Argus Metallurgical Coal

Transcription

1 Argus Metallurgical Coal Tim Hard / Rou Urn Lee December 2017 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Market Reporting Consulting Events

2 Argus and the coking coal market Market Reporting Consulting Events 2

3 Long history of involvement in coking coal Truly global view of coking coal and coke market, from USEC to AusEC. 31 price series published: Premium > Hard > Semi Soft > PCI > Coke. Price indices with histories since Widespread Argus usage among producers, traders and end-users. Argus 50% for basket of all FOB Aus. Premium indexation, since Fob indices Cfr indices 3

4 Argus universe of coverage Argus Americas and European coking coal assessments: Coking Coal high-vol A fob Hampton Roads (USD/mt) Coking Coal high-vol B fob Hampton Roads (USD/mt) Coking Coal low-vol fob Hampton Roads (USD/mt) Metallurgical Coal mid-vol fob Colombia (USD/mt) Metallurgical Coal del Rotterdam (USD/mt) Argus PCI coal assessments: Coal PCI low-vol cfr India (USD/mt) Coal PCI low-vol cfr N China (USD/mt) Coal PCI low-vol cif ARA (USD/mt) Coal PCI low-vol fob Australia (USD/mt) Coal PCI low-vol fob Baltic (USD/mt) Coal PCI mid-vol cfr India (USD/mt) Coal PCI mid-vol cfr N China (USD/mt) Coal PCI mid-vol cif ARA (USD/mt) Coal PCI mid-vol fob Australia (USD/mt) Coal PCI mid-vol fob Baltic (USD/mt) Argus Australian and Asian coking coal assessments: Coking Coal hard mid-vol cfr east coast India (USD/mt) Coking Coal hard mid-vol cfr N China (USD/mt) Coking Coal hard mid-vol del N China domestic (USD/mt) Coking Coal hard mid-vol del N China domestic (CNY/mt) Coking Coal hard mid-vol fob Australia (USD/mt) Coking Coal premium hard low-vol cfr EC India (USD/mt) Coking Coal premium hard low-vol cfr N China (USD/mt) Metallurgical Coal premium hard low-vol del Japan (USD/mt) Met Coal premium hard low-vol del N China dmstc (USD/mt) Met Coal premium hard low-vol del N China dmstc (CNY/mt) Coking Coal premium hard low-vol fob Australia (USD/mt) Argus semi soft assessments (launched Dec 17): Coking coal semi soft low vol (USD/mt) Coking coal semi soft mid vol differential (USD/mt) Argus Asian metallurgical coke assessments: Metallurgical Coke 62% CSR fob north China (USD/mt) Metallurgical Coke 65% CSR fob north China (USD/mt) 4

5 Available on line Users can graph, chart and download data for the suite of Argus metallurgical coal prices and set up templates for at-a-glance monitoring. Prices updated live, and real-time alerts. Report (PDF) auto-delivered to your inbox. 5

6 Market fundamentals Market Reporting Consulting Events 6

7 It s been quite a year in terms of pricing 325 PHCC FOB Austalia ($/t) 125 7

8 Australian supply shock Queensland coal port congestion grows Sydney 21 November (Argus) Australia raises La Nina warning Sydney 22 November (Argus) Heavy rain forecast for Australia coal regions Sydney 30 November (Argus) Fob Australia ($/t)

9 Forward curves highlights market changes Reflecting, demand, port congestions, rail and weather concerns month diff (RHS) F curve 30-Nov-17 F Curve 30-Oct-172 9

10 Big change too on the derivatives front Annualised figures show a threefold growth in volume, Albeit, since midyear, volumes are around the 1mtm rate: i.e. doubling. More players are needed to make this a transformational tool All offshore volumes 8 6 SGX CME YTD Oct 10

11 Market trend Market Reporting Consulting Events 11

12 China accounted for 60pc of spot trade China total = 157 All others total = China All others

13 Why is this a problem? ($/t) Fob Australia Cfr China May Jun Jul Aug Sep Oct-17 13

14 Chinese steel mill margins strong BOF Margin $/t Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 14

15 What about E-platform? Trades 83 Cfr China Fob Bilateral Fob Globalcoal

16 The problem of Chinese demand Cfr China trade

17 Unlocking Chinese demand LT contracts between steelmakers and domestic miners Chinese domestic coking coal prices Chinese metallurgical coke prices 17

18 Putting together the puzzle of China s policies Chinese coal production controls Reduced coal overcapacity and ensure profitability of coal mining sector Prices went up beyond control Policies to cool thermal coal prices Coking coal excluded, despite pleas from steelmakers Prices remained buoyant Free Market Focus on equalisation of profits for miners, coke plants and steel mills Thermal coal price controls still in place Mid 2016 Late

19 Premium market index composition Market Reporting Consulting Events 19

20 A watershed year for pricing Metallurgical coal markets have been through a very disruptive decade: The rise and fall of Chinese purchasing volumes Large increase in spot-based purchasing, FOB spot surge since 2012 Repeated changes to sales format of supply arrangements that safeguard supply End of benchmark pricing With almost all Australian producers using indices, is there now an opportunity for some stability? Quarterly Benchmark Annual Benchmark Monthly Pricing Index Pricing Spot Pricing Index Pricing Spot Pricing Spot Pricing

21 Mean of 14 spot trade per month for PHCC fob index 2016 saw an average of 14 spot trade Australian Premium Fob transactions received by Argus per month. Bi-lateral trade (direct spot transactions between miners, traders and end-users) made up 78.1% of spot trade seen last year. Submitted tonnes 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , , % of monthly data Bilateral Volume E-Platform Volume E-Platform Share (RHS) 21

22 A wide variety of data sources Reported transactions show End-Users providing 14.6% of tonnage, E- platform trades 21.9%, Miners 34.5% and Traders 29% PHCC Index Input : Transactions Volumes Trader 29% Battery 6% Mill 8% E-Platform 22% Miner 35% Battery Mill E-Platform Miner Trader 22

23 Fob Australia and cfr China related but distinct The FOB & CFR markets are assessed entirely separately due to the different values that regional buyers assign to coal quality. FOB Australia information is solely used for FOB Australia indices. CFR China information is solely used for CFR China indices. Fob Index + Freight = = Freight - Cfr Index The team collect spot market information for branded cargoes. Off-spec or unbranded cargoes will have their specifications checked for conformity with the permissible ranges Argus publish. Spot cargo data collected Brand Price Volume Loading window 23

24 Transaction-focused methodology & systematic approach During market validation, dedicated coking coal market analysts collect bids and offers. Information collected either has a direct electronic trail, or the source and information are noted and attributed in a secure electronic format. Stress-tested bid/offer data found wanting by the wider market is discarded before making the dataset. What data? From where? From whom? Reported transactions confirmed with at least one counterparty Bilateral & E-platform trade Bilateral spot trade By trader, miners, buyers Globalcoal, e.t.c. Firm bids and offers collected and market tested for veracity Market validation exercise Bilateral spot trade By trader, miners, buyers Dataset 24

25 Two datasets are then processed into 50:50 average Bilateral & E-platform trade 1. Confirmed transaction data is normalised to the Argus specification. 2. Outliers are removed. 3. A volume-weighted average (VWA) price is calculated. Market validation exercise 1. Stress-tested bid/offer data is normalised to the Argus specification. 2. Outliers are removed. 3. An average (Av) price is calculated. VWA AV INDEX 25

26 Transaction-focused methodology and market engagement Although spot liquidity has improved markedly in recent years, metallurgical coal spot trade can be lumpy. Spot bid/offer data smoothens out illiquidity. Structurally limits one party from dominating or gaming the index on a day/systemically. Ensures wide spot market participation in daily index price formation. Bilateral & E-platform trade Market validation exercise 26

27 Indexation across the grade Market Reporting Consulting Events 27

28 The indexation story largely limited to hard coking coal FOB Australia PHCC coal is tying to fob Australia PHCC indexes. FOB non-australia PHCC is tying to fob Australia PHCC indexes, as well. Some Australia HCC is tying to the fob Australia PHCC indexes. Some Australia HCC is tying to the fob Australia HCC indexes. Correlations are strong for hard coking coals, particularly FOB Aus. ones. They are much weaker for PCI and the semi-market: i.e. these markets need their own indices. Product Premium Hard Coking Coal Hard Coking Coal Semi-Hard Coking Coal Semi-Soft Coking Coal PCI Coke Indexation Almost Total Yes, split Very Limited Very Limited Very Limited Very Limited Premium Hard Coking Coal Index/Basket Hard Coking Coal Index/Basket 28

29 Historical correlation key to making the link Correlation in 2016 = 99.96% Correlation in 2017 = 96.5% ($/t) phcc hcc 29

30 Historical correlation key to making the link The spread between the most tightly correlated coking coal grades (hard) is strong enough to trust: but direction and magnitude are not the same. This poses a problem for buyers and sellers, who are experimenting with premium and hard indices. HCC indices currently give buyers a win, PHCC flatters sellers. Perhaps a mix would work? ($/t) PHCC/HCC Spread 30

31 New Indices Market Reporting Consulting Events 31

32 Argus PCI went daily in September 2017 To assist an industry looking to price other grades of coking coal products off indices, Argus is expanding sector coverage. ($/t) Low-Vol PCI FOB Aus Mid-Vol PCI FOB Aus 32

33 Argus Merchant Coke went daily in December 2017 To assist an industry looking to price other grades of coking coal products off indices, Argus is expanding sector coverage CSR Coke N. Chi 62 CSR Coke N. Chi 33

34 Argus Semi Soft launched in December 2017 To assist an industry looking to price other grades of coking coal products off indices, Argus is expanding sector coverage. The spread between low and mid vol semi soft coals can be quite dynamic. Argus is tracking daily prices of semi-soft coking coal. We also publish a daily differential to mid-vol semi soft coking coal too. Both full time series will be available for download online. 34

35 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Copyright 2015 Argus Media Ltd. All rights reserved. 35

36 Tim Hard SVP Metals Phone: Office: Tim Singapore Rou Urn Lee Coking Coal Analyst Phone: Office: Rouurn.Lee Singapore Stay +Argusmediaplus Argus-media argusmediavideo Copyright notice Copyright 2015 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. Trademark notice ARGUS, the ARGUS logo, ARGUS MEDIA, ARGUS DIRECT, ARGUS OPEN MARKETS, AOM, FMB, DEWITT, JIM JORDAN & ASSOCIATES, JJ&A, FUNDALYTICS, METAL-PAGES, METALPRICES.COM, Argus publication titles and Argus index names are trademarks of Argus Media Limited. 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. 36