producers occupy upper end of the cost curve in 2014 due to higher ore costs
Cost curve for the nickel industry (business costs), 2014, US$/tonne
Cerro Matoso
VBC Business Costs, $/t nickel
Cumulative production, ‘000 tonnes
Data: CRU

17. Coal outlook

18. A changing thermal coal industry
Newcastle, 6,000 kcal/kg spot US$/t FOB 18
CRU CONSULTING

19. Seaborne thermal markets integrated w/ China’s SE provinces Provincial analysis highlights both opportunities & threats for seaborne
The South-East coastal area:
consumes ~40% of China's total power
generates ~35% of China’s total power
produces 4% of China's total coal
Coastal coal trade influenced by:
Demand factors:
Interprovincial transmission
Substitution & generation mix
Underlying demand intensities
Supply factors:
Local provincial production and inland supply
Seaborne imports
Domestic north-south coastal trade
XINJIANG
QINGHAI
INNER MONGOLIA
GANSU
NINGXIA
SHAANXI
XIZANG
SICHUAN
CHONGQING
YUNNAN
GUIZHOU
GUANGXI
HAINAN
HUNAN
JIANGXI
ZHEJIANG
FUJIAN
GUANGDONG
MACAU
SHANGHAI
JIANGSU
ANHUI
HUBEI
HENAN
SHANXI
SHANDONG
HEBEI
LIAONING
JILIN
HEILONGJIANG
Data: CRU

20. India set to overtake China as world’s largest importer

21. Colombian coal production: Above average quality & below average costs21

22. Indonesian & Colombian supply fill most of bottom half – Russian, US & some Australian supply occupy high end of cost curve Seaborne CFR Business Costs – 2014 (US$/tonne)
Cumulative Production (Mt) 22
CRU CONSULTING

23. Industry margins down from 2012 despite cost decreases
Industry margins down from 2012 despite cost decreases. Colombia & Indonesia: only 2 major exporters with margins above global average Weighted global and regional US$/t margins, 23
CRU CONSULTING

24. (+) margins (-) margins
Nearly 40% of seaborne production sold at a loss in Margins by operation US$/t, 2014
(+) margins
(-) margins
Cumulative Production (Mt) 24
CRU CONSULTING

25. Nickel & Thermal Coal set for strong price increases over medium term
2018 annual average price forecast over 2013 average actual prices
Hot
> 15%
Warm
5% to 15%
Cold
-5% to 15%
Freezing
< -15%
Mild
0% to 5%
Cool
0% to -5%
Zinc, Nickel, Tin, Palladium, Sulphuric Acid, Cobalt, Bauxite, Alumina, Aluminium, Molybdenum, Thermal Coal, Chrome Ore, Platinum, silicon,
Ferrochrome, Silico-Manganese, Lead, Manganese, Urea, Met Coal,
Oil
Phosphate DAP, Copper,
Metalics, Scrap, Potash, Ammonia,
Phosphate Rock, Sulphur
Gold, Iron Ore, Silver

26. Thank You Taylor Shively – CRU Base Metals Consulting Manager
Marcio Goto – CRU Gerente Regional América Latina y el Caribe
/ cel.:

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