energy and commodity price benchmarking and market insights
TRANSCRIPT
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Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg
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Energy and commodity price benchmarking and market insights
Colombia: Atlantic basin pacesetter Argus Webinar
31 July 2013
Ross Allen
Molly Christian
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• Argus in market data services
◦ Global market intelligence provider
• Market trends & fundamentals
◦ Colombian production and exports
◦ Quality
◦ Competing coals: Russia, South Africa, USA
• Methodological discussion
◦ Indexation in Colombia
◦ 2013 and beyond – What’s coming up
Agenda for today
Copyright © 2013 Argus Media Ltd. All rights reserved.
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• Report prices globally for ◦ Gas
◦ Power
◦ NGL & LPG
◦ Emissions
◦ Coal and coke
◦ Refined products
◦ Crude
◦ Fertilizers
◦ Petrochemicals
• Nearly 500 staff globally
• Rapid growth in spot and term contract indexation, swap market indexation
Argus Media
Copyright © 2013 Argus Media Ltd. All rights reserved.
Argus in market data services
Copyright © 2013 Argus Media Ltd. All rights reserved.
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• Reports include:
◦ Coal prices
◦ Freight rates
◦ Cross-commodity
comparisons
◦ Iron ore and coke
information
• Clear and robust
methodology
Coal, transport & ore
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Indexation and benchmarks include:
Key coal indexes include:
• Argus/IHS McCloskey
Indexes: API 2; API 4;
API 5; API 6; API 8; API
10; and API C1
• Rail coal freight rates
• Physical indexation in
Central Appalachian,
PRB and Illinois basin
markets
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Key crude benchmarks:
◦ Argus Sour Crude Index
◦ Argus ESPO Blend
◦ Argus Dubai Crude
• Products benchmarks:
◦ Eurobob oxy (gasoline)
◦ German diesel
• LPG benchmarks:
◦ ANSI
◦ Argus cif ARA large
Full list available at Argusmedia.com
Colombian coal markets & fundamentals
Copyright © 2013 Argus Media Ltd. All rights reserved.
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• Competitive costs and more
favorable weather aiding
volumes but sour labor
relations have dented
tonnage in 2012 and 2013
• Thermal exports last year
were down by 5pc from 2011
because of strikes but 9.5pc
above the five-year average
Colombian steam coal exports rise in 2007-2012
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
1
2
3
4
5
6
7
8
9
2007 2008 2009 2010 2011 2012 2013
Source: SIMCO
mn mt/month
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• Cerrejon (BHP Billiton, Xstrata, Anglo American) planning to raise output to 40mn mt/yr from 34.6mn mt in 2012
• Glencore’s Prodeco unit targeting 20mn mt in 2014 from 14.7mn mt last year ◦ Inaugurated Puerto Nuevo
terminal in May (initial loading capacity of 21mn mt/yr)
Major producers planning expansions
• Drummond had been
targeting more than 30mn
mt this year compared
with 26mn mt in 2012
ahead of strike, port
setbacks
Copyright © 2013 Argus Media Ltd. All rights reserved.
Colombian steam output to reach 108mn mt in 2018, up 27pc from
last year, mines and energy minister Federico Renjifo says
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• Colombian thermal exports in January-May down 47pc from same period last year (Deep Blue shipping agency)
• Cerrejon, Colombian Natural Resources and Drummond have all encountered strike or port disruptions this year
• Lower seaborne prices reflect softer demand: FOB Bolivar prompt 90-day prices off by 20pc from the start of 2013
Labor strife, lower prices cloud near-term outlook
Copyright © 2013 Argus Media Ltd. All rights reserved.
Source: Deep Blue
0
2
4
6
8
Jan Mar May Jul Sep Nov Jan Mar May
mn mt/month
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Thermal coal reserves in Cesar, Guajira, Cordoba
Copyright © 2013 Argus Media Ltd. All rights reserved.
• 86pc of Colombia’s
exports from largest
miners
o Cerrejon (2010: 43pc)
o Drummond (30pc)
o Prodeco (13pc)
• Reflects significant
project capital needs
o Mines
o Railroads
o Terminals
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Reserves have decent heat but levels vary
Copyright © 2013 Argus Media Ltd. All rights reserved.
Producer: Typical NCV:
(kcal/kg) Sulphur: Terminal:
Cerrejon 5,906-5,933* < 1pc Puerto Bolivar
Drummond 6,017-6,350 < 1pc Puerto Drummond
Glencore 5,933-6,350 < 1pc Puerto Nuevo
Colombia Natural
Resources 5,294-5,739 < 1pc Rio Cordoba
Pacific Coal 6,239-6,739 < 1pc Carbosan
*Range of 5,628-6,000 kcal/kg
Source: Producers, US EIA
Colombian cost advantage
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Colombian steam exports by destination in 2012, mn mt
Copyright © 2013 Argus Media Ltd. All rights reserved.
Source: SIMCO
15.3
8.2
7.9
6.9
5.0
4.9
4.8
3.5
3.3
1.9
1.8
1.8
1.7
1.6
1.1
1.0
0.6
0.6
0.5
0.5
0.2
0.2
0.2
0.2
0.2
0.2
0.1
0.1
0 3 6 9 12 15 18
NetherlandsTurkeyOther
USSpainIsraelChileChina
PortugalSouth Korea
DenmarkBrazil
IrelandItaly
CanadaFrance
ArgentinaGuatemala
CroatiaGermanySlovenia
JapanCayman Islands
Dominican RepublicIndia
TaiwanBelgium
Venezuela
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European delivered prices hit three-year lows
Copyright © 2013 Argus Media Ltd. All rights reserved.
60
70
80
90
100
110
120
130
140
2010 2010 2011 2012 2013
$/mt • Europe’s economic
headwinds and high US,
Colombian exports are
pressuring prices
• Markets expected to stay
under pressure in the near
term despite favorable
economics of burning coal
versus natural gas
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Arbitrage window shut for most US coals
Copyright © 2013 Argus Media Ltd. All rights reserved.
US east coast<1pc sulphur
fob port 80.00
Capesize 11.00
Delivered 91.00
CIF ARA @ $76/mt
Prices are in $/mt for prompt 90 days, 6,000kcal
FOB US Gulf <1pc sulphur
fob port 81.00
Capesize 17.00
Delivered 97.00
FOB US Gulf 3pc typical
fob port 58.85
Capesize 17.00
Delivered 75.85
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Russian coal also above index on delivered basis
Copyright © 2013 Argus Media Ltd. All rights reserved.
Russia
fob Baltic port 80.00
Panamax 8.85
Delivered 88.85
Prices are in $/mt for prompt 90 days, 6,000kcal
CIF ARA @ $76/mt
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Delivered South African coal closer to ARA levels
Copyright © 2013 Argus Media Ltd. All rights reserved.
Richards Bay, South Africa
fob port 72.51
Capesize 8.20
Delivered 80.71 Prices are in $/mt for prompt 90 days, 6,000kcal
CIF ARA @ $76/mt
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Colombia can comfortably price into Europe
Copyright © 2013 Argus Media Ltd. All rights reserved.
US east coast
fob port 80.00
Capesize 11.00
Delivered 91.00
Russia
fob Baltic port 80.00
Panamax 8.85
Delivered 88.85
Richards Bay, South Africa
fob port 72.51
Capesize 8.20
Delivered 80.71
Puerto Bolivar
fob port 66.15
Capesize 10.60
Delivered 76.75
Prices are in $/mt for prompt 90 days, 6,000kcal
CIF ARA @ $76/mt
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Asia-Pacific is a tougher target (cfr south China $85/mt)
Copyright © 2013 Argus Media Ltd. All rights reserved.
Pitt Seam 13,000 Btu, 3.5lb SO2
Port delivered 94.96
Cape, Panamax 31, 39*
Delivered 126-134
Prices are in $/mt for prompt 90-day period, except Pitt Seam. *estimated seaborne rate
Puerto Bolivar (6,000kcal)
fob port 66.15
Capesize 26*
Delivered 92.15 Newcastle (6,000kcal)
fob port 77.02
Capesize 150k 9.20
Delivered 86.22
Colombia price assessment methodology
Copyright © 2013 Argus Media Ltd. All rights reserved.
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Argus/IHS McCloskey Coal Price Indexes
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Argus/IHS McCloskey provides coal prices and historical trend
data for the API indexes, which are the key price benchmarks
used in the international coal industry.
• Exchanges using the API indexes include CME and ICE.
• The Argus/IHS McCloskey coal indexes are used as the settlement
prices in 90% of the world's coal derivative contracts.
• Spot and historical data can be accessed in numerous ways,
including online and via FTP.
More information at: ArgusMcCloskeyCoal.com
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Argus/IHS McCloskey Coal Price Indexes - Thermal
Copyright © 2013 Argus Media Ltd. All rights reserved.
More information at: ArgusMcCloskeyCoal.com
• API 2 - the standard reference price benchmark for coal imported into northwest Europe. It is an average of the Argus cif ARA assessment and the IHS McCloskey NW Europe Steam Coal marker.
• API 4 - the benchmark price for coal exported out of South Africa's Richards Bay. The API 4 index is an average of the Argus fob Richards Bay assessment and the IHS McCloskey Richards Bay FOB marker.
• API 5 - an average of the Argus fob Newcastle 5500 assessment and the IHS McCloskey Australian 5,500 kcal NAR FOB marker.
• API 6 - an average of the Argus fob Newcastle assessment and the IHS McCloskey Newcastle FOB marker.
• API 8 - an average of the Argus cfr south China assessment and the IHS McCloskey/Xinhua Infolink South China CFR (5,500 kcal NAR) marker.
• API 10 - an average of the Argus fob Puerto Bolivar assessment and the IHS McCloskey Colombia FOB marker.
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Argus/IHS McCloskey Coal Price Indexes – API 10
Copyright © 2013 Argus Media Ltd. All rights reserved.
More information at: ArgusMcCloskeyCoal.com and ArgusMedia.com
API 10 averages the Argus fob Puerto Bolivar assessment
and the IHS McCloskey Colombia FOB marker.
Argus FOB Puerto Bolivar
Typical Reject
Heat: 6000 kcal/kg 5750 kcal/kg
Sulphur: <1pc 1pc
Lot size: 50,000 kt N/A
Delivery point: Puerto Bolivar N/A
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Argus’ coal methodology is transaction based
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Argus has a two-stage
price identification
process:
◦ Volume weighted average
◦ Market survey
Full list methodology always at Argusmedia.com
• VWA maintains firm foundation in reported deals
• Survey process keeps check on leverage and validates
the VWA transactions
30 deals of equal volume at yields $101.67/mt
fob Colombia $100x10
fob Colombia $101x10
fob $104x10
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Argus strives towards the highest possible standards in its business operations.
• Methodology ◦ Argus uses a market-appropriate methodology to assess prices in the markets it covers. Argus consults with the
range of participants involved in different markets and publishes methodologies for each price report on its website.
◦ Each methodology is reviewed regularly to ensure that it always meets the needs of market participants and is in line with industry practice. Argus seeks to reflect the way markets are traded, rather than impose its own view.
• Editorial Code of Conduct ◦ All Argus journalists operate according to a rigorous editorial code of conduct that aligns with best journalistic
practice, including the avoidance of conflicts of interest.
• Compliance and Ethics ◦ Argus operates a rigorous and transparent controls framework to govern its price reporting activities. This is
underpinned by its global compliance policy, which can be downloaded below, and which includes an ethics policy and a business continuity plan. The company’s Global Compliance Officer oversees the compliance framework, including a rolling program of internal audits to ensure compliance with stated methodologies and policies.
• Complaints ◦ Argus has a formal complaints’ handling procedure, which can be found on page 6 of the global compliance
policy.
Argus: How we work
Copyright © 2013 Argus Media Ltd. All rights reserved.
Excerpted from: www.argusmedia.com/About-Argus/How-We-Work
Ross Allen, Vice President – Business Development
Molly Christian, Editor – Argus Coal Daily
Copyright notice
Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence
from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any
form or for any purpose whatsoever without the prior written consent of Argus.
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Disclaimer
All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any
particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.