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Canadian Coal – Positive Outlooks Presented to: 2010 Minerals North Conference
Prince George, British Columbia
April 23, 2010
Presented by: Allen Wright, President & CEOThe Coal Association of Canada
2
Overview
Global Overview
Canadian Impressions
BC Outlook
Formula For Success
Summary
3
Global Overview
4
The 2010 Global Overview
The world economies have moved from “Contraction”to Expansion
A Global recovery in manufacturing appears to beaccelerating
Metallurgical Markets Steel Market Recovery
• Demand dropped 75%-80% from 2008 highs. Production dropped to 50%-60% from 2008 highs.
• Recent production recovery to near 75%-80% of 2008 maximum.
New Pricing Formula – Quarterly Pricing
Iron Ore – Availability / Price
„BRIC‟ countries – Experiencing strong Recoveries
Australian Challenges - Transportation / Flooding / Ports
Thermal Markets Asia / India – growing Demand
• Demand / Price
• Price index – Mar. 09 @ $65.36 Mar. 10 @ $101.12
• North America – Coal vs. Natural Gas
5
Coking Coal Demand
Prevailing coking coal and met coke
market conditions:• Low met coke inventories
• Current coking coal prices rising sharply
• Lack of international met coke supply
• Higher prices for imported met coke supply
The story of 2010 will be Asian steel
mills continuing to power the economy
and our industry out of recession
6
China Driving Demand
Steel production forecast to reach 600 million tons
versus approximately 570 million in 2009
Apparent steel demand forecasted to reach 610-620
million tons in 2010
– This represents an increase of 8%-10% from 2009
Coking coal production in China cannot support this
increased demand. Rapidly soaring demand signals
sustainable market for imported hard coking coal
China imported 34.5 million metric tons of coking coal in
2009, up 403% (27.6) as compared to 2008. At the same
time, met coke exports dropped 95%
Increased domestic demand due to US $585B stimulus
plan
Policies committed to continuing growth – 8 to 9.5%
Canadian Impressions
Image: Port Metro Vancouver
8
2009 Canadian Coal Production &
Consumption
62.6 MT in 2009 down from 68.1 MT in 2008
37% / 63% mix Metallurgical to Thermal
2009 Exports – 27.2 MT approx. 78% Met
56 MT consumed in Canada – 44.8 MT
sourced domestically & 11.2 MT imported
Significant Met Growth Potential beyond
2012
Modest growth for Thermal; Wapiti & Coal
Works in NEBC, expansion of Quinsam on
Vancouver Island and Coalspur in AB
Coal in Western Canada
SASK.
Saskatoon
Regina
Ridley
Edmonton
ALBERTA
Calgary
Westshore
BRITISH
COLUMBIA
PrinceGeorge
Coal Valley
Vancouver
Coal Prospects Coal Ports Major Cities Railway Lines
Neptune
Yukon
Northwest Territories
10
BC Outlook
11
Prospects Looking up for Met Coal
BC Coal Production– 2008 @ 26.1 MT / 2009 @ 21.5 MT
– Drop of 18% (steel demand)
BC Coal driven by export markets
China market demand– CDN Met imports = 3.6 MT in 2009
– 2010? Increased demand expected to
– remain steady
12
Coal In BC
Current Producing Metallurgical MinesNEBC Western Coal
• Brule
• Wolverine
Peace River Coal • Trend
SEBCTeck Coal
• Greenhills
• Line Creek
• Fording River
• Elkview
• Coal mountain
Hillsborough Resources• Quinsam
Mine Prospects
Expansions and New Mines NEBC
• Teck Coal – Quintette (re-open)
• Western Coal – Willow Creek (re-open) / Belsax (new)
• Peace River Coal – Roman (new) / Horizon & Belsax (new)
• First Coal – Central South & South Cirque (new)
• Cline – Lossan (new)
• CDN Dehua – Gething: Hudson Hope (new UG)
• Unicorn Int‟l – Hasler (new UG)
• Colonial Coal – Huguenot (new)
WBC • Fortune Minerals – Mount Klappan (new Anthracite)
SEBC• Teck Coal – Expansion
• Centermount resources – Bengay Creek (new)
VCR Island• Compliance Energy – Bear & Raven (new)
Thermal• Hillsborough Resources – Wapiti (new) & Quinsam (expansion)
• Coal Works (new)
14
It is possible to double the
current coal production level
from British Columbia if all the
proposed new mines and the
expansion of existing mines
happens.
15
Current Environment Facing NEBC Coal
Moving Projects Forward Need Demand & Price
Canadian Dollar $
Skills – Surface & Underground
Government– Permitting
– Environmental constraints & politics
– First Nations
– Flathead Valley
Transportation / Infrastructure– Ridley terminals
Social License to operate– Health & safety
Communication & Education
Summary - Globally
Fundamentally, the global coking coal market
appears extremely tight
China‟s move to a significant importer
“structurally” changes the seaborne coking
coal market
Pricing for FY2010/11 seaborne coking coal
contracts will be a combination of fixed annual
prices and quarterly pricing
Fixed Annual Pricing is at a premium to the Q1
FY2010 Quarterly Price
The Asian Pacific market will set the coking
coal pricing benchmarks for the global steel
industry
17
Summary - BC
2010 – strong potential
Taking Advantage of Up-cycle
Canada positioned well with high quality coal resources & reserves
To capture these opportunities need:
Solid, efficient infrastructure
Government resolve to remove roadblocks to development
Reasonable and Practical Solutions
Thank You and don’t forget…
48th Canadian Conference on Coal
September 11-14, 2010
Whistler, British Columbia