1. U.S. Coal Exports Adapting to Structural Change
West Virginia Coal Mining Symposium 2016
Charleston, West Virginia
January 27, 2016

2. Structural changes affecting seaborne coal trade
Anemic economic growth in the global economy.
China’s demand for raw materials has peaked.
A strong US$ has significantly affected the exchange rates of the local currencies in commodity producing countries.
Excess ocean vessel capacity has affected the freight rates for various seaborne coal trade routes.

3. Global Economic Growth

4. Global Merchandise Trade Growth
Global merchandise trade growth declined in 2015; the first time since 2009

5. Global crude steel production
2015 global crude steel production decreased by 2.8% compared to 2014

6. Global crude steel production growth trends
January 2011 release
January 2016 release
Growth rates of global crude steel production have peaked and are forecast to decrease by an additional 3% in 2016

7. Global energy demand
Due to anemic global growth, global energy demand is moderating

8. Global coal demand
Due to government policies and competing fuels, global coal demand is also moderating

9. China

10. China – no longer an economy based on CAPEX investments and basic industries
Overall growth in energy consumption in 2015 was its lowest since 1998, at 0.9 percent.
Year-on-year growth in electricity consumption was less than 1% in
Fixed asset investment increased 10% year-on-year, a sixteen year low.
Crude steel production declined year-on-year in 2015, the first year- on-year decline since 1981.
Domestic coal production in 2015 is estimated to be 3.7 billion tons, a year-on-year decrease of ~4%.
Steel exports reached million tons, an increase of 19.9% year- on-year.

11. China Seaborne Coking Coal Imports

12. China seaborne coking coal imports Year-on-year change
Y-o-Y reductions in seaborne coking coal imports in 2006, 2008, and 2011 were mainly due to increased imports from Mongolia. During this time, total coking coal imports increased. Recent decreases in seaborne coal imports are due to decreased demand
Y-o-Y reductions in seaborne thermal coal imports in 2015, versus 2014, were ~65 million tons. Since 2013, seaborne thermal coal imports have decreased by ~81 million tons

13. China crude steel production
China crude steel production peaked in 2014 at ~823 million tons. Production declined by -2.3% in Forecasts for 2016 crude steel production range from million tons, i.e. a further decline

14. Currencies

15. Currency exchange rates Median Effective Exchange Rates US$ DXY Index
As the US$ has strengthened, the currencies of commodity exporters have depreciated

16. US$ strengthening on the back of an improving U.S economy
Recovery from the 1982 recession
“Tech” boom
US$ exchange rate value on track to repeat the values experienced during the time period

17. Australian $ Exchange Rate

18. A$ Exchange rate forecast-Another challenge?
Note forecast that the A$ may continue to depreciate to approximately US$0.61, a further drop of ~13%

19. Canadian $ Exchange Rate

20. CD$ Exchange rate forecast-Another challenge?
Note forecast that the CD$ may be stabilizing with minimal depreciation, i.e. CD$1.55 = US$0.6896

21. South African Rand per US$ Exchange Rate

22. Colombian Peso vs. US$ Exchange Rate

23. Russian Ruble vs. US$ Exchange Rate

24. Ocean Freight

25. Ocean freight rates-Capesize vessels Continent/Far East & Tubarao-Qingdao

26. Ocean freight rates-Capesize vessels Hampton Roads (USA) /Rotterdam vs
Ocean freight rates-Capesize vessels Hampton Roads (USA) /Rotterdam vs. Queensland /Rotterdam
The ocean freight rate to ship coal from Queensland, Australia to Rotterdam (Europe) is less than the rate to ship coal from Hampton Roads, Virginia to Rotterdam (Europe)

27. U.S. Coal Exports

28. Seaborne Coal Market

29. Major Seaborne Coking Coal Suppliers

30. Seaborne Coking Coal Supply 2010 to 2015
Percentage Seaborne Coking Coal Market By Region
Region
2010
2011
2012
2013
2014
2015
Australia 63 53 55 57 61 64
USA 19 24 23 17 14
Canada 10 11 09
Other 12 13

31. U.S. Seaborne Coal Exports

32. Hard Coking Coal-Benchmark Settlements (FOBT vessel-Australia)

33. API2 Thermal Coal pricing
API2 is an index representing the price of 11,300 BTU / 1% sulfur coal priced basis a metric ton delivered to Amsterdam / Rotterdam / Antwerp

34. U.S. Coal Exports – How prices affect volumes
U.S. coal companies respond to market prices
Seaborne coking coal currently at 2005 price levels
Seaborne thermal coal currently at 2003 price levels
Year
Total Exports (MT)-ex Canada
2014
83.2 million
2013
106.9 million
2012
114.1 million
2009
53.6 million
2005
45.3 million

35. Summary
The global seaborne market for both coking coal and thermal coal will decline in 2016.
Only low cost producers, i.e. NAPP Pitt #8 Seam, highly efficient CAPP, SAPP, and Illinois Basin longwall operations, are likely to participate in the seaborne market at current price levels
Consolidation will be necessary for many companies to reduce costs, increase efficiencies, and survive.
Get ready, and implement a survival plan, to protect and sustain your business until the market improves in

36. Credits John T. Boyd Company Financial Times
International Monetary Fund
Macquarie Research
McCloskey Group
Platts
SSY Research
T. Parker Host
World Steel Association
World Steel Dynamics

37. Xcoal Energy & Resources
Contact Info
Ernie Thrasher
Xcoal Energy & Resources
Phone: +1 (724)
Web: