LC News Thursday, 12th January 2012

© London Commodity Brokers of 29 Thursday, January 12, 2012

TABLE OF CONTENTS CONTACT DETAILS ................................................................................................................................ 2 COAL PRICES ......................................................................................................................................... 3

Coal Market Overview ............................................................................................................................ 3 Coal Market Prices ................................................................................................................................ 3 SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps .......................................................... 4 SOUTH CHINA SWAPS ........................................................................................................................ 5

SUMMARY OF CHINA COAL PRICES ..................................................................................................... 6 COAL MARKET NEWS ............................................................................................................................ 7 INTERNATIONAL ..................................................................................................................................... 7

Medium-term global coal trade markets uncertain: IEA ............................................................................ 7 Coal set to rebound after worst year since 2005...................................................................................... 7

U.S.A........................................................................................................................................................ 7 RailAmerica Carload Traffic Creeps Down On Coal Volume Drop ............................................................ 7 US thermal coal prices sink further as selloff continues ........................................................................... 8

AUSTRALIA ............................................................................................................................................. 8 China Trade Triggers $115 Billion Australia Ports, Railway Boom: Freight ............................................... 8

EUROPE .................................................................................................................................................. 9 Coal swaps volumes plummet in 2011 .................................................................................................... 9 Euro Coal-Prices fall $1/T with oil, low coal burn ................................................................................... 10 Russian ice returns but coal export disruptions unlikely ......................................................................... 10 Russia's Mechel completes rail link to huge coking coal deposit ............................................................ 10 Russia's 2011 coal exports rose 8.5% year-on-year to 104.7 million mt ................................................. 10

INDONESIA ............................................................................................................................................ 11 Peabody opens an office in East Kalimantan ........................................................................................ 11 PHI Group to acquire Indonesian coal mines ........................................................................................ 11

INDIA ..................................................................................................................................................... 11 Labour unrest hits coal production ........................................................................................................ 11 Coal India's new pricing rule faces opposition ....................................................................................... 11 Indian government earmarks 146 coal blocks for State entity ................................................................ 12 Steel Authority Of India To Gain From Lower Jan-March Imported Coking Coal Price ............................ 12

AFRICA .................................................................................................................................................. 13 A closer look at RBCT’s record coal shipments ..................................................................................... 13 Exxaro faces strike at Arnot coal mine .................................................................................................. 13 Sekoko rethinks its Waterberg strategy ................................................................................................. 14 Malawi, Vale ink $1bn rail line deal ....................................................................................................... 14

ASIA ...................................................................................................................................................... 14 Vietnam 2015 coal output to rise to 55-58 mln T –govt .......................................................................... 14 Italian-Thai to ‘Renegotiate’ After Myanmar Scraps Coal Plant .............................................................. 15 China's power use wobbles a little ........................................................................................................ 15 China coke exports in 2011 dip 1.4% year-on-year on limited demand ................................................... 15 TENDER: KEWPO issues a tender for 100kt of Vietnam ....................................................................... 16

FREIGHT ................................................................................................................................................ 16 Price Indication: ................................................................................................................................... 16 Falling freight prices limit API 4 losses .................................................................................................. 16 DRY BULK MARKET CRASHING AT START OF THE YEAR - NIKOS ROUSSANOGLOU ................... 17

OIL ......................................................................................................................................................... 18 Oil Declines After U.S. Fuel Inventories Climb as German Economy Contracts ...................................... 18

STEEL .................................................................................................................................................... 19 US weekly raw steel production rises 1.3% ........................................................................................... 19 German crude steel output seen flat in 2012 ......................................................................................... 19 Korea: Exports of steel products hit record high in 2011 ........................................................................ 19

IRON ORE .............................................................................................................................................. 20 Thursday, 12th January 2012 .......................................................................................................... 20

IRON ORE NEWS ................................................................................................................................... 23 Iron Ore-Spot at 7-week top, Australian miners suspend loading ........................................................... 23 Vale has yet to sell huge iron-ore cargo in China – traders .................................................................... 23 Cyclone shuts Australian iron-ore ports, oil fields .................................................................................. 24 Vale Declares Force Majeure for Iron Ore Contracts on Heavy Brazil Rains ........................................... 24 Venezuela's iron production jumps 21% in 2011 ................................................................................... 24 Exxaro puts Republic of Congo on iron-ore map with R3bn takeover bid................................................ 25


Karnataka’s iron ore export ban sinks planned facility at New Mangalore port ........................................ 26 CONFERENCES..................................................................................................................................... 27

CONTACT DETAILS

London Head Office 1st Floor 9 Savoy Street London WC2E 7ER United Kingdom Tel: +44 20 7240 1112 Coal Desk: +44 20 7010 7500 Iron Ore Desk +44 20 7010 7501 Options Desk +44 20 7010 7502 F: +44 (0)20 7240 5122 Email: [email protected]

Clive Murray - CEO Paul Graham-Clarke – Managing Director Stephen Petchey Jessica Hydleman Jamie Jones Chris Hudson Emma Shillingford Ben Webb Kenny Groth Steve Gong Phil Simms Michael McDermott

Dubai Office Suite no. 3702, Liwa Heights, Jumeirah Lake Towers Dubai T: +97 144534200 F: +97 144534214

Ritunjay Mehta - Dubai Manager Sushil Shinde (Mobile +97 1554545394) Lalit Lodha (Mobile: +97 1554545364) Siddharth Banthia

Johannesburg Office Level 2, 17 Baker Street, Rosebank, 2193 Johannesburg South Africa T: +27 11 447 0764 F: +27 86 733 8311

Bevan Jones – Johannesburg Manager Tracy Zungu Emma Franz Duncan Murray

Singapore Office Level 30, Six Battery Road Raffles Place, 049909 Singapore T: +65 6725 6434 / 6435 F: +65 6550 9898

Gareth Hudson - Singapore Manager James Graham-Clarke Myles Clement Gisele Yan

Hong Kong Office Level 19, Two International Finance Centre (2 IFC) 8 Finance Street, Central Hong Kong T: +852 2816 4326/7/8 F: +852 3010 0087

Stuart Murray - Hong Kong & China Manager Victor Chow Ted Larmour

China Office 2111-B, Flagship Tower, Cyber Port, 40 Hong Kong Mid Road Qingdao, 266071 China T: +86 532 8667 8682 F: +86 532 8667 8683

Becky Bi 中國山東省青島市香港中路 40號, 數碼港旗大廈 2111-B 電話號碼: +86 532 8667 8682 傳真號碼: +86 532 8667 8683

mailto:[email protected]


COAL PRICES

Coal Market Overview

Wednesday, 11th January 2012, Once again the weakness returned to the coal market around a dollar lower from last night, also showing losses were gas and power and the oil market. There were no fixed trades in the physical market today. Stephen Petchey

Coal Market Prices

Date 日期

Bid 出价

Offer 供价

API #2 Paper Mid

期货价 Bid 出价

Offer 供价

API#4 Paper Mid 期货价

Bid 出价

Offer 供价

NEWCPaper Mid 期货价

Jan-12 108.10$ 105.75$ 114.00$

Feb-12 107.50$ +#$0.50 +#$0.85 104.75$ 112.00$

Mar-12 $106.50 +#$0.00 107.50$ +#$0.40 104.65$ 111.20$

Q1'12 107.70$ 105.05$ 112.40$

Q2'12 +#$0.00 107.90$ -#$0.60 -#$0.25 104.75$ 110.20$

Q3'12 110.05$ -#$0.25 106.65$ 110.85$

Q4'12 112.75$ 108.75$ 111.75$

CAL-12 109.60$ 106.30$ 111.30$

CAL-13 115.75$ 111.25$ 113.75$

CAL-14 120.35$ 114.85$ 115.60$

CAL-15 124.35$ 118.60$ 118.60$

129.60$ 124.10$ 125.35$

FOB Newcastle 纽卡斯尔离岸价

DES / CIF ARA 欧洲港口到岸价

FOB Richards Bay 理查湾离岸价

Below is a list of prices that we offered the market Wednesday, 11th January 2012, the prices are fixed prices, the prices represented by # refer to those that are index based. The coal paper mid rate is the point between the bid and offer spread on coal derivatives.

$100.00

$110.00

$120.00

$130.00

Coal Paper Market Mid Point Curve 煤炭市场掉期中点

API #2 Paper Mid…

API#4 Paper Mid …

NEWCPaper Mid …


SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps

Daily Settlement Prices of SGX AsiaClear OTC Sub-Bit Coal FOB Indonesia Swaps

Contract Period

Daily Settlement

Price

Prev Daily Settlement

Price US$

Change %

ChangeJan-12 $79.88 $80.00 -$0.12 -0.15%Feb-12 $79.88 $80.00 -$0.12 -0.15%Mar-12 $79.88 $80.00 -$0.12 -0.15%Apr-12 $79.75 $79.88 -$0.13 -0.16%May-12 $79.80 $79.93 -$0.13 -0.16%Jun-12 $79.85 $79.98 -$0.13 -0.16%Jul-12 $80.27 $80.39 -$0.12 -0.15%

Aug-12 $80.39 $80.51 -$0.12 -0.15%Sep-12 $80.52 $80.64 -$0.12 -0.15%Oct-12 $80.95 $81.07 -$0.12 -0.15%Nov-12 $81.08 $81.20 -$0.12 -0.15%Dec-12 $81.20 $81.32 -$0.12 -0.15%

Period Average

DSP Prev Averag

DSP US$

Change %

Change

Q112 $79.88 $80.00 -$0.12 -0.15% Product Name:

Q212 $79.80 $79.93 -$0.13 -0.16% Contract Size:

Q312 $80.39 $80.51 -$0.12 -0.15%Q412 $81.08 $81.20 -$0.12 -0.15%Cal 12 $80.29 $80.41 -$0.12 -0.15%

Source: www.sgx.com/asiaclear/commodities http://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

Below are the Daily Settlement prices of SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps as at 8.00pm Singapore times on Wednesday, 11th January 2012, 8pm Singapore time.

1 lot = 1,000 metric tonnes

# Above daily settlement prices are for market-to-market open positions on contract month basis

The Indonesian sub-bituminous FOB marker is an assesment of the price of this quality coal delivered into ocean going vessels from a range of East and South Kalimantan load-outs. It represents the types of coal currently supplied by Adaro, Kideco, Bumi Resources (Melawan), ABK (Loajanan) and Straits Asia (Jembayan) amonst others

SGX OTC Sub-Bituminous Coal FOB Indonesian Swap

Indonesian sub-bituminous coal specs: 4,900 NAR, 28% max Total Moisture, 40% Vols, 10% max Ash, 1.0% max Sulphur, 1,200C AFT (IDT), basis 20,000t / day loadingrefer: http://cr.mccloskeycoal.com/

Below daily settlement prices are summarized below in quarterly and yearly basis and are for reference only

For more information please contact Mr. desmond Wan at [email protected] (DID: +65 6236 8388) or Mr. Kenneth Ng at [email protected] (DID +65 6236 8388 or Ms Lindy Li [email protected].

Trade Reg. hours

(Sing Time) 8.00am - 4.00amLast Trading Day : 8.00am - 8.00pm

Last publication day (Friday) of IHS McCloskey Indonesian Sub-Bitumous FOB marker in the contract month

Last Trading Day Final

Settlement price Cash Settlement using the arithmetic average of all publications of HIS MCCloskey

Indonesian Sub-Bitumous FOB marker in the expiring contract month, rounded to 2 decimal places

$77.00

$78.00

$79.00

$80.00

$81.00

$82.00

$83.00

$84.00

$85.00

$86.00

Daily Settlement prices for SGX AsiaClear OTCIndonesia Sub-Bit Coal Swaps

Daily Settlement PricePrev Daily Settlement Price

Daily Settlement Prices of SGX AsiaClear OTC CFR South China Coal Swaps

Contract Period

Daily Settlement

Price


Price US$

Change %

ChangeJan-12 $106.13 $106.13 $0.00 0.00%Feb-12 $105.98 $105.98 $0.00 0.00%Mar-12 $105.98 $105.98 $0.00 0.00%Apr-12 $106.18 $106.18 $0.00 0.00%May-12 $106.23 $106.23 $0.00 0.00%Jun-12 $106.28 $106.28 $0.00 0.00%Jul-12 $106.50 $106.50 $0.00 0.00%Aug-12 $106.60 $106.60 $0.00 0.00%Sep-12 $106.70 $106.70 $0.00 0.00%Oct-12 $107.33 $107.33 $0.00 0.00%Nov-12 $107.45 $107.45 $0.00 0.00%Dec-12 $107.58 $107.58 $0.00 0.00%

Period Average

DSP Prev

Averag DSP US$

Change %

ChangeQ112 $106.03 $106.03 $0.00 0.00% Product Name:Q212 $106.23 $106.23 $0.00 0.00% Contract Size:Q312 $106.60 $106.60 $0.00 0.00% Ticker Symbol

Q412 $107.45 $107.45 $0.00 0.00% Min Price

Fluctuation Cal 12 $106.58 $106.58 $0.00 0.00%

Source: www.sgx.com/asiaclear/commodities http://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

1 lot = 1,000 metric tonnes

Below are the Daily Settlement prices of SGX AsiaClear OTC CFR South China Coal Swaps as at 8.00pm Singapore times on Wednesday, 11th January, 8pm Singapore time.

# Above daily settlement prices are for market-to-market open positions on contract month basis

Below daily settlement prices are summarized below in quarterly and yearly basis and are for reference only

CFR South China coal specs: 5,500 NAR, 1.0% max Sulphur, min vessel size 50,000mt . refer: http://cr.mccloskeycoal.com/

SGX OTC CFR South China Coal Swap is based on coal delivered into South China with base calorific value of 5,500 kcal/kg NAR. Each contract is equivalentto an exposure of 1,000 metric tonnes of physical coal into CFR South China. The contract is cash settled using artithmetic average of the IHS McCloaskey/ Xinhua Infolonk South China (5,500 kc NAR) CFR marker.

SGX OTC CFR South China Coal Swap

For more information please contact Mr. Desmond Wan at [email protected] (DID: +65 6236 8388) or Mr. Kenneth Ng at [email protected] (DID +65 6236 8388 or Ms Lindy Li [email protected].

CF

US$0.01 per tonne (US$10)

Trade Reg. hours (Sing Time)

8.00am - 4.00amLast Trading Day : 8.00am - 8.00pm

Last Trading Day Last publication day (Friday) of IHS McCloskey / Xinhua South China (5,500kc NAR) CFR marker in the contract month

$102.00

$103.00

$104.00

$105.00

$106.00

$107.00

$108.00

$109.00

$110.00

$111.00

$112.00

Daily Settlement prices for SGX AsiaClear OTCCFR South China Coal Swaps

Daily Settlement PricePrev Daily Settlement Price

http://www.sgx.com/asiaclear/commodities

http://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

http://cr.mccloskeycoal.com/




http://www.sgx.com/asiaclear/commodities

http://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

http://cr.mccloskeycoal.com/





SOUTH CHINA SWAPS

Daily Settlements for China Coal (HIS McCloskey/ Xinhua Infolink South China CFR Marker 5,500kc NAR) Swap Futures

Contract Period

Daily Settlement

Price


Price US$

Change %

ChangeJan-12 $ 106.25 $ 106.25 $ - 0.00%

Feb-12 $ 106.00 $ 106.00 $ - 0.00%Mar-12 $ 105.83 $ 105.83 $ - 0.00%

Product Symbol CMC Venue CME ClearPort, open Outcry (New York)

Contract Size 1,000 metric tons

Price Quotations U.S. dollars and cents per metric ton

Min Fluctuation $0.05 per metric ton

Floating Price

Termination of Trading

Listed Contracts Current year and next full year

Settlement Type Financial

Position Limites NYMEX Position LimitsRulebook Chapter 1121

Exchange Rule

http://www.cmegroup.com/trading/energy/coal/china-coal-ihs-mccloskey-xinhua-infolink-south-china-cfr-marker-5500kc-nar-swap-futures_contract_specifications.html

The floating price for each contract month is the arithmetic mean of the HIS McCloskey / Inhua Infolonk South China CFR Marker 5,500kc NAR for the corresponding month as published each Friday in the McCloskey Fax in the table entitled "McCloskey Key Market Prices".

Below are the Daily Settlement prices of China Coal (HIS McCloskey / Xinhua Infolonk South China marker 5,500kc NAR) Swap Futures clearing through CME ClearPort as at 6.00pm Chicago Time Wednesday, 11th January, 6pm Chicago time.

The contract shall terminate at the close of trading on the last Friday of the contract month. If such Friday is a UK holiday, the contract will terminate on the UK business day immediately prior to the last Friday of the contract month unless such day is not an Exchange business day, in which case the contract shall terminate on the Exchange business day immediately prior.

These contracts are listed with, and subject to, the rules and regulations of NYMEX.

http://www.cmegroup.com/trading/energy/coal/china-coal-ihs-mccloskey-xinhua-infolink-south-china-cfr-marker-5500kc-nar-swap-futures_quotes_settlements_futures.html

For more information please contact:Mr. Owain Johnson at [email protected] (DID: +65 6593 5568) or Ms. Louise Croucher at [email protected].

$100.00

$102.00

$104.00

$106.00

$108.00

$110.00

$112.00

Contract Months

Daily Settlement prices for China Coal Swap Futures

Daily Settlement Price Prev Daily Settlement Price

http://www.cmegroup.com/trading/energy/coal/china-coal-ihs-mccloskey

http://www.cmegroup.com/trading/energy/coal/china-coal-ihs-mccloskey-xinhua-infolink-south




SUMMARY OF CHINA COAL PRICES

CCIV - Comparative CFR Import Value

Origin产地

Brand of Coal煤种

GAR/ NAR NAR Specification指标

Terms价格类型 11-Jan-12

*CCIVUS$ 30-Dec-11

*CCIVUS$

+ / - from prev week

+ / - on CFRUS$

Qinhuangdao FOBT - (refer China Coal Resources - Daily Market Watch)Qinhuangdao Datong Premium Blend NAR >5,800 CV 5,800, V 25 - 28%, S 0.5 - 1%, Mt 10 - 13% FOBT 845.00￥ 101.56$ 860.00￥ 103.48$ -15.00￥ (1.92)$ Qinhuangdao Shanxi Premium Blend NAR >5,500 CV 5,500, V 25 -28%, S < 1%, Mt <12% FOBT 790.00￥ 94.52$ 805.00￥ 96.44$ -15.00￥ (1.92)$ Qinhuangdao NDRC PRICE CAP NAR >5,500 NEW PROPOSED NDRC 2012 PRICE CAP 800.00￥ 95.80$ 800.00￥ 95.80$ Qinhuangdao Shanxi Blend NAR >5,000 CV 5,000, V 24 - 27%, S <1%, Mt <13% FOBT 690.00￥ 81.72$ 700.00￥ 83.00$ -10.00￥ (1.28)$ Qinhuangdao Common Blend NAR >4,500 CV 4,500, V 25- 28%, S <1%, Mt <14% FOBT 590.00￥ 68.91$ 600.00￥ 70.19$ -10.00￥ (1.28)$ China Coastal Freight 中国沿海运费 4-Jan-12 30-Dec-11

Qinhuangdao - Guangzhou, 40 - 50,000 DWT ￥39.70 6.22$ ￥39.60 6.21$ 0.10￥ 0.02$ Qinhuangdao - Shanghai, 20 - 30,000 DWT ￥30.40 4.76$ ￥31.20 4.89$ -0.80￥ (0.13)$ Qinhuangdao - Ningbo, 15 - 20,000 DWT ￥33.20 5.20$ ￥33.10 5.19$ 0.10￥ 0.02$

Indicative Guangzhou Stock Pile Price based on Ex Qinhuangdao FOBT 11-Jan-12 30-Dec-11Guangzhou Datong Premium Blend NAR >5,800 CV 5,800, V 25 - 28%, S 0.5 - 1%, Mt 10 - 13% Exstock 934.70￥ 111.06$ 949.60￥ 112.96$ -14.90￥ (1.91)$ Guangzhou Shanxi Premium Blend NAR >5,500 CV 5,500, V 25 -28%, S < 1%, Mt <12% Exstock 879.70￥ 104.02$ 894.60￥ 105.92$ -14.90￥ (1.91)$ Guangzhou NDRC PRICE CAP NAR >5,500 PROPOSED NDRC 2012 PRICE CAP - EXSTOCK 889.70￥ 105.30$ Guangzhou Shanxi Blend NAR >5,000 CV 5,000, V 24 - 27%, S <1%, Mt <13% Exstock 779.70￥ 91.21$ 789.60￥ 92.48$ -9.90￥ (1.27)$ Guangzhou Common Blend NAR >4,500 CV 4,500, V 25- 28%, S <1%, Mt <14% Exstock 679.70￥ 78.41$ 689.60￥ 79.68$ -9.90￥ (1.27)$ Guangzhou Common Blend NAR >4,000 CV 4,000, V 25 - 28%, S < 1%, Mt <15% Exstock 559.70￥ 63.05$ 569.60￥ 64.31$ -9.90￥ (1.27)$

SELECTED PORT STOCK PILE PRICES9-Jan-12 26-Dec-11

Shanxi Shanxi Premium Blend NAR 6,000 CV 6000, A 8%, V 35%, S 0.8%, Mt 10% Ex Stock 1,250.00￥ 151.43$ 1,250.00￥ 151.43$ -￥ -$

Shanxi Shanxi Premium Blend NAR 5,496CV 5496, A 12.19%, V 30.24%, S 04.7%, Mt 14.6% Ex Stock 950.00￥ 113.02$ 950.00￥ 113.02$ -￥ -$

Shanxi Shanxi Mix NAR 5,100 CV 5,100, A 13%, V 27%, 0.4% S Mt 17% Ex Stock 870.00￥ 102.77$ 870.00￥ 102.77$ -￥ -$

Shanxi Shanxi Mix NAR 5,000 CV 5000, A 23%, V 25%, <1%, Mt 8% Ex Stock 830.00￥ 97.65$ 830.00￥ 97.65$ -￥ -$

Shanxi Shanxi Mix NAR 4,700 CV 4700, A 24%, V 30%, <1%, Mt 10% Ex Stock 780.00￥ 91.25$ 780.00￥ 91.25$ -￥ -$

Indonesia Indonesia Thermal NAR 5,800NAR 5800 V(ad) 42%, A (ad) 10%, S (tad) 0.8%, M(t) 11% Ex Stock 860.00￥ 101.49$ 880.00￥ 104.05$ -20.00￥ (2.56)$

Indonesia Indonesia Thermal NAR 5,100NAR 5100 V(ad) 38%, A (ad) 16%, S (tad) 0.6%, M(t) 17% Ex Stock 760.00￥ 88.69$

Indonesia Indonesia Thermal Coal NAR 4,800GAR 5900, NAR 4,800V(ad) 35%, A (ad) 5%, S (tad) 0.31, M(t)28% Ex Stock 750.00￥ 87.41$ 750.00￥

Indonesia Indonesia Thermal NAR 4,300NAR 4300, V(ad) 37%, A (ad) 8%, S (tad) 0.31%, M(t) 28% Ex Stock 640.00￥ 73.33$ 640.00￥ 73.33$ -￥ -$

Philippines Philippines Thermal NAR 4,300NAR 4300, V(ad) 36%, A (ad) 12%, S (tad) 0.5%, M(t) 25% Ex Stock 650.00￥ 74.61$ 685.00￥ 79.09$ -35.00￥ (4.48)$

Australia Australian Thermal NAR 5,700NAR 5700, V(ad) 31%, A (ad) 16%, S (tad) 0.6%, M(t) 11% Ex Stock 950.00￥ 113.02$

South Africa South Africa NAR 6,000NAR 6,000, V(ad) 25%, A (ad) 15%, S (tad) 0.6%, M(t) 7.8% Ex Stock 950.00￥ 113.02$ 950.00￥ 113.02$ -￥ -$

Qinhuangdao Port - Imported Coal Prices

Australia HCC HCC HCC, A 9%, V 25%, S <0.6%, G 85 Ex Warehouse 1,700.00￥ 209.04$ 1,700.00￥ 209.04$ -￥ -$

Russia PCI Coal PCI A 8%, V 15%, S 0.6%, FOR 1,250.00￥ 151.43$ 1,250.00￥ 151.43$ -￥ -$

Russia Russia NAR 5500 NAR 5,500 NAR 5500, A 17%, V >25%, S < 1%, Ex Warehouse 880.00￥ 104.05$ 880.00￥ 104.05$ -￥ -$

The above data available from China Coal Resource ("CCR") - refer http://en.sxcoal.com. CCR was founded in 1988 and is the only commercial English website in China's coal and coke industry. CCR has more than 360 staff throughout China. CCR provides current news and related data, consulting services as well as facilitating investments and joint venture arrangements between foreign and domestic enterprises.

Guangzhou Port - Imported Coal Prices

Difference

Notes:From 21 June CCR has revised the specification of their NAR 6,000 Marker down to NAR 5,800 due to the continued deterioration of thermal heating value quality.To determine landed cost of China coal to other China ports use FOBT Qinhuangdao rate + Local Freight + Allowance of RMB 50.00/mt (US$7.75) for Domestic Coal Port Handling Charges and stock pile rental

Note: To convert local China coal RMB prices to Comparative CFR Import Values we calculate as follows:Local China RMB /mt / 1.035 Management Overheads including cost of LC - RMB 65.00* (Allowance for new imported coal Port Handling charges, load / discharge port inspection + stock pile charges) / 1.17 VAT / RMB 6.45 Exchange = CCIV US$/mtCCIV represents the equivalent US$ CFR value for the coal currently available on stock pile. Currently Chinese Buyers are bidding at a discount of between US$3.00 - 6.00 to these CCIV values)

Guangzhou Port - Domestic China Coal Prices

1,500

2,000

2,500

3,000

3,500

￥25

￥35

￥45

￥55

￥65

￥75

￥85

￥95 China Domestic Coastal Freight

(RMB)

Gz Stock ktQhd - Gz 40 - 50kt DWTQhd - Shang 20 - 30kt DWTQhd - Ning 15 - 20kt DWT

3,000

4,000

5,000

6,000

7,000

8,000

9,000

￥300

￥400

￥500

￥600

￥700

￥800

￥900

￥1,000

China Domestic Coal pricesFOBT Qinhuangdao

FOB Qhd NAR 5,800NAR 5,500 NAR 5,000NAR 4,500 NAR 4,000

http://en.sxcoal.com


COAL MARKET NEWS

INTERNATIONAL

Medium-term global coal trade markets uncertain: IEA International Energy Agency officials said they project global coal demand to increase by 2.8% in the next five years, but warned that China's volatile production levels make trade markets much more difficult to predict. "China's imports can either double or fall by two-thirds in the next five years," Laszlo Varro, head of IEA's gas, coal and power division, said. "That's the range of uncertainty." China-specific challenges like a congested domestic transport infrastructure and what Laszlo calls "19th century safety standards" at local mines will dramatically impact global trade outcomes over the next few years. Under a scenario where China's coal production and transportation infrastructure cannot keep pace with domestic demand, the IEA says Chinese coal imports in 2016 will almost double 2010 totals. But if the country can relieve railroad congestion from the mines in northern China and increase coal production, the IEA says Chinese imports could drop 58% over the 2011-2016 timeframe. The US, as a swing supplier of coal to Asia, could double exports to China in 2012 if the country cannot keep pace with domestic demand. The IEA says China's domestic coal market is more than three times the entire international coal trade. "China's prices used to follow other international prices, but since the economic crisis, China is in a price-setting role," said Didier Houssin, IEA's director of energy markets and security. "In the medium-term, China's dominance will continue and India will be a bigger factor since its domestic producer, Coal India, has struggled." The IEA downplayed the role of carbon capture and storage (CCS) and shale gas when discussing global coal markets to 2016. CCS utilization is so low, Houssin said, that the impact remains unseen. And the revolution in US shale gas, he said, is not spreading to other parts of the globe. "In the global gas market, the US is insulated from the rest of the world," he said. "We are not optimistic on shale gas in Europe. And even if China were to explore shale gas, it's so big that it would take quite a long time to have an impact." -- Source: Platts

Coal set to rebound after worst year since 2005 The price of coal used to generate electricity in Asia may rebound after its biggest decline in six years as China imports unprecedented amounts of the fuel to power its growing economy. Thermal coal at the Australian port of Newcastle, the benchmark price for Asia, may average A$120 (Dh123.30) a metric ton this year, according to the median of five analyst estimates in a Bloomberg. Prices slipped 12% to $111.35 in 2011, the biggest annual drop since 2005 and the first since 2008, IHS McCloskey data show. Prices rose 46 per cent in 2010. "It's more about at what price China will absorb more tons rather than how much will they import," Hayden Atkins, an analyst at Macquarie Group in London, said in an email. "China remains the wildcard." Newcastle coal rose to the highest level in almost three years in January 2011 as the flooding in the state of Queensland cut exports by 33%. Prices have since slid as China's buying eased and the availability of supplies from South Africa undercut Australian shipments, according to Peter Richardson, chief metals economist at Morgan Stanley in Melbourne. "We saw a big import increase in China as well as a lift in domestic production, which effectively ended when inventories were rebuilt, and as a consequence, the market was much better supplied," said Richardson. China's highest domestic coal prices in more than two years relative to Newcastle supplies, combined with an increase in the amount utilities can charge customers for their power, has encouraged electricity producers to seek more supply from overseas just as unfavourable weather limits output. The La Nina weather system, which contributed to flooding at Australian mines a year ago, is bringing heavier-than-normal rainfall to the country again, according to the Bureau of Meteorology. Source: Bloomberg

U.S.A

RailAmerica Carload Traffic Creeps Down On Coal Volume Drop RailAmerica Inc. said carload traffic crept down again in December as a large volume drop in coal, the company's biggest commodity group, failed to offset growth in agricultural products and other lower-volume commodities. Weak coal shipments have been plaguing RailAmerica since this summer, though October saw a volume increase. Wednesday, the company said total freight carloads were down 0.4% in December, the ninth straight monthly drop in volume. Coal, its top commodity, had a 13% decrease in traffic, the biggest drop of any commodity group. RailAmerica's No. 2 group, agricultural products, had 4.6% higher carloads, but its No. 3 group chemicals declined 12%. Lower-volume groups like metallic ores and metals and forest products also posted gains. The company's lowest-volume commodity group, motor vehicles, saw its carloads more than double. RailAmerica, which operates smaller lines that haul shippers' and manufacturers' freight to major railways, in October reported its third-quarter profit rose 14% as it improved operating revenue despite the lower carloads. Shares closed Wednesday down 12 cents at $15.65 and weren't active after hours. The stock has risen 20% in the last year, better than the market at large. Source: The Dow Jones


US thermal coal prices sink further as selloff continues Both Central Appalachian and Powder River Basin 8,800-Btu/lb thermal coal contracts sold off for a second consecutive session on Wednesday, with prices down by a considerable margin over the two-day period. CAPP and PRB 8,800 coal prices followed the broader energy complex lower. The NYMEX natural gas futures contract settled 5.7% lower at $2.774/MMBtu Wednesday, the lowest level for a front month contract since September 4, 2009, when the October 2009 contract settled at $2.728/MMBtu. In the East, CAPP barge and rail (CSX) contracts traded in good volume for a second straight session, including initial interest in the barge Q1 2013 contract. The illiquid Cal 2014 package was also seen trading for a second consecutive session. In the CSX physical market, March 2012 contracts were seen trading for the first time. Over the past two sessions, the CAPP barge front month contract fell 4.8% to $65.10/st. The Q2 2012 strip fell 4.9% to $65/st. The CSX physical front month contract fell 5.2% to $63.80/st, while the Q2 2012 strip fell 4.5% to $64/st. In CAPP barge, no trades were seen at the front of the curve. Based on broker information, Platts assessed the front month at $65.10/st, down $1.65/st. Q2 2012 traded at $65.50/st for five barges twice, at $65.25/st for five barges, at $66/st for five barges and at $65/st for five barges. The strip was assessed at $65/st, down $2.05/st. Q4 2012 traded at $68.75/st for five barges four times. This part of the curve appeared to walk subsequently lower and Platts assessed the contract at $68.25/st, down $1.55/st. The Cal 2013 package was assessed at $71.90/st, down $1.25/st. Q1 2013 traded at $70/st for five barges, at $70.30/st for five barges and at $70.15/st for 10 barges. Cal 2014 traded at $75.75/st, at $75/st and at $75.25/st, each for five barges. In the CSX market, February 2012 traded at $64/st and at $63.75/st, each for one train. Platts assessed the front month contract at $63.80/st, down $1.65/st. CSX physical March 2012 traded at $64.90/st and at $64/st, each for one train. The contract was heard to have traded at $63.50/st early in the day. The March contract was assessed at $64/st, down $1.45/st. In the swaps market, CSX financial Q2 2012 traded at $65/st for 5,000 st and at $64.50/st for 5,000 st and 10,000 st. The physical price was assessed at $64/st, down $1.45/st. CSX financial Q3 2012 traded at $66/st for 10,000 st. The physical price was assessed at $65.95.st, down $1.50/st. CSX financial Cal 2013 traded at $72/st and at $71.75/st, each for 5,000 st. The package was heard to have also traded at $71.50/st early in the day. The $71.75/st traded occurred late in the session and Platts assessed the contract the same, down $1.50/st. Norfolk Southern 1%-sulfur February 2012 traded at $61/st for two trains. NS 1% Cal 2013 traded at $72/st for one train. Elsewhere, traders focused more attention on the Powder River Basin 8,800 contract, which traded in above-average volume on Wednesday. PRB 8,800-Btu/lb physical February 2012 traded at $11.50/st for one train. Platts assessed the contract at $11.50/st, down 40 cents/st. The front month contract had been on a steady decline since late-October, losing about 20% in value over the period. PRB 8,800 physical Q2 2012 traded at $11.35/st and at $11.30/st, each for one train. Platts assessed the contract at $11.35/st, down 65 cents/st, an eight-month low for the front quarter contract. PRB 8,800 financial Q2 2012 traded at $11/st for 15,000 st and 5,000 st. The term also traded at $10.90/st for 5,000 st. PRB 8,800 financial Q2 2012 over Q3 2012 traded at a discount of 60 cents/st for 40,000 st and at a discount of 50 cents/st for 20,000 st. PRB 8,800 financial Q4 2012 traded at $11.90/st for 5,000 st and at $11.85/st for 10,000 st and 20,000 st. The Q4 2012 strip was assessed at $12.30/st, down 15 cents/st. PRB 8,800 financial Q3 2012 traded at $11.45/st for 5,000 st three times. PRB 8,800 back-half 2012 over Cal 2013 traded at a discount of $1.35/st for 5,000 st. PRB 8,800 financial Cal 2013 traded at $12.75/st for 5,000 st twice. The Cal 2013 package was assessed at $13.10/st, down 10 cents/st. Source: Platts

AUSTRALIA

China Trade Triggers $115 Billion Australia Ports, Railway Boom: Freight Australia is set for an A$112 billion infrastructure boom as the nation adds ports and railways to feed China and India’s appetite for coal and iron ore. The largest exporter of the key steelmaking materials will build enough railroads to stretch from Washington D.C. to Los Angeles over the next decade, as well as a new port on the Great Barrier Reef coast that will dwarf the world’s biggest bulk harbor. The projects will near-double global coal trade and add 57 percent to the market for seaborne iron ore. “There is so much opportunity here,” said Philippe Bouquet, Australia construction head at French builder Bouygues SA. “People in Paris are very impressed. They say: ‘23 million people? How can they do so much?’” Leighton Holdings Ltd. , Australia’s biggest builder, Bechtel Group Inc. and trainmaker General Electric Co. are among companies winning deals as Australia adds transport links to support A$232 billion of mineral and energy projects. The demand, coupled with economic slowdowns in the U.S. and Europe, has helped make Australia the developed world’s fastest-growing construction market. “This isn’t a short-term phenomenon,” said Hamish Tyrwhitt, chief executive officer of Sydney-based Leighton. “This is about the urbanization of India and China and the economic prosperity of the region.” Leighton rose as much as 2.9%, the biggest intraday gain in a week, to A$20.42, while the benchmark S&P/ASX 200 index fell as much as 0.5%. The builder was up 2.5% at A$20.34 at 1:08 p.m. Engineering company Downer EDI Ltd. rose as much as 0.9% and builder Lend Lease Group climbed as much as 1.2%.


Ports, Rail: Australia’s A$114 billion plans include building port terminals with capacity of almost 1.5 billion metric tons a year by 2022, and laying as much as 3,700 kilometers of rail track, according to data compiled by Bloomberg. One of the main sites is Abbot Point, a small coal port sandwiched between a salt marsh and the lagoon of the Great Barrier Reef. Queensland’s state government wants to boost capacity 26-fold from 15 million metric ton to 385 million tons under a construction plan due to begin in 2014. That would surpass by almost 40 percent the 2011 volumes at China’s Qinhuangdao port, the world’s biggest dry-bulk harbor. In the Pilbara iron ore-producing region on Australia’s northwest coast, BHP Billiton Ltd. (BHP) and Rio Tinto Group are leading plans to raise ore exports by 538 million tons over the next five years. That will more than double output from an area that already accounts for about 40 percent of the iron ore shipped by sea each year. Port Hedland, the Pilbara’s biggest harbor, plans to add 390 million tons of annual capacity by 2016 to support the expansion push. It exported 199 million metric tons of cargo in year ended June. GE (GE), which supplies 70 percent of the locomotives for mines in the Pilbara and Queensland’s Bowen Basin coal district, plans to double its total business in Australia by 2014, spokeswoman Joanne Woo said by e-mail. Bouygues (EN), Europe’s second-largest listed builder, aims to win two to three new construction deals in Australia each year, Bouquet said. The company has only done three projects in the country since 1995, he said. Bechtel is building a US$2.5 billion expanded coal port for BHP on the Barrier Reef coast and extending four BHP mines in the Bowen Basin. In Western Australia, Irving, Texas-based Fluor (FLR) is leading the US$3.9 billion expansion of BHP’s iron ore terminal at Port Hedland. “These companies have certainly got expertise that would put them above what would otherwise be available here,” said Phillip Greenham, a construction lawyer at Minter Ellison in Melbourne. Still, overseas companies can meet difficulties establishing reliable workforces and setting up supply chains, which may cause them to focus on partnerships with local contractors, according to Steve Gatt, KPMG’s Sydney-based lead construction partner. “There’s not a large number of companies that know the geography, the markets and the customers and have a demonstrated ability to build these things,” said Mike Carter, the head of coal-train operator QR National Ltd. (QRN)’s network division. The railroad last month completed an A$1.1 billion link to Abbot Point. It expects to spend A$1.6 billion on its network this year. Australia, with a population 40 percent smaller than California’s, spent $176.5 billion on construction in the 12 months to September 2011. Spending has surged 50 percent since June 2006, giving it the fastest-growing building market of any advanced economy. New construction spending in the U.S. totaled $724.8 billion in the 11 months ended November, the lowest level since the 1990s and down 34% from its peak in 2006. An index tracking construction in the European Union was 21% lower in October than in December 2006. The Australian boom is showing up in customs data. The value of large metal sections, used in construction, imported in the 12 months ended November was almost twice the amount for the whole of the 1990s, government data shows. Rolling-stock imports were a third above the 1990s total. Imports of prefabricated buildings -- mainly used for accommodation at remote building and mining projects -- almost matched the 1990s total in September alone. “You are seeing exponential growth,” said Jay Leary, a construction partner with Freehills lawyers in Brisbane. “The projects that are committed and planned for the next few years are game-changing.” Source: Bloomberg

EUROPE

Coal swaps volumes plummet in 2011 European coal swaps traded in the over-the-counter market dropped by nearly a quarter on the year in 2011. Around 1.5bn t traded on API 2 last year, down by 650mn t (or 23pc) on 2010, according to the London Energy Brokers' Association. On API 4, total volumes were pegged at about 293mn t, down by just under 600mn t year on year. “A few market participants moved away from the paper market,” a trader said. “One US bank was quite a big player in 2010, but reduced its swaps trading quite significantly last year.” The high volatility of the paper market and reluctance to commit to positions were also cited as reasons for a drop in swaps volumes. In total, 1.95bn t changed hands in the paper market last year, down by 1.09bn t on 2010, when total volumes traded stood at around 3.04bn t. March was the busiest month with over 216mn t changing hands, while July was the quietest — total traded volumes did not exceed 111mn t amid milder weather and the summer holiday lull, brokers said. The proportion of cleared swaps on API 2 doubled in 2011 to 56pc from 28pc in 2011, while on API 4 it grew from 36pc to 65pc, Leba said. The physical market also registered lower trading activity amid subdued demand. “Physical traded volumes dropped last year in comparison to 2010, so this could be the reason why the paper market's activity was also lower,” one broker said. Around 43.95mn t of coal changed hands on screen last year, down by just under 35mn t on the previous year, when on-screen traded volumes were around 78.94mn t. October was the quietest trading month this year with on screen deals pegged at around 1.9mn t, while April was the busiest — on screen trades stood at just under 6mn t. The fourth quarter of last year saw the lowest number of trades — on screen deals were pegged at around 7mn t, while the second quarter was the busiest, with over 14.3mn t of coal changing hands on screen. Source: argusmedia.com


Euro Coal-Prices fall $1/T with oil, low coal burn

Prompt European physical coal prices slipped by around $1.00 a tonne on Wednesday as utilities sold coal swaps in the face of weak coal burn across most of northern Europe after the warmest winter for 30 years. A $1.00 fall in oil prices as risk aversion returned to the market and a rise in oil stockpiles in the U.S. also helped pull coal lower, traders and utilities said. "There was a lot of utility selling earlier today, everybody's got too much coal and the burn outside of southern Europe has been poor," one European utility source said. "Oil fell, swaps fell and a lot of people backed off as a result," a European trader said. No fixed price trades were reported. Earlier in the week, a prompt DES ARA trade at $109.00 was seen as an aggressively low number but on Wednesday March ARA cargoes were offered at $105.75. Analysts and suppliers expect prices to remain above $100.00 this year but to come under increased downward pressure during January because key Chinese buyers will not be back in the market until the end of the month. A February loading South African cargo was bid at $105.25, down $1.25. A March South African cargo was bid at $104.75 and offered at $105.75, down $1.50. A March DES ARA was bid at $106.75 and offered at $107.50, down around $1.00 Source: Reuters

Russian ice returns but coal export disruptions unlikely Ice has begun forming in the Baltic Sea, with icebreakers likely to be deployed in key coal-exporting areas in the coming week, a Finnish Meteorological Institute (FMI) researcher told Montel on Wednesday. But although heavy icing resulted in considerable delays to coal and biomass exports in the 2010-11 winter, there is unlikely to be a repeat of such disruptions in the current season, said the FMI’s Patrick Eriksson. However, there could still be a sudden, unexpected, drop in temperatures, he said. “There’s been ice at [coal and wood pellet loading hubs] Vyborg and St Petersburg for a little more than a week, and – considering the forecasts for the next two weeks – freezing will continue in Russian waters,” he said, noting the potential for ice of up to 20cm in depth. Icebreakers are generally required once the ice thickness reaches 10cm. “Ice breakers are likely to be needed from next week, to assist the harbours, and keep them open,” he said, regarding the St Petersburg and Vyborg areas. “It looks that this winter will be very much different from the last one,” said a Russian icebreaker owner, adding, “Thus, the ice situation is very much better.” Russia is Europe’s largest coal supplier. Source: Montel

Russia's Mechel completes rail link to huge coking coal deposit Russian steel and mining company Mechel has completed the 321 km rail track linking its Elga coking coal mine, which sits one of the world's largest coking coal deposits, to the main Siberian rail network, the company said in a statement late Wednesday. The new tracks, which have so far cost $1.25 billion to lay, link the deposit to Ulak station on the Baikal-Amur Mainline. Some 70 contractors were involved in the construction work in "difficult climatic and geological conditions," Mechel said, adding that the line includes 76 bridges. The railway was completed in December 2011. Open pit mining at Elga began in August 2011 with 200,000 mt of coal mined by the end of 2011. "The launch of direct railway access to Elga Coal Complex will in 2012 significantly facilitate delivery of material necessary to increase production at Elga," Mechel Chairman Igor Zyuzin said. Elga is located in the southeast of Yakutia, 415 km east of the city of Neryungri and 320 km north of Verkhnezeysk village in the central part of Toko Coal-Bearing region. The Elga coal deposit can be worked by surface mining methods using high-capacity draglines, excavators and trucks, Mechel said on its website. The project includes construction of coal processing facilities as well as further open pit infrastructure development. Elga will mine and wash high-volatile, high-fluidity coking coal with low sulfur, nitrogen and phosphorus content and high calorific value as well as oxidized coals with high calorific value, which will be marketed as thermal coals. The mine's output is expected to grow to close to 7 million mt/year by 2015, including 2.4 million mt of metallurgical coal and 4.3 million mt of thermal coal. Source: Platts

Russia's 2011 coal exports rose 8.5% year-on-year to 104.7 million mt Russia's coal exports totaled 104.656 million mt in 2011, up 8.5% from 2010, while coal output rose 4.3% year-on-year to 334.753 million mt, according to data from Russia's energy ministry. In December, Russia's coal exports jumped 22.8% year-on-year to 8.509 million mt, while December coal production rose 2.4% year-on-year to 31.886 million mt,the ministry said over the winter holidays in Russia, which lasted from January 1 through January 9. Coal supplies to the national market in 2011 fell 2% year-on-year to 185 million mt, the data said. Russia's energy ministry estimates that the country's coal output will grow to 430 million mt by 2030, of which about 170 million mt will be exported, according to a draft development program. Source: Platts


INDONESIA

Peabody opens an office in East Kalimantan The world's largest private sector coal company, US-based Peabody Energy, has opened an office in the East Kalimantan port city of Balikpapan to increase its presence in Indonesia, the world's largest supplier of seaborne thermal coal. The company, which also has an office in the Indonesian capital of Jakarta, has secured multiple term off-take agreements in East Kalimantan. Peabody sold 246Mst of coal in 2010 and provides fuel for 10% of US electricity needs. Source: coalportal.com

PHI Group to acquire Indonesian coal mines US-based PHI Group has inked a Letter of Intent with Indonesian coal miner PT HBP to jointly operate a producing coal mine in South Kalimantan. The 80.6ha licence area at Jombang has about 5.5Mt of mineable coal with a CV range of 5,900-6,500kcal/kg. The JV expects to produce about 50kt/month of coal. PHI has also inked a Letter of Intent with Indonesian miner PT CSP to acquire about 20.7Mt of coal resources and a production licence in the Jambi province of Sumatra. The 2,000ha licence hosts coal with a GCV range of 5,087-5,884kcal/kg adb at Kabuoaten Sarolangun. Source: coalportal.com

INDIA

Labour unrest hits coal production Labour unrest has been causing severe loss to coal production in a section of mines under the Raniganj coalfields of the Eastern Coalfields Limited, a sick Coal India subsidiary. The company has expressed concern as the ECL is incurring a loss of production worth Rs 30 crore every month. Besides, coal supply to the nearby thermal power plants, steel, cement, fertiliser and other industries is also affected following the strike. Around 215 labourers of ECL are on an indefinite strike after the closure of the North Searsole mines which were flooded due to incessant rainfall last monsoon. The company held rampant illegal mining by the coal mafia responsible for it. The labourers now have demanded reopening of the mines, though, according to Mr Varun Vagis, Senior Public Relations Officer, ECL: "The Directorate General of Mines Safety, after inspecting the flooded mines, expressed concern over the safety of the miners. We are helpless.” ECL was also incurring a loss of Rs 3,500 per ton in the North Searsole underground mines due to the high cost of production there. The sick coal major finally planed to open a new Open Cast Project at North Searsole, which according to the company, “is likely to earn a profit of Rs 3,000 per ton.” Mr Vagish said: “The standalone profit from this OCP may revive the condition of the entire Kunustoria area in Raniganj, which earlier used to be the most profitable area of ECL." However, high production costs of many underground mines, like North Searsole, have led Kunustoria into losses. Coal production is also affected in Bansra mines in the Kunustoria area, resulting in a loss of Rs 1.8 crore per month to the company, as 215 striking labourers from North Searsole have refused to move to Bansra. Source: The statesman

Coal India's new pricing rule faces opposition Coal India's new pricing system faces strong opposition from consumers across the country as it has pushed fuel costs up by up to 70% for the small and medium steel and cement industries that face a shutdown now. Power companies too are facing the heat and said that tariffs would rise by at least 40% to factor in the price hike. Since January 1, Coal India has begun pricing coal based on gross calorific value or heat produced by burning it. Earlier, prices were fixed based on moisture and ash content present in coal. The pricing mechanism will be reviewed after three months. Steelmakers alleged that Coal India was misusing its monopolistic position to profiteer without taking stakeholders' views, but a coal ministry official termed the new pricing policy as the most consumer-friendly reform by Coal India ever and said that it is globally accepted method and will lead to improvement in quality of coal. Industry representatives from Chhattisgarh, Karnataka, Jhark-hand, West Bengal, Orissa and Andhra Pradesh met coal secretary Alok Perti on Tuesday to convey their grievance. "Worldwide, coal pricing is done after taking out intrinsic impurities and a universally-accepted analysis. Coal India started the new pricing policy without proper analysis. The company is misusing its monopoly to earn hefty profits. All small and medium enterprises will be wiped out," Chhattisgarh Sponge Iron Manufacturers Association president Anil Nachrani said. Coal India's largest consumer NTPC expects a 60-70% impact on tariff. "This will mean about a 70 paise per unit rise in generation cost, which will be passed on to consumers," a company executive said. The power ministry has asked the coal ministry to move back to the old pricing mechanism. A coal ministry official said "the company moved to the new pricing system after recommendations by the TL Shankar committee and the Planning Commission's Integrated Energy Policy". He said the move was revenue neutral for Coal India. Analysts, however, said that the new pricing would increase the company's revenue by 15%. A Coal India official said that even after the revision, coal price would be 77% lower than international prices for power, fertiliser and defence sectors. Coal India has been asked not to implement the new policy for West Bengal power companies till January 16 after a non-profit organisation, Howrah Ganatantrik Nagarik Samity, filed a PIL in the Calcutta High Court accusing the company of making abnormal profits by repeatedly raising prices. Source: India times


Indian government earmarks 146 coal blocks for State entity India’s Coal Ministry was set to allocate some 146 coal blocks with an estimated aggregate reserve of 60-billion tons of coal, to Coal India Limited. The allocation would be completed ahead of a scheduled auction of a further 30 blocks, which would take place within the next three months. The auction would be aimed at private miners and user industries. CIL, which is majority owned by the govt, would be accorded priority status to enable the miner to maintain its monopoly position in the industry, which accounts for close to 80% of domestic coal supplies, with its production of 452-million tons. The Ministry has decided that the 30 blocks to be auctioned would be earmarked, with a number of blocks set aside for use by specific sectors, including power, cement or steel. “It may also be a possibility that some of the 30 blocks may go to CIL by default if competitive bids from private sector companies were not found favorable in terms of bid amounts quoted, mining plan or investments,” a Ministry official said. “While framing the auction norms, past records too have been kept in mind. Out of the 198 blocks allocated for development and use by private companies, only 25 have been operationalised, producing just 40-million tons of coal mined,” the official added. The allocation of the additional 146 blocks would enable CIL to achieve production levels of 556-million tons by the end of 2017, as envisaged in the twelfth Five Year Plan, beginning in April 2012. However, much like the private companies who have been unable to develop and operationalise captive coal blocks, CIL has not been able to incrementally grow its production levels either, owing to the Forest and Environment Ministry’s classification of mining projects in forest areas into `Go’ and `No-go’ areas. This classification meant that around 30% of the allocated areas, which cover nine coal fields across the country, could not be taken up for development. According to the Ministry of Coal’s estimates, the loss of production as a result of this classification would be around 619-million tons. Issues relating to rehabilitation and resettlement of local population, land acquisition and compensation and equipment shortages have also held up new mine development. The government would have to protect the interests of CIL through preferential allotment of new coal blocks, or risk the company losing its status as the world’s largest coal miner, Ministry officials said. However, preferential allotment of blocks ahead of auctions has raised the hackles of private investors. “In a liberalised and competitive economic environment, the government should allocate all natural resources through competitive bidding and ensure a level field for private and government companies without preferential treatment,” an official in a private independent power producer said. The Geological Survey of India found that, as of April 2011, Indian coal reserves were estimated at 33.47-billion tons of coking coal and 252.4-billion tons of thermal coal. However, imports of coal during March/April 2011/12 were forecast at 117-million tons and were expected to rise to over 200-million tons by 2017. Source: Mining Weekly

Steel Authority Of India To Gain From Lower Jan-March Imported Coking Coal Price The Steel Authority of India Ltd. is set to gain from an on-quarter fall of up to 20% in the price of imported coking coal for the January-March period, two government officials said. This will likely help reverse a trend of declining profits in the past few quarters at SAIL, which has been hit by higher costs of imported coal, a key raw material in the making of steel. SAIL has contracted purchases of coking coal from main suppliers Australia and New Zealand at $225-$235 per metric ton, FOB for the January-March quarter, down from $280-$285/ton in the previous quarter, a steel ministry official said. The price fall is even sharper for imports from the U.S.: SAIL will pay $191/ton, down from $250/ton a year earlier. But the advantage would be smaller for SAIL as it sources only 20% of its annual requirement of 11 million tons from the U.S. Most of its imported coking coal needs is met by Australia and New Zealand. SAIL imports almost the entire quantity of its coking coal needs as local sources are few and the quality is poor. Prices of blended coking coal from Australia and hard coking coal from New Zealand usually command higher prices due to better quality. "The benefit of lower contract prices of coking coal will be partially negated because of the weakening of the rupee, but it will still boost our margins," SAIL Chairman C.S. Verma said, referring to a 15% fall in the Indian rupee against the U.S dollar since April last year. "Coking coal prices should fall further," he added. SAIL's annual requirement of coking coal is expected to rise to 21 million tons by March 31, 2013, as it is expanding its crude steel production capacity to 21.4 million tons from 13.4 million tons. The decline in costs of coking coal may not immediately reflect in steel prices as the company wants to improve its margins after partly absorbing the higher input costs in the past few months, another steel ministry official said. SAIL posted a worse-than-expected 55% fall in net profit to INR4.95 billion for the second quarter ended Sept. 30, 2011, hurt by a foreign-exchange loss and higher raw-material cost. Source: Dow Jones


AFRICA

A closer look at RBCT’s record coal shipments Richards Bay Coal Terminal (RBCT) reported it had shipped 8.1mt of coal in December setting a new record for the port company and exceeding the monthly average equivalent of its design capacity of 7.6mt (91mtpa). Annual shipments totalled 65.5mt, an increase of 3.3% on 2010’s number. Volumes of this magnitude were last seen in 2007 (66.2mt). Despite the numbers being far below the capacity of 91mtpa it’s a step in the right direction. However, the numbers reported for the month are confusing as stock levels did not drop commensurately with the increase in shipments. Rail deliveries to the port likewise, did not increase enough to make up the additional shipments. The deviation is significant (1.7mt). Alan Waller, acting CEO of RBCT, responded to the abovementioned query saying: “Month and year end railings and stock are closed off at 0600 hrs January 1 2012. Close off for shipping is different in that if a ship arrived before midnight on December 31 2011 then it is included in December and that years export throughput. This year end ruling is a long standing historical one. There were a large number of ships planned for December many of them arriving in the second half of December which resulted in a roll-over of export tonnage into January, accounted for in December.” Transnet Freight Rail’s (TFR) coal deliveries to Richards Bay Coal Terminal (RBCT) also surprised on the upside breaching 6mt for the fourth month this year. After slipping to 5.75mt in November, Transnet Freight Rail (TFR) bounced back and delivered just over 6mt for the month of December and 65.7mt for the 2011 calendar year. This is an improvement of 4.5% on the previous year and its highest annual tonnage since 2006. Sandile Simelane, TFR spokesperson, said “we are working like a conveyor belt” attributing the increase in performance to a combination of factors. “It is a basket of things and internal efficiencies. The introduction of new locomotives, the ring fencing of the coal export wagons and the phasing in of jumbo wagons that have a larger capacity” the spokesperson said. When asked if these increases were benefitting those smaller miners that did not have rapid load out facilities Simelane used an analogy to describe the situation: “It is like a fast car compared to a slow car - who will reach their destination first?” An interpretation of the analogy would be that turnaround times are faster for the mines that have these facilities thus enabling them to better exploit the increased capacity and efficiency currently being enjoyed by TFR. An example would be Anglo American’s coal mines that are all equipped with rapid load out facilities. Despite the recent drop in coal prices the increase in volumes would be pleasing for those coal producers. After a gradual drop of 10% in the rand-coal price over the first eight months of 2011 there was a hefty increase in rand terms of 21% between the end of July and the beginning of October due to a weakening in the local currency – this coincided with the increase in deliveries by TFR. The rand-coal price has since fallen back 12% since the beginning of October but bounced again on the back of increased demand in December. RBCT is the single largest export coal terminal in the world and is co-owned by various mining companies including Anglo, BHP and Xstrata. It was opened in 1976 with an original capacity of 12mtpa and has grown into an advanced 24-hour operation with a design capacity of 91mtpa. Full utilisation of the capacity has been hamstrung by a slower ramp up in rail capacity. TFR is working towards closing the gap but only expects to reach 81mt per annum by 2016. Source: Money Web

Exxaro faces strike at Arnot coal mine The National Union of Mineworkers (NUM) said on Wednesday that about 1 000 of its members would down tools at diversified miner Exxaro’s Arnot coal mine near Witbank on Friday. This follows the Commission for Conciliation, Mediation and Arbitration issuing a certificate of nonresolution regarding a dispute over conditions of employment. “When Eyesizwe and Kumba merged to form Exxaro, which took over Arnot as one of its operations, Eyesizwe had a long-service award that Exxaro promised it would not tamper with. “It is unacceptable that Exxaro changes its policies as such that our members lose years of service. Some employees have worked at Exxaro for 20 years and some for 30 years and we cannot allow the company to nullify that,” NUM branch secretary at Arnot Coal, Mxolisi Hoboyi, said in the statement. Exxaro spokesperson Hilton Atkinson told Mining Weekly Online that the company had been notified about the planned strike and confirmed that it was related to the interpretation and application of the long-service award policy, which Exxaro believed did not prejudice employees. “The company is currently engaging with NUM representatives at Arnot to find an acceptable solution that could avoid the strike action. Should the engagement not be successful and the strike proceeds, contingency plans regarding production and supply of product will be in place to limit disruption,” he said. Exxaro’s Arnot coal mine produces five-million tons a year of power station coal and is contracted to supply State-owned power utility Eskom’s Arnot power station until 20 Source: Mining Weekly


Sekoko rethinks its Waterberg strategy

Sekoko Resources has said it was negotiating a “significantly improved” offtake agreement with Eskom, after the parties had called off a deal concluded at the beginning of 2011. The company announced in February last year it had signed a memorandum of understanding with the power utility to provide 525,000 tonnes of coal per year for six years to the Matimba power station. The takeoff agreement was supposed to commence in April this year. At the time, Sekoko also clinched a R250m financing deal with the Industrial Development Corporation for the development of its Waterberg coal project. Chairperson Timothy Tebeila and CEO Jan Britz told Miningmx on Wednesday Sekoko had decided to change the project’s scale and mining plan. “That (first) deal was not sufficient to get the finance we needed,” said Tebeila. Britz told Miningmx the company was now working on a reconfigured bank feasibility study, with first production planned for 2014, ramping up to annual sales of 10 million tonnes (Mt) by 2019. The project has a 5 billion tonnes resource base. Tebeila said Sekoko was still negotiating to bring a strategic partner on board, after earlier talks with both Jindal Steel and Coal India had failed. He didn’t want to divulge what percentage of production would be earmarked for offtake by Eskom, as the MoU was still being negotiated. “It will be quite a significant improvement on the previous contract,” he said, adding that Sekoko expected to make an announcement on this and a strategic partnership within the next month or two. “All the holes are lined up,” Britz said. “We’re not in limbo; we’re up and running. “It is a matter of weeks before we’ll have a lot to communicate.” Sekoko’s joint venture partner for the Waterberg coal project is JSE and ASX-listed Firestone Energy. Firestone’s share price have languished in recent months and fell from a high of 37c in January 2011 to its current lows of around 9c. Tebeila was appointed chairperson of Firestone in December. Asked whether Sekoko and Firestone were moving towards a single corporate structure – Firestone has no assets or operations other than its share in the Waterberg project – Tebeila declined to comment, but did say the two companies were working on a restructuring. Britz said Sekoko would in 2012 also submit mining right applications for the company’s Tuli coking coal project, which is close to Coal of Africa’s Vele Colliery, as well as its Capricorn iron ore project. He dismissed concerns that Sekoko would face the same challenges over environmental concerns which CoAL had to deal with at Vele, saying the project was located 48km’s away from the Mapungubwe World Heritage Site. “We’ll do everything by the book,” Britz said. “I think we all have learnt a lot of lessons on how to approach this.” Source: miningmx

Malawi, Vale ink $1bn rail line deal MALAWI has signed a $1bn deal with Brazil’s Vale for the construction and rehabilitation of a rail line that will transport 18 million tonnes of coal from Mozambique, government officials said on Wednesday. Vale Logistics, a subsidiary of mining giant Vale, will build a new 138.5km line from Chikhwawa in the south, to meet an existing line at Balaka. It will also rehabilitate 98.6km of the existing link between Nkaya to Nayuchi. “Vale will invest about $1bn in Malawi over a period of three years for construction and rehabilitation of the railway line and it is expected to employ 4,500 workers, of which 70% will be Malawians,” Minister of Transport Sidick Mia told Reuters. The railway will have annual haulage of at least 5 million tonnes of general Malawian cargo. Distances can be cut in transporting Mozambican coal by taking cargo through neighbouring Malawi. Mozambique has some of the world’s largest untapped coal reserves. “It’s expected that Malawi will be saving in excess of $120m annually in transportation costs, and this has an overall effect of reducing the transport costs of goods to and from Malawi by about 40%,” he said. Source: Miningmx

ASIA

Vietnam 2015 coal output to rise to 55-58 mln T –govt Vietnam aims to raise its coal output to 55-58 million tonnes in 2015 from an estimated 48.9 million tonnes this year in an effort to meet demand for fast-growing electricity production, the government said. Output is projected to rise to more than 75 million tonnes by 2030 thanks to the exploitation of new sites, the government said late on Tuesday in a plan for coal development. Electricity demand is growing at 7-10 percent a year and Vietnam is having trouble ensuring supply. Coal will be a major fuel for electricity over the next five years and will account for 47 percent of power generation by 2020, state utility Vietnam Electricity has said. The country has a dozen thermal power plants under construction which are expected to start operation by 2015. Vinacomin, the state-run coal and mineral group, plans to import at least 5 million tonnes of the fossil fuel in 2015, officially starting imports in large volumes. Vietnam has estimated total coal reserves at 48.7 billion tonnes by 2011, a government coal development plan said. In 2020, exploitation will probably start in the Red River Delta, which is estimated to have reserves of 39.4 billion tonnes, nearly five times larger than the country's main coal site in the northeastern region, the plan said. However, mining coal in the Red River Delta would be controversial because it is a big rice-producing area and densely populated, and locals are worried about the environmental impact. Source: Reuters


Italian-Thai to ‘Renegotiate’ After Myanmar Scraps Coal Plant Italian-Thai Development Pcl, Thailand’s biggest construction company, may change the fuel supply for a power plant in a planned $8.6 billion industrial zone in Myanmar after the government scrapped plans to use coal. The company has yet to receive a formal notice from Myanmar, after media reports this week said the government rejected plans for a 4,000 megawatt coal-fired power plant, said Somchet Thinaphong, managing director of the Dawei Development Co., an Italian-Thai unit. The company’s November agreement with Ratchaburi Electricity Generating Holding Pcl to build the plant remains unaffected, he said. The government’s decision “only means we have to renegotiate the source of fuel,” Somchet said in an interview in Bangkok yesterday. “With Ratchaburi, the intention was to use coal. If we change the source of supply, Ratchaburi has to sit down and recalculate.” Italian-Thai plans to secure financing and woo companies to invest in a deepsea port and industrial estate located in Myanmar on the Indian Ocean about 300 kilometers (186 miles) west of Bangkok. Myanmar’s 11-month-old government, whose democratic reforms have prompted the U.S. and Europe to reassess sanctions, has canceled two power-plant projects in the past six months because of environmental concerns. Italian-Thai shares fell 1.1 percent yesterday. They have dropped 14 percent over the past year, compared with a 3.8 percent gain for Thailand’s SET Index. Ratchaburi shares fell 1.1 percent yesterday. Myanmar’s decision is “nothing dramatic,” Somchet said, adding that the company would explore using natural gas from the Indian Ocean instead. He said it remained unclear how changing the fuel supply for the power plant would affect cost projections or deadlines for the Dawei development. PTT Pcl, Thailand’s biggest energy company, is studying whether to invest in a power plant in the Dawei project, Chief Executive Officer Pailin Chuchottarworn told reporters in Bangkok yesterday. A gas-fired power plant may be problematic since no pipelines currently run near the project, he said. “We have to look for signs from the government there,” Pailin said. Myanmar suspended the project over environmental concerns, Xinhua reported, citing Cabinet member Khin Maung Soe. Myanmar President Thein Sein on Sept. 30 suspended a $3.6 billion hydropower dam backed by China Power Investment Corp. Italian-Thai Chairman Premchai Karnasuta said last month he expects to sign loan agreements next year valued at $12.5 billion to develop the project. Japan Bank for International Cooperation will probably provide most of the funding for the port, road and railway links in Dawei, he said on Dec. 26. Representatives from Thailand-based Bangkok Bank Pcl, Krung Thai Bank Pcl and Siam Commercial Bank Pcl have expressed interest in financing the project, Somchet said. Potential investors include Malaysia’s Petroliam Nasional Bhd., known as Petronas, and Japanese companies including Mitsubishi Corp. and Mitsui & Co., he said. “I have faith and confidence” in Myanmar’s government, Somchet said, adding that he would give their relationship an “A-plus” grade. “They understand what they are doing.” Italian-Thai is still seeking partners and financing for an integrated steel mill, an oil, gas and petrochemical complex, and fertilizer plants. The company expects to gain income from selling 50,000 rai (80 square kilometers) of land, an area equivalent to about a 10th of Singapore, and serving as the main contractor on infrastructure projects, Premchai said on Dec. 26. Source: Businessweek

China's power use wobbles a little The chair of China's State Electricity Commission (SERC), Wu Xinxiong, told reporters at a conference in Beijing the growth of China's annual power consumption slowed to 11.7% during 2011. "Power consumption reached 4.7 TkWh in 2011 and grew at a slower rate than the 14.56% recorded in 2010," he said. "During 2012 power consumption is expected to go up by only 8.5% with first quarter growth to taper off as low as 5%. "China's total installed power-generating capacity climbed 9.3% during the year to exceed 1.06BkW. "Coal consumption per kilowatt hour of electricity for thermal power plants, a key indicator of China's power-generating efficiency, dropped by 3 grams to 330 grams during 2011." Source: coalportal.com

China coke exports in 2011 dip 1.4% year-on-year on limited demand China exported around 100,000 mt of coking coal in December, settling the nation's total coke export volume at 3.3 million mt, down 50,000 mt, or 1.4%, from 3.35 million mt in 2010, official China customs data, released Tuesday, said. The country's coke exports peaked at 770,000 mt in March. At the time, global coking coal prices jumped sharply in response to floods in Australia's Queensland in late 2010 and early 2011. The high coking coal prices and limited supply made Chinese coke -- previously seen as very expensive -- acceptable to international buyers, coke traders in China said. But in the last quarter of 2011, when global coking coal supply from Australia normalized and the steel market flattened, China's coke exports fell to a rate of 80,000-100,000 mt/month. "We were carrying out old contracts, no new deals were concluded [at the time]," a Shanxi Province-based exporter said. China used to be the largest seaborne coke exporter, but exports abated in 2008 after the central


government raised coke export duties to 40%, from the previous 25%, to conserve coal resources. China's coke producers have been working, with limited success so far, to persuade Beijing to remove or lower the tax. Source: Platts

TENDER: KEWPO issues a tender for 100kt of Vietnam Korea East West Power has issued a tender for 100kt of Vietnamese anthracite coal for the Donghae thermal power plant. Bid No.: EWP-A.Coal-2012-SP01. Specifications: 100kt of GCV min. 4,900kcal/kg Vietnam anthracite coal with a max. total moisture of 10% arb, min. 15% to max. 40% of ash adb and max. sulphur of 0.6% on DDP (delivered duty paid) basis to the power plant. Delivery: March 1 - May 31, 2012. Bids close at 2pm Korea Standard Time on January 18. For further information, go to KEWPO's website, www.ewp.co.kr Source: coalportal.com

FREIGHT

Port of Newcastle – Daily Performance Report (as at midnight of 11th January 2012) There is currently 6 vessels assembled with 48 vessels currently in queue, coal stocks in the port are currently 1,303,000mt. The average waiting time last week was 15 days compared to 18 days from the previous week. Actual volume for Dec was 108.20 MTPA, target volume throughput for Jan 115.8 MTPA. Source: Hunter Valley Coal Chain Logistic Team Richards Bay - Coal loading (as at 0600 on 5th January 2012) There are 3 vessels alongside this morning. There are 8 vessels at anchorage. There are a total of 6 berths available for loading. Source: LBH South Africa Cape Market Report Cape rates continue to falter with bad weather having negative effects in both basins. In the Pacific, cyclone Heidi has caused load ports in West Australia to close and charterers have further lowered their bids with $7.75 now there for 3 feb onwards, whilst owners are looking to obtain figures in the low/mid $8’s. In the atlantic, $21.10 has been fixed for end January/early February dates bss Tubarao / Qingdao whilst t/A cargoes remain very hard to come by. Source: Clarksons Cape Market – 11th January 2012

Price Indication: Capesize – RBCT – Rotterdam $ 10.50 Previous – $ 10.50 Panamax – RBCT – Rotterdam $ 13.91 Previous – $ 13.91 Source: Clarksons Daily Coal Report –11th January 2012

Falling freight prices limit API 4 losses Plummeting freight rates are lending some support to free-on-board (Fob) coal prices, with the spread between the API 2 and 4 contracts having narrowed by around USD 1.20 to some USD 3/t since the beginning of the year. Front quarter forward freight agreement prices have fallen by more than 30% since the beginning of the year, closing at USD 11,375/day on Tuesday, shipbroker data shows. And the Baltic Dry Index – which tracks global dry freight prices – has dropped by more than 20% over the same period, to a last assessment of 1,258 points. Paper cargoes are coming under pressure amid a “lack of fresh enquiry and ample tonnage” in both the Atlantic and Pacific basins, shipbrokers FIS said. Partially as a result, the spread between coal’s front quarter API 2 and API 4 contracts – or the implied freight – has narrowed, as more buyers are encouraged to snap up Fob cargoes. The API 2 contract is for South African coal, including cost, insurance and freight (Cif) to northwest Europe, while the API 4 contact reflects Fob South Africa material. “The recent drop in freight rates has opened some and motivated a few Indian industries to ask for small Richards Bay parcels,” an analyst said. “That is main reason behind the API 4 price support,” he added. “This [decline in freight prices] might encourage more Indian demand, but I’m not sure it’s enough,” Société Générale analyst Emmanuel Fages said, adding, “Indian demand [for imported cargoes] depends on this, but also on the rupee.” And the rupee remains weak, at some 52 against the US dollar, compared with 44 in mid 2011. “Once the current friction in terms of the weakening rupee alleviates we could see better [import] numbers come in,” said Barclays Capital analyst Miswin Mahesh. “I am positive on Indian demand,” he added. But the narrowing Fob-Cif spread is also attributable to sharper losses on the API 2 market, where speculation and non-fundamental factors play a greater role. “The API 2’s behaviour is linked more to macro [factors], than to the fundamentals,” Fages said, adding, “The API 4 might just be living its own life, as it’s more fundamentally driven.” The front quarter API 2 contract was last seen at USD 107.90/t, down by USD 1.40 on Tuesday’s close, while the equivalent API 4 contract last traded at USD 104.90/t, down by USD 1.15, broker data showed. Source: Montel’

http://www.ewp.co.kr


DRY BULK MARKET CRASHING AT START OF THE YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING The dry bulk market has kept being on freefall mode yesterday, with the industry's benchmark, the BDI (Baltic Dry Index) losing a massive 5.17% on the day and ending the session down to just 1,193 points, which is almost half of where it stood during the final weeks of 2011. Leading the plunge was the Capesize sector which yesterday lost 5.82%, with the BCI (Baltic Capesize Index) ending down by 5.82%, while Panamaxes were also heavily hit, falling by an additional 4.26%. In its latest weekly report, Fearnleys said on the Capesize market that "history repeats itself - with the new year starting with lack of cargoes and too many ships, just like the beginning of year 2011. We have seen some activity on the West Australia/China route but rates have been dropping and time being around mid 8´s. Now the activity x W.Australia is basically stopped due to cyclone. For the fronthaul, bids/offers are presently USD 21 against 22 and the short period market is dead, with FFA values suggesting these rates are in the lower 10,000s dly which does not make sense for most owners" said shipbroker. On a similar note, Shiptrade said " the market dropped heavily and pessimism took over. The average of the four T/C Routes decreased by USD 12,000, closing the week at USD 15,500 and this was reflected on the BDI which recorded a free fall of 983 points. Rates for front haul trips concluded at USD 32,500 per day and the T/A round, which was heavily affected by the rainfalls in Colombia, concluded at around USD 14,500, both significantly less than the week before. In the Pacific the majors appeared relatively quiet ending up at declining levels of USD 9.00 pmt towards the close for the Dampier/Qingdao. Owners preferred to ballast to Brazil or South Africa as west Australia lacked cargos followed by the huge amount of available tonnage in the East. Capesize rates are going to be supported by lower iron ore prices and coal demand for Winter heating in the coming months, thus freight rates are expected to stay sensitive to iron ore price developments Mining companies will prefer to sell their production in larger volumes rather than higher prices, as long as China appears ready to purchase" said Shiptrade. Meanwhile, on the Panamax front, Fearnleys said that it "continued its softening trend, especially in the Pacific. In Q1 last year, the situation was quite similar and seems history is repeating itself. On Tuesday this week, there were more activity but the instant burst of excitement and activity was soon replaced with the tough facts. The open vessels are simply out numbering the available cargoes hence rates continue to slip. China´s coal stocks are high after the rally in coal cgos from especially Indonesia prior Christmas. This is not helping the Pacific market and causing owners to offer in at lower levels than what´s last done. We are in between two grains seasons thus we do not expect any boom in the activity for the ECSA market either in the short term. In Australia, Port Hedland is closed down due to the approaching Tropical Cyclone Heidi. Tarvs now being fixed at around USD 13k while the fronthauls in the low/mid 20´s. Pac rounds keeps slipping and now achieve in the region of USD 8/9k" said Fearnleys. Shiptrade also mentioned that "the first fixtures of the year followed the same decreasing patterns as the last week of 2011. In the Atlantic Basin the lack of Mid January cargoes in Continent led the owners ballast their ships towards USG/USEC. In the Med the market was really quiet as well, which was no surprise due to the past New Year’s Holiday. On the other hand owners who were keen to call Far East had to compete with the ballasters from North China/Korea. In the Pacific Basin the week started with optimism as LME vessels were reported at 10-11,000 basis delivery North China for Pacific rounds. However, the week closed with many similar vessels being reported at USD 9-10,000 basis delivery North China for same route. The average time charter rate of the four assessment routes dropped about USD 1,100 USD to 12,200 per day". As for the Supramax trades, Shiptrade, a Piraeus-based shipbroker said that "rates dropped both at Atlantic and Pacific. On the Atlantic side owners faced a lack of cargoes in Continent and high competition which led them to ballast at USG. There, although some few fresh cargoes came out market decreased further due to the too many available vessels at the region. Trips to Persian Gulf and West Coast India were fixed at USD 29,000 levels and Transatlantic trips to Skaw/Passero at USD 24,000. Also Med was weak with trips to USG rating at USD 4-5,000 and front haul trips fixed around a lower USD 22,000. On the Pacific rates dropped further given that vessels from china were fixed at USD 5,000 for Indonesian round voyage with nickel ore. The imminent Chinese New Year’s combined with the abundance of existing and new building tonnages do not leave much hope for market revitalization, at least for the month to come" it concluded. Source: Hellenic shipping News


OIL

Oil Declines After U.S. Fuel Inventories Climb as German Economy Contracts Oil fell as U.S. crude and fuel supplies climbed more than expected and concern mounted that a contracting German economy will drag Europe into recession. Futures dropped 1.3 percent after a government report showed that crude inventories rose 4.96 million barrels last week, almost five times the gain projected in a Bloomberg News survey of analysts. Fuel stockpiles jumped as demand decreased. Oil also slipped as Germany’s Federal Statistics Office said Europe’s largest economy shrank last quarter. “The fundamentals are poor, with both today’s inventory report and the fourth-quarter contraction of the German economy pointing to lower prices,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Today’s numbers point to a poor demand period, which should be weighing on the market.” Crude oil for February delivery declined $1.37 to settle at $100.87 on the New York Mercantile Exchange. Prices are up 11 percent from a year earlier. Brent oil for February settlement fell $1.04, or 0.9 percent, to end the session at $112.24 a barrel on the London- based ICE Futures Europe exchange. The European contract’s premium to Nymex crude widened to $11.37 a barrel today. Crude inventories rose to 334.6 million barrels last week, the highest level since the seven days ended Dec. 2. A 1 million-barrel gain was forecast, based on the median of 12 analyst estimates in the Bloomberg News survey. “We’ve had three bearish reports in a row and oil has only managed to briefly dip below $100,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We’ve got every reason to drop but have held up well. I expect we will soon be testing resistance in the $103 to $104 area again.” Oil in New York reached $103.74 a barrel on Jan. 4, the highest level since May 11. Futures have touched a low of $98.30 during the last three weeks. Gasoline supplies climbed 3.61 million barrels to 223.8 million in the week ended Jan. 6, the highest level since March, the report showed. Analysts projected a 2.25 million-barrel increase in stockpiles. Demand (DOEDMGAS) tumbled 4.4 percent to 8.18 million barrels a day, the lowest level since February 2003. Inventories of distillate fuel, a category that includes heating oil and diesel, climbed 3.99 million barrels to 147.6 million, the report showed. “The market was shaken by the combination of the German economic news and the U.S. gasoline numbers, which were anemic,” said Matthew Dougherty, a managing director at Advisory Research Inc. in Chicago, who manages $6 billion. German gross domestic product decreased by about 0.25 percent in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said today in an unofficial estimate. A recession is defined as two consecutive quarters of GDP contraction. “Germany is on the cusp of recession, which will be bad for demand,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “There will be pressure on this market as long as there’s no clear path out of Europe’s economic problems.” The euro slipped 0.6 percent to $1.2703 at 3:47 p.m. in New York. A weaker common currency and stronger dollar decrease the appeal of raw materials to investors. “The dollar keeps going higher as the euro sinks on concerns about Europe,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “It looks like Germany, the engine of Europe’s economy, is heading into recession if it isn’t there already.” Futures climbed as much as 0.2 percent earlier after Iran’s Fars news agency said a nuclear scientist, Mostafa Ahmadi Roshan, was killed in a bomb attack in Tehran. Rising tension between Iran and the West over the country’s nuclear program has bolstered oil prices. Four diplomats said European Union talks on ending imports of Iranian oil are bogged down. Greece, Italy and Spain are trying to soften a U.K. push for a blanket ban, on concern it would weaken economies, the diplomats said, declining to be identified because no final agreement has been reached. EU foreign ministers will discuss sanctions on Jan. 23 in Brussels. “Iranian saber rattling has been embedded in the price,” Dougherty said. Oil has risen this year because of an improving economic outlook rather than tension with Iran, Goldman Sachs Group Inc. said in a report dated yesterday. The bank sees little evidence of an Iran premium in the price, according to the note from David Greely, head of energy research at Goldman in New York. The Nigerian oil union Pengassan said it has started the process of shutting the oil platforms of Africa’s top producing country to support demands for return of fuel subsidies. The West African country was the fifth-biggest source of U.S. oil imports during the first 10 months of 2011, according to the Energy Department. Oil volume in electronic trading on the Nymex was 538,697 contracts as of 3:47 p.m. in New York. Volume totaled 652,853 contracts yesterday, 8.6 percent above the three-month average. Open interest was 1.39 million contracts. Source: Bloomberg


STEEL

US weekly raw steel production rises 1.3% The American Iron and Steel Institute (AISI) reported that US raw steel production rose 1.3 percent last week (ended January 7) compared to the previous week. Total raw steel production in the United States amounted to 1,891,000 net tons (nt) last week, representing a 1.3 percent increase from the 1,867,000 nt produced in the previous week, and a 5.6 percent increase from the 1,790,000 nt produced in the same week last year. The capacity utilization rate of US raw steelmaking facilities was 76.5 percent in the week ending January 7, compared to 75.3 in the previous week and 73.2 percent in the same week of last year. Source: Steel Orbis

German crude steel output seen flat in 2012 Germany's crude steel output will probably remain almost flat this year as the euro zone debt crisis starts to affect the economy of Europe's largest steelmaker, and the risk of rising raw material prices weighs, a German industry body said. The German Steel Federation said crude steel production last year rose 1 percent to 44.3 million tonnes, affected by a summer dip in demand that deepened into a second-half slump that forced capacity cuts in steel mills. "We expect crude steel production in 2012 at around 44 million tonnes. The production will substantially remain stable," Federation President Hans Juergen Kerkhoff said on Tuesday in a statement. He said demand would be supported by major end-clients, such as the automotive and engineering sectors, and that the construction segment was expected to grow further this year. But he warned that raw material costs pose a downside risk despite recent slight price reductions for iron ore and coking coal, key inputs in steel-making. Germany's biggest steelmaker, ThyssenKrupp, and other European steel companies have announced some production cuts in the face of weaker demand, and more furnaces are likely to be idled in coming months. Some producers in the region have announced restarts and even an expansion, but curtailments are widely seen as likely to dominate as customers prefer to run down their inventories in an uncertain economic environment. Source: Reuters

Korea: Exports of steel products hit record high in 2011 Korea’s exports of steel products rose to a record high last year, buoyed by rising overseas demand and increased production capacity, a local steel association said Wednesday. Local steelmakers, led by leader POSCO, exported 28.48 million tons last year, up 9.3 percent from a year earlier, according to the Korea Iron and Steel Association. Exports accounted for 39.7 percent of total steel output. On the other hand, domestic firms imported some 22.96 million tons of steel products last year, falling 8.5 percent over the cited period, the association said. The association said the increased exports were attributable to increased production capacity and overseas demand. “Increased spending on facility expansion over the past years helped boost overseas sales and reduce imports,” said an official at the association. The KOSA predicted that the nation’s steel exports would rise 4.1 percent on-year to 29.65 million tons this year. But steel imports are expected to decline 4.6 percent to 21.91 million tons this year, it said. Meanwhile, the country produced 71.62 million tons of steel products last year, up 8.6 percent from a year earlier, as they boosted production facilities, it said. Hyundai Steel Co. and other local steelmakers have boosted output capacity over the past few years to meet rising demand and better compete with foreign rivals. Source: Yonhap


IRON ORE

Thursday, 12th January 2012

Physical: The physical iron ore market was quieter than yesterday, with few changes to the indices. Platts 62% was flat at $143.50, while TSI 62% was down 10 cents at $142.20. TSI 58% was up 30cents at $126.5. Reports a cyclone approaching Western Australian mining regions have cautioned some miners to halt iron ore loading at ports. Whether this will impact Australian iron ore exports remain to be seen. Swaps: The IOS market has seen a bit of movement the last couple of days peaking yesterday and edging down again today – the Feb trading around the $144 mark before settling around $142.5 on close. The Indices did little to inspire any bidding interest post index and we saw a lack of buyer’s pull the curve lower in the afternoon session. TSI printed $0.10 lower to $142.2 and Platt’s was flat @ $143.5.

62% Swap Curve (62%掉期价格） Change 变动 Previous 昨日

Period 时期Mid Point 中间价

Mid Point 中间价 Period时期

Mid Point 中间价

Jan-12 $142.25 -$2.75 Jan-12 $145.00Feb-12 $142.50 -$2.75 Feb-12 $145.25Q1 12 $142.00 -$2.50 Q1 12 $144.50Q2 12 $139.00 -$2.50 Q2 12 $141.50Q3 12 $135.00 -$3.00 Q3 12 $138.00Q4 12 $132.00 -$3.00 Q4 12 $135.00Cal 12 $137.00 -$2.75 Cal 12 $139.75Cal 13 $127.00 -$1.00 Cal 13 $128.00

Spreads SpreadsDec/Jan ($0.25) $0.00 Dec/Jan ($0.25)Q1/02 $3.00 $0.00 Q1/02 $3.00Q2/03 $4.00 $0.50 Q2/03 $3.50Q3/04 $3.00 $0.00 Q3/04 $3.00

Cal 12/13 $10.00 -$1.75 Cal 12/13 $11.75 $100

$110

$120

$130

$140

$150

$160

$170

Jan-12 Feb-12 Q1 12 Q2 12 Q3 12 Q4 12 Cal 12 Cal 13

62% Swap Curve (62%掉期价格）

Current Mid-Point Previous Mid-Point

115

125

135

145

155

165

175

185

195

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

US$/

t CFR

N. C

hina

TSI, Platts and Metal Bulletin Indices for 2011 & 2012

TSI 62% MB 62% Platts 62%

50

70

90

110

130

150

170

190

Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11

US

$/t C

FR N

. Ch

ina

TSI, Platts and Metal Bulletin Historical Data

TSI 62% MB 62% Platts 62%


0.0M t

10.0M t

20.0M t

30.0M t

40.0M t

50.0M t

60.0M t

70.0M t

80.0M t

90.0M t

100.0M t

0.0M t

10.0M t

20.0M t

30.0M t

40.0M t

50.0M t

60.0M t

70.0M t

80.0M t

90.0M t

100.0M t

China Iron Ore Stock Pile By Originwww.Mysteel.net

Australian Mt Indian Mt Brazilian Mt Total

Mt

10 Mt

20 Mt

30 Mt

40 Mt

50 Mt

60 Mt

70 Mt

80 Mt

90 Mt

100 Mt

Mt

10 Mt

20 Mt

30 Mt

40 Mt

50 Mt

60 Mt

70 Mt

80 Mt

90 Mt

100 Mt

China Iron Ore Stock Pile By Regions www.Steelhome.com

Yangtse River Southern Ports Total

Indicative Iron Ore Prices in China （铁矿石中国现货和期货价）

Grade品位 11-Jan-12 30-Dec-11 WoW diffFe %

58印粉 Indian Fines 58.0% ￥850.00 ￥820.00 ￥30.00 61印粉 Indian Fines 61.0% ￥960.00 ￥930.00 ￥30.00 63印粉 Indian Fines 63.0% ￥1,050.00 ￥1,020.00 ￥30.00 62.5澳粉 OZ Fines 62.0% ￥1,010.00 ￥1,000.00 ￥10.0064.5巴粉 BZ Fines 64.5% ￥1,100.00 ￥1,060.00 ￥40.00

China Local Spot Prices 中国现货价

￥500

￥700

￥900

￥1,100

￥1,300

￥1,500

￥1,700

cny/

dmt 干吨

CIF China Import Prices CIF 中国进口价格

IN FeO Fines 58 IN FeO Fines 61 IN FeO Fines 63

AUS FeO Fines 62 BRZ FeO Fines 65

Grade品位 11-Jan-12 30-Dec-11 WoW diff

Fe % 63.5/63印粉 Indian Fines 63.5/63 $147.00 $145.00 $2.00 62/61印粉 Indian Fines 62/61 $137.00 $134.50 $2.5061/60印粉 Indian Fines 61/60 $132.00 $129.50 $2.5060/59印粉 Indian Fines 60/59 $127.00 $124.50 $2.50 59/58印粉 Indian Fines 59/58 $122.00 $119.50 $2.50 58/57印粉 Indian Fines 58/57 $118.00 $116.00 $2.00

CIF China Import Prices 中国CIF进口价格

$60

$80

$100

$120

$140

$160

$180

$200

$220

US$

/ dm

t 干吨

CIF China Import Prices CIF 中国进口价格IN FeO Fines 63.5/63 IN FeO Fines 62/61IN FeO Fines 60/59 IN FeO Fines 59/58

http://www.Mysteel.net

http://www.Steelhome.com


Capesize Freight Routes C3, C5, FFA (Cape C3,C5运费及远期运费协议） FFA远期运费协议

Period 日期 Bid 买价 Ask卖价

Jan 12 11,250 11,500

Feb-Mar 12 9,500 9,750

Q1 12 10,125 10,500

Q2 12 11,500 11,900

Q3 12 12,250 12,750

Q4 12 13,500 13,750

CAL 12 12,000 12,350

Source: Clarksons 11th January 2012

Routes 航线 Cost 价格

(US$/t)

Movement 变动

(US$/t) C3 - Tubarao - Qingdao, China中国青岛 21.932 -0.768C5 - W Australia 澳洲西岸 - Qingdao, China中国青岛 8.633 -0.288Source: Clarksons - 11th Janauary 2012

LDB Market Metric （LDB 市场矩阵）

Maturity of Rebar Future 螺纹钢期货到期月 May-12Maturity of Iron Ore Swap 铁矿石掉期到期月 May-12TSI 62% Iron Ore Swap 铁矿石掉期价 US$/t 139.00$ Implied Input Cost Iron Ore to Steel (1:1.6) 钢材隐含价 US$/t 222.40$ Rebar Shanghai Futures Exchange 上海螺纹钢期货价（人民币） RMB/t 4,221￥ Exchange Rate 汇率 CNY/USD 6.3148Rebar Shanghai Futures Exchange 上海螺纹钢期货价（美金） US$/t 668.43$ London Dry Bulk Red Hot Spread LDB 红色价差 US$/t 446.03$

$350

$400

$450

$500

$550

$600Red Hot Spread 红色价差 (US$/t)*


IRON ORE NEWS

Iron Ore-Spot at 7-week top, Australian miners suspend loading Spot iron ore prices rose to seven-week highs, spurred by Chinese steel mills building inventories ahead of the Lunar New Year break later this month and expectations prices may climb further after the holiday. News of supply disruption from top iron ore exporter Australia, where miners Rio Tinto and Fortescue Metals Group have suspended loading operations ahead of a cyclone bearing down on the west coast, should also support prices. Iron ore with 62 percent iron content gained 1.6 percent to $142.30 a tonne on Tuesday, cost and freight delivered to China, its highest since Nov. 23, according to Steel Index .IO62-CNI=SI. The Australian supply disruption may cause a "near-term tightness in supply", said Rory MacDonald, iron ore broker at Freight Investor Services. But given a lacklustre steel market in China, the world's biggest iron ore buyer, MacDonald saw limited impact on the supply-demand balance from the closure of some of the world's largest iron ore ports in Australia. "Whether we see prices gain significantly because of this is another thing altogether, but I don't think it's necessarily going to drive us into another upward cycle that we wouldn't be entering into anyway post-Chinese New Year holiday. "If it's fairly minimal, then they'll be back on track in 48 hours or so, but if it repeats then obviously we're talking about a different scenario, but we'll have to wait and see," he said. Traders are relatively upbeat about China's iron ore demand after the week-long holiday that starts Jan. 23, with construction activity seen picking up and on expectations the government will loosen monetary policy to boost the economy. The construction sector accounts for around half of steel demand in China. Iron ore touched a 2011 peak of $191.90 a tonne in mid-February in a rally following last year's Chinese New Year. "Even as Chinese mills wind down buying activity ahead of Chinese New Year, traders are increasingly taking positions with a view that demand will increase following the New Year holidays in February, and on an expectation that more Chinese policy loosening will be delivered in the next quarter or two," Commonwealth Bank of Australia said in a note. Several cargoes of Australian iron ore fines were sold on Tuesday at levels slightly higher than previous deals, surpassing expectations of many participants, Steel Index said. Rio Tinto sold 61.4-percent grade Pilbara fines at around $141.50 a tonne, while BHP Billiton sold 61-grade MAC fines also at $141.50, traders said. BHP also sold 62.7-grade Newman iron ore fines at $145.50 a tonne, traders said. Source: Reuters

Vale has yet to sell huge iron-ore cargo in China – traders Brazilian miner Vale has not yet sold its first mega iron ore cargo delivered to China two weeks ago, and has instead stored the material near a port for now, traders said on Wednesday. The 388 000-deadweight-ton vessel Berge Everest, which carried 350000 t of iron ore, unloaded at China's Dalian port in late December, ending months of delays in getting the world's biggest dry bulk ships into China. "It was discharged into a bonded warehouse in Dalian," said an iron ore broker in Singapore. "From Vale's point of view, it's not particularly wise to sell right now given the lacklustre demand from Chinese mills." "There's a lot of material in bonded warehouses across the coast at the moment because of the demand situation," he said. Vale may be waiting for Chinese demand to pick up, possibly after the week-long Lunar New Year break in late January, before selling the cargo, traders said. The world's biggest iron ore miner, hoping to slash shipping costs to China by using a new fleet of mega dry bulk carriers, was not planning to sell the maiden cargo from Berge Everest immediately, said an iron ore trader in Hong Kong. Vale, which sells about 40% of its ore to China, is counting on a fleet of 35 Valemaxes to cut shipping costs and better compete with Australian rivals BHP Billiton and Rio Tinto. "Vale just wanted to show its Chinese clients that its vessel can berth in China," he said, adding the cargo is likely to be sold into the spot market, instead of to a single buyer on a long-term contract. "We're quite sure it's not sold yet. It should be put in the spot market, we're quite confident," said the Hong Kong trader, who sells iron ore to mills in mainland China. Vale may offer a discount for the cargo of high-grade ore with 65-percent iron content given that it was the first material shipped on its Valemax, he said. Offering a discount for the cargo could be a "short-term ploy" by Vale to draw customers to its big shipments, said Mark Pervan, global head of commodity research at Australia and New Zealand Bank. "From a short-term point of view there potentially could be some discount. But they won't want to be doing this on an ongoing basis because it defeats the whole purpose. "The whole reason for those ships was to try and be competitive against the Australians. So if you're going to be selling it to the market at a big discount, you'll lose any upside from the lower freight cost," Pervan said. A spokesperson for Vale was not immediately available for comment. Vale's first megaship cargo to China was forced to turn back in June last year due to the lack of permits . In early December, Vale Beijing, the newest member of the "Valemax" fleet -- 50 percent bigger than most ore carriers and one of the largest afloat -- developed cracks in its hull on its maiden voyage. The China Shipowners Association has opposed Vale's fleet, worried that the vessels will give the miner monopoly on both the shipping and iron ore markets at China's expense. Source: Reuters


Cyclone shuts Australian iron-ore ports, oil fields A tropical cyclone bearing down on west Australia forced the closure of some of the world's largest iron ore ports and several offshore oil fields on Wednesday, the first major series of shutdowns in what is forecast to be a tempestuous summer. Ports serving the enormous iron ore mines of northwest Australia began closing on Tuesday night as Cyclone Heidi, packing winds of more than 100 kph (60 mph), swept across the Indian Ocean toward a stretch of coast where nearly two-thirds of the world's seaborne-traded iron-ore is handled. Cyclones are a normal feature of Australian summers but the national weather forecaster is predicting a better-than-even chance of more than seven such storms this season. Port Hedland, the region's largest iron-ore port, exporting around 240-million tons of the steel-making commodity a year, is closed to traffic until the storm passes and any damage is assessed, deputy harbourmaster Adrian Olsen said on Wednesday. Australia's second and third biggest iron-ore miners, BHP Billiton and Fortescue Metals Group, both export through Port Hedland, which lies directly in the path of the cyclone, forecast to hit the coast late on Wednesday night. Australia's biggest iron-ore miner and the world's second-largest, Rio Tinto, said it had also halted all loading at Dampier and Cape Lambert ports, south of Port Hedland. Rio Tinto ships around 225-millions tons a year from these two ports, which are also in the projected path of the cyclone. Fortescue exports about 55-million tons a year, while BHP Billiton ships around 155-million tons. Australia's largest oil and gas firm, Woodside Petroleum , also took precautions against the onset of Cyclone Heidi, shutting production from several offshore fields. "In response to Tropical Cyclone Heidi, Woodside has shut-in production from the Cossack, Wanaea, Lambert and Hermes oil fields on the North West Shelf and the Vincent oil field off the North West Cape," Woodside said in an emailed statement. Heidi is rated a category-one cyclone, the lowest ranking on a scale of one to five, but could intensify to a category two before it hits the coast, which could mean winds picking up to destructive speeds of around 160 kph. The cyclone is already causing heavy rains further inland in the Pilbara mining belt, the country's richest iron ore region, with downpours of up to 100 mm (3.9 inches) seen as possible. The Pilbara mines, though, are all still running. The bureau warned in October the region was facing a 65 % chance of being hit by more than seven cyclones during the November to April tropical storm season. Tropical cyclones and temporary shutdowns are a normal part of Australian summers, but an especially stormy season can have major impacts, such as when cyclones and flooding swamped the coal-mining industry in the country's northeast a year ago. "Cyclones are typical at this time of year. If it's fairly minimal, then they'll be back on track in 48 hours or so, but if it repeats then obviously we're talking about a different scenario, but we'll have to wait and see," said Rory MacDonald, iron-ore broker at Freight Investor Services. Spot iron ore-prices rose 1.6 % to a seven-week high of $142.30 a ton on Tuesday as Chinese steel producers boosted stockpiles ahead of a week-long Lunar New Year break in late January. But overall demand is still generally lacklustre, and the spot price remains 26 % down from its 2011 peak of $191.90 reached in mid-February last year. Source: Reuters

Vale Declares Force Majeure for Iron Ore Contracts on Heavy Brazil Rains Vale SA (VALE3), the world’s largest iron- ore producer, declared force majeure on iron-ore shipments and said it will lose 2 million metric tons of the steelmaking ingredient because of heavy rains in three Brazilian states. The Rio de Janeiro-based miner’s force majeure, a legal clause that allows companies to miss deliveries, affects a series of iron ore contracts beginning yesterday, according to a regulatory filing. “Heavy rains since mid-December of 2011 in the states of Minas Gerais, Rio de Janeiro and Espirito Santo have created difficulties for our operations in the South and Southeast systems,” the company said. “We’re contacting customers, in accordance with the terms of respective contracts.” Floods and landslides in the three southeastern states have killed at least 30 people and left more than 5,000 homeless since the beginning of the year. MMX Mineracao e Metalicos SA, the mining producer controlled by Brazilian billionaire Eike Batista, said on Jan. 9 that iron ore production has been affected by heavy rains in Minas Gerais. Last year, Vale said the heaviest rains in 44 years at the beginning of 2011 reduced output by 600,000 metric tons. Vale rose 0.8 percent to close at 39.81 reais in Sao Paulo trading yesterday, compared with a 0.3 percent gain for the benchmark Bovespa index. Source: Bloomberg

Venezuela's iron production jumps 21% in 2011 Venezuela's year-to-year iron production increased by 21% in 2011, with output at 17 million tons last year, said state-run iron ore producer Ferrominera del Orinoco, Venezuela's largest producer of the metal. However, the figure is still far from installed capacity of 25 million tons per year. Iron, aluminum and steel industries in Venezuela are producing below capacity, as a result of a divestment process and the lack of technological adequacy, along with a serious electricity crisis that led to power rationing in 2010. This energy crisis has not been overcome. Radwan Sabbagh, the president of Ferrominera Orinoco, said: "We are celebrating this significant achievement with the productive recovery of our company. Our goal is to produce 20 million tons in 2012." Source: El Universal


Exxaro puts Republic of Congo on iron-ore map with R3bn takeover bid South Africa’s black-controlled diversified mining company Exxaro Resources is putting the Republic of Congo (RoC) on the map as a new African iron-ore development frontier with its R3-billion (A$338-million) cash takeover offer of African Iron. Exxaro CEO Sipho Nkosi said in a media teleconference that the company had been well received by top RoC politicians and that he had also taken advantage of the visit of the RoC president to South Africa for the recent African National Congress centenary celebrations to hold discussions on Exxaro’s proposed investment, which would be continued during the company’s proposed visit to RoC in February. Exxaro finance director Wim de Klerk described RoC as an “attractive platform for iron-ore growth” and said that the company had an “appropriate” hurdle rate that took into account both country and associated risk. Exxaro GM Ernst Venter said London-listed Xstrata and ASX-listed Equatorial Resources had also moved into the RoC, where there was the potential for large capital investment that required both central and local government collaboration. While Exxaro had not held takeover discussions with Equatorial Resources, African Iron's 20% shareholder, it had already entered into a 19.99% pre-bid share-purchase agreement with African Iron’s largest shareholder, ASX-listed Cape Lambert. Venter said that the norm in the RoC was for the central government to be given 10% of the shares in a project free of charge as a “free carry”, which ad been included in Exxaro’s value calculation. Xstrata’s Zanaga iron-ore project was situated 350 km from the railway line compared with the 2 km distance of the Mayoko project that Exxaro would acquire. The rail line, which Venter described as being “in extremely good condition” apart from a few areas where upgrading would be necessary, was currently used several times a week to transport passengers. The Pointe-Noire port, though currently a container port, was a deep-water port whose northern aspect was earmarked for development as a bulk terminal. Venter said that following a thorough due diligence, the Exxaro executive committee was “quite comfortable” doing business in RoC and saw itself as being competitively placed to use existing rail and port infrastructure. He noted that African Iron’s 120-million ton Mayoko project was RoC's most advanced iron-ore project and that the acquisition would initially bring into the Exxaro portfolio a mere 20% of the total prospect area, which contained iron-ore that outcropped onto the surface, allowing for low-cost openpit mining, probably initially by a contract miner. Mayoko presented a near-term development opportunity in an emerging iron-ore province that was served by existing nearby logistics infrastructure. The nearby heavy-haul railway line that the project would use terminated at the port of Pointe-Noire, where African Iron has been granted an allocation to establish a bulk-ore terminal to facilitate iron-ore exportation to both European and Eastern markets from early 2014. The agreements for use of the State-owned rail and port network were being put in place with the government and five-million tons of the annual rail capacity had already been allocated. “The willingness of the government to support us as far as infrastructure is concerned has been quite great,” Nkosi said. Adjoining Mayoko is a nigh thousand square kilometres of the Ngoubou-Ngoubou prospect that also forms part of the deal, which had been preceded by a five-year company study of iron-ore opportunities led by Exxaro’s Brian van Rooyen. Venter said Exxaro had found the African Iron deal the most favourable of 70 projects that had been screened globally. JSE-listed Exxaro, a coal and mineral sands miner, already has a 20% interest in the Sishen Iron Ore Company, a subsidiary of the Anglo American-controlled Kumba Iron Ore, which operates the Sishen and Thabazimbi mines in South Africa. Exxaro has issued bidder statement that outlines its February 14-deadlined offer of A$0.51 cash for each ASX-listed African Iron share, rising to A$0.57 cash if Exxaro gains a 75% interest. Bank of America Merrill Lynch’s Andrew Snow queried whether the ‘leaking’ of the deal to the media two days ahead of the official announcement had impacted on the efficacy of Exxaro’s due diligence, and quipped that it would be great if “the Australian rugby team’s backline was as ‘leaky’ as the Australian stock market”. A cause of the two-day official announcement delay, Exxaro said, was that certain shares were held in escrow and the spilling of the beans two days ahead of time was irrelevant, De Klerk said. Mining Weekly Online was one of the publications able to break the story at a time when Exxaro was still refusing to comment on what it said was “speculation”. Venter said that Exxaro had met with African Iron’s 200-strong team in RoC, which he anticipated would remain there should the company be successful in its takeover bid. Should Exxaro obtain more than 90% shareholder acceptance, the company would be obliged in terms of ASX rules to make an offer to minorities and delist the company. Cape Lambert is to receive A$72.2-million, based on A$0.57 an African Iron share, which generates a 209% return on the company’s investment. Cape Lambert also retains a A$1-a-ton royalty in the Mayoko project from the original sale agreement with African Iron. African Iron board of directors have backed the Exxaro bid, provided there is not a superior proposal. African Iron’s projects are located in the Niari Prefecture 300 km north-east of Pointe-Noire on the Atlantic Ocean. Its key Mayoko project is a compliant mineral resource, consisting of a hematite cap of 55%-iron direct shipping ore and 41% beneficiable ore. Source: Mining weekly


Karnataka’s iron ore export ban sinks planned facility at New Mangalore port A lack of iron ore cargo due to Karnataka’s ban on exporting the steel-making commodity has led to the termination of a Rs. 277 crore iron ore loading facility project at the New Mangalore port. The facility was to be developed by Sical Logistics Ltd. The trust that runs the Union government-controlled New Mangalore port on Monday decided to terminate the project after Sical Logistics applied for force majeure, citing the export ban for not beginning work on the project that was awarded in 2009, said two members of the port’s board of trustees. Companies can declare force majeure when they want to break contracts due to unforeseen circumstances such as natural disasters, fires or political events. Sical Logistics had signed a concession agreement with the New Mangalore port in October 2009 to develop and operate a 6.62 million tonnes (mt) a year iron ore loading facility at the port for 30 years. It won the contract after agreeing to share 37% of its annual revenue from the facility with the port, emerging the highest bidder. “Iron ore export has been banned by Karnataka. The ball is in the Supreme Court, which has set up an empowered committee to look into the legality or illegality of mining in the state. Nobody knows when the court will give its final verdict,” G.G. Mohandas Prabhu, a member of the board of trustees of the New Mangalore port, said after the Monday meeting. “We cannot wait indefinitely and it is not going to help neither the port nor Sical.” Mint could not independently verify what the port proposes to do with the bank guarantee of Rs. 13 crore submitted by Sical. “A decision on recovery of the dues, etc., from Sical has been left to the port chairman,” said K. Tharanath Shetty, another member of the port’s board of trustees. Sical could not be reached for comment immediately. A spokesman for the New Mangalore port declined to comment ahead of an official announcement. On Sunday, New Mangalore port chairman P. Tamilvanan said the port received a letter from Sical a few months ago invoking force majeure. T.S.N. Murthy, deputy chairman of the port, said the port had received legal opinion on the issue that said “both the parties should decide the future of the project mutually”. Sical had not spent a penny on the project, he said, adding the port can use the back-up area and the berth for loading other cargo. Sical’s Rs. 500 crore iron ore loading facility at Ennore port has been idling since it was opened in January 2011 for want of iron ore. From 26 July, 2010, Karnataka banned exports of iron ore from the state in a bid to curb rampant illegal mining in the mineral-rich Bellary-Hospet belt. Karnataka is the second largest producer of iron ore in the country and the ban has resulted in a significant decline in Indian ore exports. The ban clipped iron ore loaded by New Mangalore port by half to 3.74 mt in the year to March 2011 from 7.06 mt in the previous year. Between April and November, the port loaded 1.93 mt of iron ore, down from 2.61 mt in the year-ago period. Source: Live Mint


CONFERENCES

LC News Thursday, 12th January 2012

Documents

Transcript of LC News Thursday, 12th January 2012