© HMS Bergbau Group

not to be copied or distributed without written consent Slide 0

Project Name

Coal market – a makro trend

Wendelin Knauss

Flensburg, März 2016

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 1

Project Name HMS Bergbau AG – Dry Bulk Trading from Berlin with Subsidiaries

in South Africa, Singapore, Indonesia, Poland

Headquarters

Subsidiary

Rep Office

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 2

Project Name

Power generation

70%

Steel industry 15%

Cement industry

3%

Others 12%

Note: It is assumed that cement consumed about 400 Million tons in 2014

Sources: Author’s estimates based on own research and analysis; Schernikau 2010; VDKI 2006-2015; Ritschel/Schiffer 2007; IEA Energy Outlook 2007-2014, i200

Usage of Coal 2013

Estimation

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 3

Project Name

0

20

40

60

80

100

China USA Other

5.033 TWh

22%(1) 1.1

28

TW

h, 5

%

4.291 TWh

19%(1) 1.0

71

TW

h, 5

%(1

)

1.0

34

TW

h, 5

%(1

)

63

4 T

Wh, 3

%(1

)

63

0 T

Wh, 3

%(1

)

56

4 T

Wh, 2

%(1

)

53

5 T

Wh, 2

%(1

)

55

2 T

Wh, 2

%(1

)

7.910 TWh

35% Share of

energy source

worldwide in %

Nuclear (11%)

Other (22%)

Coal (40%)

Gas (22%)

Petroleum (5%)

Ind

ia

Russia

Ja

pa

n

Can

ad

a

Ge

rma

ny

Fra

nce

B

razil

Ko

rea

∑ = ~22.750 TWh

Electricity generation

+3,2% p.a. (2)

World

p.a.

+9,7%(2)

p.a.

+7,6%(2) Coal p.a.

+3,2%(2)

2013 Top 10 Electricity Producers…

… Account for 68% of Global Electricity Production

(1) Electricity production share of respective country; (2) CAGR 2005-2012 in %

Sources: IEA-Statistics 2014; author’s analysis; i234

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 4

Project Name

Sources: IEA-Statistics 2004 to 2014; author’s analysis, i236

0

20

40

60

80

100

China USA Other

Ind

ia

Russia

Ja

pa

n

Can

ad

a

Ge

rma

ny

Fra

nce

B

razil

Ko

rea

2013 ∑ = ~22.750 TWh

0

20

40

60

80

100

China USA Other

Ja

pa

n

Russia

Ind

ia

Can

ad

a

Ge

rma

ny

Fra

nce

B

razil

UK

2005 ∑ = ~18.300 TWh

World average

coal share

Nuclear (15%) Other (18%) Coal (40%)

Gas (20%) Petroleum (7%)

Nuclear (11%) Other (22%) Coal (40%)

Gas (22%) Petroleum (5%)

Coal and Electricity Generation 2005 vs. 2013

% %

World average

coal share

Electricity generation in % share of energy source worldwide

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 5

Project Name

World 1990 Growth 1990-2013(23 years)

World 2013 Growth 2013-2035(22 years)

World 2035

57%

8.118

Note: Percentages may not add to 100 due to rounding

Sources: BP Energy Outlook 2015; s695 and S154; IEA (what, year?); author’s analysis; i202

Energy Demand Will Grow Until 2035: OECD vs. Non-OECD

World Energy Demand Will Continue to Increase, Driven by Non-OECD Demand

33%

8%

4.612

9%

47%

24%

20% 2,2%

12.730

5%

22%

43%

30%

4.724

16%

36%

44%

4%

8%

26%

33%

33%

17.455

2,0% 1.4%

0,1%

2,0%

2,2%

3,8%

India

OECD

Non-OECD excl. China & India

China

Avg. growth p.a. (CAGR) x%

Primary energy consumption growth by region (in Billion toe)

81%

43% (Non-OECD)

57% (Non-OECD)

96%

67%

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 6

Project Name

Note: 2013 data; reserves + resources = remaining potential; oil and gas include non-conventional reserves and resources

Sources: BGR 2014; author’s analysis; i254b

265

100 58 52 20

4.436

2.658

244 132

245

0

200

400

600

800

1000

1200

1400

1600

Oil Uranium Gas Hard coal Lignite

4.000

2.000

2.500

3.500

3.000

Static range of energy fuels worldwide (production ratios) in 2013

4.500 Years

2013 Coal’s Remaining Potential is Huge

Left column: reserve/production ratio

Right column: remaining potential/production ratio

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 7

Project Name So, what’s the macro-trend for coal?

+40%

coal

+45%

coal?

Coal: 30% primary energy share Coal: +40% electricity share

(China ~75%, India ~70%, ∑ Asia +60%)

World electricity (today)

World electricity (in 20 years)

Absolute and relative growth of coal for power is inevitable – until an energy revolution!

… population will grow from 7,3 Bln people today to about ~8,5 Bln by 2035

1,5 Bln people have

no electricity

2 Bln people have only

access to erratic power

∑ 3,5 Bln people lack

electricity today!

Source: Author’s research and analysis based on Schernikau 2010; IEA-Statistics 2012 and 2014; Forbes 2014; VDKI 2006 to 2015; ixxx

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 8

Project Name Powering the African Continent

Ghana

11.401

Malawi

1.929

South Africa

239.166

Egypt

152.914

Algeria

53.795

Libya

27.908

Cameroon

6.145

Réunion

0,923

Morocco

26.101

Côte d‘Ivoire

5.986

Lesotho

0,746

Nigeria

26.065

Angola

5.774

Madagascar

0,736

Mozambique

17.762

Ethiopia

5.442

Mauritius

0,584

Zambia

12.047

Senegal

2.818

Botswana

0,350

DRC (Congo)

8.310

Gabon

1.755

Kenya

7.909

Namibia

1.687

Sudan

7.334

Rep. Congo

1.307

Tunisia

16.022

Tansania

5.286

Guinea

0,554

Zimbabwe

7.456

Uganda

1.536

Hydroelectricity

Wind

Coal

Nuclear

Gas

Oil

Biomass & waste

Geothermal

Solar

African Population without

access to electricity

Electricity generation in selected African

countries (in TWh)

Ethiopia 77%

Djibouti 52%

Eritrea 67%

Mada- gaskar 86%

Western Sahara (under UN mandate)

Comoros 52%

Seychelles 70%

Sudan 71%

Kenya 81%

Tanzania 85%

Uganda 85%

Burundi 95%

Rwanda 89%

Dem. Rep. Congo 85%

Zambia 81%

Malawi

91%

Zimbabwe63%

Mozambique 85%

Swaziland 65%

Mauritius 0%

Lesotho 83%

South Africa 17%

Botswana 57%

Namibia 56%

Angola 65%

Rep. of Congo 63%

Gabon 18%

Equatorial Guinea 71%

C. African Rep. 90%

Chad 96%

Niger 91%

Nigeria 52%

Cameroon 46%

Benin 72%

Ghana 39%

Togo 72% Côte d'Ivoire 41%

Liberia 96%

S. Leone 88% Guinea 79%

Guinea-B. 43% Gambia 69%

Senegal 43%

Mauritania 82% Mali

83%

B. Faso 87%

Algeria 1%

Morocco 1% Tunisia 0%

Libya 0% Egypt 0%

Cap Verde 33%

Less than 40%

60-79,9% 40,0-59,9%

80-89,9% 90-100%

Source: Renewable Energy 2015; Renewable Energy World Magazine crediting AEEP Status Report 2014 and The Shift Projects, s746, i284

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 9

Project Name Coal Receives Only Minimal Resource Investment Share …

World Energy Investments Cumulative Between 2014 and 2035 (New Policies Scenario)

17%

9% 13%

14%

8%

17%

Energy resource investments:

~23,8 Trillion US$(1)

Coal resource investments:

~1,0 Trillion US$(1)

China

India Australia &

Indonesia 13%

US, Canada

& Colombia

Russia &

South Africa

Other & Shipping

71% Mining

(sustaining and new)

Shipping & ports

Coal

29% 37,4%

Gas

58,2%

Oil

4,4%

(1) Global cumulative investment in Energy 40 Trillion US$, of which 40% or 16,4 Trillion US$ are investments in electricity generation (of which 9,6 Trillion power generation); 23,8 Trillion US$ investments in energy resources

Note: IEA New Policy Scenario assumed, US$ of year 2012

Sources: IEA World Energy Investment Outlook 2014; Dissertation Lars Schernikau 2009, s683, p101, p103; i221b

Coal receives only 1.034 Billion US$ or 4% of

resource investments

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 10

Project Name

(1) The author added 61 Mt of subbituminous coal supplied to India in 2014 to the seaborne trade numbers; Perret estimates 985 Mln tonnes

Sources: VDKI 2014-2015; author’s analysis; i206b

939 Mt International Traded Steam Coal

Σ = 7,2 Bt

1,3 Bt internationally

traded

5,9 Bt local

consumption

Σ = 1,3 Mt

1.241 Mt seaborne

trade

85 Mt green border

trade

Σ = 1,2 Mt

939 Mt steam coal(1)

309 Mt coking coal

Production International trade Seaborne trade

Global coal volumes in 2014

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 11

Project Name 2014 Global Seaborne Coking Coal Trade Flows

Canada

30 Mt

Colombia

6 MT

Russia

13 Mt

Indonesia

1 MT

Mozambique

2 Mt Australia

186 Mt

Brazil

19 Mt

Europe

59 Mt

India

49 Mt

China

61 Mt

Japan

55 Mt

Korea

33 Mt 32 Mt

USA

53 MT

1 Mt

3 Mt

7 Mt

2 Mt

2 Mt 22 Mt

Taiwan

11 Mt

40 Mt

19 Mt

Major exporter

Major importer

Note: 2014 full-year data, making assumptions for land-borne trade

Source: MacQuarie 2015 (s754) based on Customs data, Macquarie Research, September 2015, i227

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 12

Project Name

1) Includes China (222 incl 60 lignite), Japan (114), Korea (107), Taiwan (68), Thailand (25), Malaysia (22) Hong Kong (13), other (South East) Asia (35)

2) Including low CV/lignite steam coal exports

3) Including Mediterranean and North Africa

Source: Author’s research and analysis, based on Perret

40 %

Coal 79

South

Africa

214

Australia

405(2)

Indonesia

97

8

Vietnam

76

Colombia/

Venezuela

Russia

56

USA

Canada 166(3)

Europe

604(1)

(South-) East

Asia

India

21

Import Export

32

Latin

America

152

50

Other

Coal movements in 2014 in Mio t

985 Mio. Tons Steam Coal Traded in 2014 (Perret)

ME &

Africa

9

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 13

Project Name

2014 Asian Steam Coal Trading Distribution (Perret)

Pacific Market: coal movements in 2014 in Mio t

South Africa

Australia

79

Indonesia

97

China

Russia

4

Pakistan Japan

SEA

South Korea

Hong Kong, imported

13 Mio t

145

107

405(2)

xx

222(1)

214

US, Canada,

Colombia

~ 46 Mio t

(to China: 5 Mio)

(to India: 29 Mio)

(to Africa/ME: 8 Mio)

~ 46 Mio t ~ 51 Mio t

~ 14 Mio t

Indo’s Exports (approx)

India 116

China 106

South Korea 36

Taiwan 27

Japan 15

~ 106

~ 116

Australia’s Exports (approx)

Japan 80

China 62

South Korea 35

Taiwan 20

Export

Import

1) Inc lignite coal from Indonesia

2) Inc lignite coal

Source: Author’s research and analysis, based on Perret; Chinese Customs Data; RBCT Export Data; and various market research

~ 33 Mio t

(to DE+NL: 12 Mio)

(to Turkey: 4 Mio)

(to Med/N.Afr.: 3 Mio)

(to UK: 1 Mio)

153

India

~ 3

~ 1 Taiwan

67

© HMS Bergbau Group

not to be copied or distributed without written consent Slide 14

Project Name

Note: API2 = coal price CIF Europe; API4 = coal price FOB South Africa

Source: Author’s Analysis; McCloskey Coal Price Index, author’s analysis

API-2 (US$/t)

API-4 (US$/t)

0

25

50

75

100

125

150

175

200

225

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

Jan

12

Jan

13

Jan

14

Jan

15

Jan

16

Jan

17

Jul 08: 210 US$/t US$/t

Mar 09: 62 US$/t

Coal Indices 2002-2015 (as per November 2015)

Prices today at 8-year low

Coal will be around for decades to come…

… and coal prices will definitely recover (only when?)

40455055606570758085

Ju

l 1

4

Se

p 1

4

No

v 1

4

Ja

n 1

5

Mrz

15

Mai 1

5

Ju

l 1

5

Se

p 1

5

No

v 1

5

Ja

n 1

6

Mrz

16

Mai 1

6

(2014 historic and forward)

Per Nov 2015

?