Argus ferrous derivatives and physical market wrap, 2017

London

Houston

Washington

New York

Portland

Calgary

Santiago

Bogota

Rio de Janeiro

Singapore

Beijing

Tokyo

Sydney

Dubai

Moscow

Astana

Kiev

Porto

Johannesburg

Riga

Market Reporting

Consulting

Events

2017 Ferrous Derivatives Round Up:

Steelmaking Raw Materials

January 2018

Market Reporting

Consulting

Events 2

Iron Ore

3

• Breaking a seven year growth streak

2017: Internationally-traded iron ore derivative volumes fell

for the first year, ever

Copyright © 2017 Argus Media Ltd. All rights reserved.

-50%

0%

50%

100%

150%

200%

250%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

-on

-ye

ar G

row

th

Bill

ion

To

nn

es

Source: SGX & CME

4

• This year-on-year pullback continues a well-established trend. Half

yearly volumes have been in retreat since H2, 2016

The pattern is a sustained one..


0

200

400

600

800

1000

H1

-09

H2

-09

H1

-10

H2

-10

H1

-11

H2

-11

H1

-12

H2

-12

H1

-13

H2

-13

H1

-14

H2

-14

H1

-15

H2

-15

H1

-16

H2

-16

H1

-17

H2

-17

Mill

ion

To

nn

es

International Iron Ore Derivative Volumes

Source: SGX & CME

5

• Quarterly volumes peaked in Q4 2016

Of quarterly volumes flattening out..


0

100

200

300

400

500

600

Mill

ion

To

nn

es

International Iron Ore Derivative Volumes

Source: SGX & CME

6

• Lowest monthly volumes in over a year (October 2016)

• Sharp year-on-year contractions in November and December 2017

2017 ended on a particularly weak monthly volume note


-100%

-50%

0%

50%

100%

150%

200%

0

50

100

150

200

250

Year

-on

-ye

ar g

row

th

Mill

ion

To

nn

es

Source: SGX & CME

7

• There have been eight negative y-on-y monthly comparisons since April

2010. Seven occurred since September 2016.

Negative y-on-y comparisons no longer unusual


-50%

0%

50%

100%

150%

200%

Year-on-year changes

Source: SGX & CME

8

2017: However, ‘onshore’ (Chinese traded) iron ore derivative

volumes at DCE also fell for the first year, ever


-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0

5

10

15

20

25

30

35

40

2013 2014 2015 2016 2017

Year

-on

-ye

ar G

row

th

Bill

ion

To

nn

es

• So, perhaps the story is one of consolidation after years of huge growth.

• The scale of Chinese volume is immense. More than 15x international.

Source: DCE

Market Reporting

Consulting

Events 9

Coking Coal

10

• Having struggled to achieve critical mass, 2017 saw a large rise in

trading volumes.

2017: Coking Coal derivative volumes grew meaningfully


-100%

-50%

0%

50%

100%

150%

200%

0

5

10

15

20

2014 2015 2016 2017

Mill

ion

To

nn

es

Coking Coal Derivative Volumes

Coking Coal Volumes y-o-y growth

Source: SGX & CME

11

0

1

2

3

4

5

6

7

8

9

10

H12014

H22014

H12015

H22015

H12016

H22016

H12017

H22017

Mill

ion

To

nn

es

SGX Options

SGX

CME

Although take off was confined to the first half…


• Volumes in the second half fell by -31.2%

Source: SGX & CME

12

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Q1

20

15

Q2

20

15

Q3

20

15

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17

Q4

20

17

Mill

ion

To

nn

es

SGX Option

SGX

CME

Or more specifically, the first quarter


• But the addition of options in Q4 broke the trend of derivatives volumes

falling for consecutive quarters

Source: SGX & CME

13

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Mill

ion

To

nn

es

SGX Options

SGX

CME

December was the worst month since Dec 2016


• Again, December was a particularly weak month.

Source: SGX & CME

Market Reporting

Consulting

Events 14

Scrap

15

0

1

2

3

4

2016 2017

Mill

ion

To

nn

es

Turkish Scrap

Ferrous scrap volumes established themselves in 2017


Source: LME

16

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

H1 2016 H2 2016 H1 2017 H1 2018

Ton

ne

s Half yearly volumes growing strongly and consistently


Source: LME

17

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Ton

ne

s

Quarterly Scrap Volumes - LME

Quarterly volumes growing for seven consecutive periods


Source: LME

18

Monthly volumes trend line strongly upwards


• Again, December was a particularly weak month.

0

100,000

200,000

300,000

400,000

500,000

600,000

Ton

ne

s

Monthly Scrap Volumes - LME

Source: LME

Market Reporting

Consulting

Events 19

Argus Physical Round Up 2017

20

Physical Market 2017 at-a-glance: iron ore


Source: ARGUS

US$

/t

CN

Y/w

t

$ ce

nts

/dm

tu

US$

/t

$40$50$60$70$80$90

$100$110

Iron ore fines 58% Fe cfr Qingdao

Iron ore fines 62% Fe (ICX) cfr Qingdao

Iron ore fines 65% Fe cfr Qingdao

400.000

450.000

500.000

550.000

600.000

650.000

700.000

750.000

BRBF portside NHGF portside PBF portside

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

Iron ore lump premium 63% Fe cfr Qingdao

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

PCX/ICX - portside/seaborne spread

*Portside pricing launched in 2014 * Daily portside pricing launched daily in September 2017

21

100.00

150.00

200.00

250.00

300.00

350.00

Prem low-vol, fob Aus Hard mid-vol, fob Aus

Physical Market 2017 at-a-glance: coking coal


100.00

120.00

140.00

160.00

180.00

200.00

PCI mid-vol, fob Aus PCI low-vol, fob Aus

110.00

115.00

120.00

125.00

130.00

135.00

140.00

01 D

ec 2

017

03 D

ec 2

017

05 D

ec 2

017

07 D

ec 2

017

09 D

ec 2

017

11 D

ec 2

017

13 D

ec 2

017

15 D

ec 2

017

17 D

ec 2

017

19 D

ec 2

017

21 D

ec 2

017

23 D

ec 2

017

25 D

ec 2

017

27 D

ec 2

017

29 D

ec 2

017

Semi Soft mid-vol, fob Aus Semi Soft high-vol, fob Aus

250.00

270.00

290.00

310.00

330.00

350.00

370.00

390.00

62CSR coke FOB China 65CSR coke FOB China

Source: ARGUS

US$

/t

US$

/t

US$

/t

US$

/t

*PCI launched daily in September.

*Semi-soft launched daily in December. *Coke launched daily in December.

22

225

245

265

285

305

325

345

365

Jan

-17

Feb

-17

Mar

-17

Apr

-17

May

-17

Jun

-17

Jul-

17

Aug

-17

Sep

-17

Oct

-17

No

v-17

Dec

-17

80:20 cfr Turkey

Physical Market 2017 at-a-glance: scrap


225

245

265

285

305

325

345

Jan

-17

Feb

-17

Mar

-17

Apr

-17

May

-17

Jun

-17

Jul-

17

Aug

-17

Sep

-17

Oct

-17

No

v-17

Dec

-17

80:20 cfr taiwan

Source: ARGUS

US$

/t

US$

/t

265

275

285

295

305

315

325

335

Jan

-17

Feb

-17

Mar

-17

Apr

-17

May

-17

Jun

-17

Jul-

17

Aug

-17

Sep

-17

Oct

-17

No

v-17

Dec

-17

US Midwest Shred

US$

/t

23

400.00

450.00

500.00

550.00

Steel rebar fob China Steel rebar cfr ASEAN

Physical Market 2017 at-a-glance: steel


400.00

450.00

500.00

550.00

600.00

HRC FOB China HRC CFR ASEAN

540.00

550.00

560.00

570.00

580.00

590.00

600.00

610.00

620.00

08 Sep 2017 08 Oct 2017 08 Nov 2017 08 Dec 2017

Wire Rod fob N. China

Source: ARGUS

US$

/t

US$

/t

US$

/t

US$

/t

*Argus FOB and CFR HRC launched daily in September.

*Argus Billet launched daily in September. *Argus Wire rod launched daily in December.

* Argus FOB and CFR rebar launched daily in September.

3,400.00

3,500.00

3,600.00

3,700.00

3,800.00

3,900.00

4,000.00

04 Sep 2017 04 Oct 2017 04 Nov 2017 04 Dec 2017

Tangshan billet CNY/t

24

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Argus ferrous derivatives and physical market wrap, 2017