Shipping Intelligence Report

McCloskey Key Physical Prices

Feb 10 Jan 11 Feb 4th Feb 11th

NW Europe steam coal marker ($/t)

75.50 124.13 122.14 118.42

Richards Bay FOB marker ($/t)

83.00 123.07 120.91 114.89

Newcastle FOB marker ($/t)

93.68 132.01 126.75 120.75

Indonesian Sub-bit FOB marker ($/t)

65.03 92.41 87.80 85.75

Australian Prime Hard Coking Coal FOB ($/t)

-- 298.75 325.00 318.25

Weekly average German power price - (E/MHh)

41.73 51.55 52.66 45.34

Carbon - (E/t)

12.90 14.36 14.83 14.69

Source: McCloskey, EEX

CoalReportComprehensive News & Analysis of the International Coal Market Issue 253 – February 11 2011

McCloskey

Market Round Up

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MCIS Asian & NW Europe steam coal markers ($/t)

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aCanada’s Teck Resources is understood tohave indicated to its met coal customers inJapan that it does not favour a switch tomonthly-priced contracts and wouldpropose to stay with the current quarterlyregime.

If confirmed, the strategy could putTeck – the world’s second largest met coalexporter – at odds with the largest exporter,BHP Billiton, which started a push formonthly pricing late last year.

This could provide a lead for othershippers, many of whom are generallyunenthusiastic about the monthly option,and perhaps see a further shelving of themonthly concept, probably also to thedelight of most major customers.

Talk of the split in strategy isthreatening to further complicate anegotiating season already overhung by thethorny issue of treatment of carryovertonnage, as Queensland producers continueto improve shipment levels followingJanuary’s damaging floods.

Overall, this looks like a recipe for morerapid change in what was, until a year ago,one of the most traditional of commoditymarkets. Several old hands in the businesstold MCR this week the result may beincreasingly disparate outcomes in a marketpreviously known for uniformity.

This could involve the emergence of‘hybrid deals’ involving some monthly andsome quarterly pricing. BHPB’s trackrecord suggests it may offer inducementsfor buyers willing to join the monthlyconcept, as it did in late 2009 when itestablished quarterly pricing, ending almosthalf a century of annual tradition.

But at the other end of the scale, someshippers who kept a proportion of theirtonnes on annual contracts when the

market went quarterly in 2009, may nowseek to extend those annual percentages,locking in current high prices for longer.

“The game’s changing alright,” was howone experienced producer put it to MCR. “Itused to be a game of follow the leader, nowit’s more like pin the tail on the donkey.”

This producer noted that severalAustralian producers had already heldmeetings with customers on April-Junecontracts and delivery arrangements,effectively moving ahead of BHPB, which isnot expected to seriously engage contractcustomers until late this month.

“I think you’re going to see more andmore differences emerge betweensuppliers,” another producer told MCR.“Apart from the monthly issue, cancellationof tonnage is obviously also a major moneyissue. “FM provisions are not necessarilyclear in all contracts, so a bit of negotiationis going to come into it.”

This producer said he understood FMprovisions were ‘more prescriptive’ in somecontracts, especially since the 2008Queensland floods. But equally, someremained more traditional, i.e. were notspecific on what happened to undeliveredtonnes in an FM event.

“It’s hard to apply any blanket rule, so Ithink you’ll see some producers simplytrying to cancel Q1 tonnes they couldn’tdeliver under FM and demanding(substantially higher) April to June pricingon all their deliveries. The customers, ofcourse, will demand the opposite.

“You’re dealing with hundreds ofmillions of dollars difference if the Q1tonnage losses turn out to be anywhere nearthe estimates (around 15mt), so historymight turn out to be the best guide to howthe two sides treat each other.

Split mooted on monthly met pricing

EEuurrooppee:: Atlantic spot markets were softerthroughout the week but staged a recovery today.European buyers appear content to run down stocksat their respective power stations and Indian buyersremain confident of further decreases in Richards Bayvalues. Some traders believe that Brent oil pricesstaying above the $101/bbl level is providingbackground support to a fundamentally weak market.

AAssiiaa:: Spot deals remained scant from Australia,with continued pressure on Newcastle availabilityand Queensland output just beginning to recoverfrom flood effects. But price expectations tookanother step down, with small tonnages ofAustralian material available in the $118-120/tFOB range, basis 6,000kc NAR. That reflects a dipof around $25/t FOB from the January 'floodspike.' The market is pondering whether that pricedip may be sufficient to attract a return of Chinesebuyers to the market following national holidays.Meanwhile, a surfeit of tonnes bid into the latestKospo tender demonstrated continued availabilityof sub-bituminous product from Indonesia.

CoalReport

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Lead Stories

Issue 253 - February 11 2011 2 © IHS Global Limited

“In other words, sellers who canceltonnes instead of delivering them at thecurrent price will be asked for, and willprobably give, some measure ofcompensation to buyers – maybe somediscounted tonnes in the whole package.”

Another source noted that FMarrangements will likely vary by region.Indian buyers, for instance, havetraditionally honoured contracts, but overan extended time-frame.

It’s understood India’s SAIL still hassome obligations to take 2007-2008 hardcoking contractual deliveries at $300/tFOB, after negotiating a ‘staggered’ deliveryschedule extending over around three yearswith its contract customers.

Ironically, those $300/t cargoes couldturn out to be cheaper than for this year’sApril-June quarter, with sellers likely tomake first offers in coming weeks at wellabove the $300/t FOB mark, against the

ruling January-March quarter benchmarkof $225/t FOB.

Meanwhile, SAIL is understood to havereceived only one offer in its 0.6mt hardcoking coal tender, issued January 13, witha closing date of January 25, this year. It wasa 300,000t offer from US-based XCoal, buttechnical evaluation has apparently not yetprogressed far.

Consequently, the price envelope hasnot yet been opened, but SAIL is expectinga price well above $300/t as the bid was lodged just as the full impact of the Queensland floods was becomingapparent.

As previously reported by MCR,potential spot buyers in India has recentlymade substantial coke purchases to offsettheir coking coal needs. Sources indicatesellers would now need to tier one qualityhard coking coal at $310-315/t FOB toprompt any buyer interest.

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Semi-soft settles, but it’s complicatedAustralian shippers have belatedly begunsettling January-March quarter semi-softpricing with Japanese and other Asianbuyers, but it’s complicated, and amountsto what is probably the first overtlyvariable headline settlement between themajor buyers and sellers for this coalcategory.

The deals remain unconfirmed, butMCR understands Rio Tinto has settledMarch quarter pricing at $180/t FOB –i.e. 80% of the hard coking coal ‘headline’of $225/t FOB for the same quarter – butwith a contingent deal that its April-Junequarter pricing is also at 80% of the hardcoking benchmark for that quarter.

The other major shipper, Xstrata, issaid to have settled at $182.50/t FOB for the January-March quarter, with acontingent deal that its price for thefollowing two quarters will be at 77% ofthe hard coking benchmark.

The deals reflect slightly differingviews of the market, but both share thebackground that semi-soft was the onlymajor metallurgical category which didnot settle January-March quarter pricingbefore the severe flood event that hit

Queensland coal supply late last year.Some sources suggest that at least one

of the major shippers was close to asettlement at around $172/t FOB late in2010, but once the impact of theQueensland floods became apparent, theAustralians returned early this yearindicating prices closer to $200/t FOB.

The $200/t idea reflected a view thatpost-flood hard coking coal contract priceswould likely approach $300/t FOB, thus aprice of $200/t for semi-soft was justified tokeep pace. But the main effect of thisargument was to cause a pull-back from thebuyers, delaying the ultimate settlement.

While they have fallen short of $200/t,the shippers appear to have won two otherimportant points in this settlement.Firstly, they have for the first timeestablished a firm price relationshipbetween semi-soft and hard coking coal ina rising market.

And second, they have, at least fornow, ‘broken the nexus’ with AustralianULV PCI coal which settled at $180/tFOB for the January-March quarter andhas traditionally received a higher pricethan semi-soft.

Merger mania: Alpha grabsweakened MasseyThe acquisitive craze sweeping the coal industry has continuedwith US-based Alpha Natural Resources announcing an agreedcash and share merger with Massey Energy.

The deal was announced just ahead of release of corporateresults showing Massey dipping deep into the red for the latest year,under pressure from the fatal Upper Big Branch mine accident (see separate story).

The merger, worth an estimated $7.1bn, will create the secondlargest coal producer in the US – after Peabody – and itsannouncement also came with claims that the combined group wouldbe the country’s largest met coal supplier, and potentially, exporter.

Detail in the merger presentations shows the combinedcompany would have total coal output approaching 140mt for2011, with met coal sales of around 20mt/yr, pipping Anglo andtrailing only Teck and BHPB/Mitsubishi.

Although styled as a merger, the deal was greeted in marketcircles as more of a takeover by Alpha. That company’sshareholders will own 54% of the post-merger shares and thetransaction follows a severe weakening of Massey’s corporate profilefollowing the fatal Upper Big Branch tragedy, last year.

The incident precipitated a halving of Massey’s share price,forced a $130m initial write-down and saw the departure of long-serving chief, Don Blankenship. Facing onerous government safetyscrutiny on its mines, Massey late last year effectively hung out thefor sale sign, by announcing a ‘strategic review.’

Alpha was almost immediately fancied as a likely suitor forMassey in what became a long list, including Indian companies.Alpha had earlier demonstrated its acquisitive abilities though thetakeover of Foundation Coal in 2009.

One of Alpha’s most obvious risks in the deal is that Massey’s‘safety issues’ continue to prove costly. But in a jointannouncement, the two companies estimated $150m in ‘synergies’from the deal by the second year.

If all approvals are received, the merger is expected to closearound the middle of 2011. This gives ample time for other suitorsto emerge, but industry perception of the damage wrought onMassey by the Upper Big Branch tragedy is likely to deter most, ifnot all, other suitors.

The transaction comes amid a continuing wave of coal industrytakeovers, including US-based Walter Energy’s $3bn-plus bid forCanada’s Western Coal and Rio Tinto’s near $4bn tilt atMozambique-focused Riversdale Mining.

South African rail misery returnsA second significant derailment in as many months on the coal lineto Richards Bay contributed to a disappointing start to the year forshipments from South Africa’s dominant coal export terminal, RBCT.

RBCT shipped only 4.4mt in January, down from 4.9mt inJanuary 2009. On an annualised basis January’s exports come to

just 51.55mt - that’s already 20.5mt short of an RBCT target of72mt for 2011.

Railings to the port performed only marginally better, withTransnet Freight Rail (TFR) moving 4.73mt in January, at anannualised rate of 55.37mt - nearly 15mt behind its 70mt targetfor this year.

TFR is yet to issue official reasons for the derailments, whichsaw 1mt of lost railings in December and contributed to lower-than-expected exports of 62.86mt, just short of the 65mt target.Shippers estimated a further 0.7mt was lost in the Januaryderailment.

Derailments used to occur regularly until a couple of years agowhen TFR made a concerted effort to improve the line’s reliabilityand two major incidents in such a short space of time is a worryingsign.

Coal stocks at the port remain uncomfortably low. RBCT saidstocks were 1.76mt at the end of January, rising slightly from1.66mt at the end of December. Many shippers consider 2mt aminimum inventory level - anything below this can cause shortagesof certain grades, as was seen througout January when vessels wereleft waiting for coal to arrive.

January is, however, a traditionally slow month for bothrailings and exports, with shippers generally limiting their line-upsfollowing a usually packed December shipping schedule.

Russian rail and SUEKenter Mongolian raceRussian rail operator RZhD has announced two significant railplans which could see it exploiting new coal mine developments inMongolia and opening a significant transport corridor for the giantElegesta coking coal deposit in south east Russia.

RZhD said this week it has created a consortium to bid for theTavan Tolgoi coal deposit in Mongolia. Its partners are Russia’sleading coal producer and exporter SUEK, Japanese trading housesSumitomo, Marubeni, Itochu and the Tata-owned steel subsidiaryin South Korea.


Lead Stories

Source: RBCT

RBCT Monthly Data

RZhD has experience in Mongolia as it is a 50% managingpartner of Mongolia’s Ulan Bator Railway.

The consortium is one of 15 bidders for Tavan Tolgoi withother high profile global players including Vale, Xstrata,ArcelorMittal, Mitsui/Shenhua, Peabody, Fortescue Metals,India’s Mesco Steel, China’s Erdos and Russia’s En+ Group.

Up for grabs is 30% of Erdenes-Tavantolgoi, the state-ownedcompany which holds the licence to develop the deposit.

RZhD’s interest is in building and operating the 400kmrailway required to connect the deposit to China and Russia.

It is understood RZhD’s plan will see it connecting the railwayto the existing Trans-Siberian Railway and from there to privately-owned connections to Russia’s pacific ports. Significantly one ofthe partners in the RZhD approach, SUEK, has its own portfacilities at Vanino.

The railway build cost will be about $2bn, RZhD said. TavanTolgoi has 6.5bnt reserves of which 40% is coking coal.

The plan is supported by the government of Russia’s TuvaRepublic in southern Siberia, 1,300km from Mongolia.

The Tuva government said this week that the 412km Kyzyl-Kuragino railway, which will connect the Ulug-Khemskoe coaldeposit with the national rail network, is likely to be extended toMongolia and, in future, on to the South-East Asia region. Tuvasaid this plan is supported by the Russian government.

A consortium of investors in Tuva’s coal deposits is beingformed, including Severstal-Resources and Evraz Holdings, as wellas the Yenisy Industrial Company, which hold licences to developthe coal deposit and are investing in the infrastructure of theregion, especially the railway.

The pool of private investors will become part of the newly-created Tuva Railways Company, whose shares will be dividedbetween the state and the private investors.

RZhD said it will connect Elegesta to the national rail networkby 2015.

The first phase will see it build 145.4km of track by 2015 onthe Mezhdurechensk-Taishet section, to connect it to Pacific portsvia the Kyzyl-Kuragino railway.

The line will also be used to shift increasing amounts of coalfrom West Siberia to the Pacific ports for export. Total investmentis put at R4.4bn ($150m) in 2011-2013.

RZhD added that its ultimate aim is to increase capacity on theMezhdurechensk-Taishet section by 70% by 2020, although it didnot supply absolute figures.

It is believed the Elegesta deposit contains reserves of 1bnt ofhigh quality coking coal.

Premium met coal falls,spot remains scantSpot price ideas for premium grade Australian hard coking coalsoftened again this week as Chinese and Indian buyers remained onthe sidelines.

Chinese buyers have only just returned from extensive New Yearholidays and tell MCR they will be attempting to contact Australiansuppliers next week to establish availability and price ideas.

But interest among Chinese buyers is generally weak as theworst of the Queensland floods and cyclone appears to have passed.Buyers also tell MCR that they are wary of high international pricesbecause comparable domestic coking coal prices remain muchweaker, although premium Australian brands are always wellsought after.

Spot availability is scarce as most Australian suppliers areconcentrating on their contract positions following the weatherdisruptions. Many Australian coal marketing teams are already inJapan to discuss with steel mills the fallout from the floods andcarryover tonnages, ahead of the next round of quarterlynegotiations which is expected to commence by the end ofFebruary.

One Chinese buyer said: “The majority of Australian hardcoking coal mines have resumed full production at this moment,but they haven’t lifted force majeure.”

He added: “Xstrata has some availability but at a very, veryhigh price”. He declined to give a firm indication on current offerprices but confirmed that he had received an offer above $400/tFOB prior to commencement of the Chinese New Year a couple ofweeks ago. This compared with Chinese re-sale offers at the time of$350/t CFR for a full cape of premium Australian product.

Chinese buyers and Asian traders surveyed by MCR indicatedthey viewed the current market price for premium Australiangrades in a range of $300-325/t FOB.

Indian traders and buyers say Indian demand for internationalcoking coals has cooled significantly in the last week or so. Onetrader said: “Nobody is buying in India. People are not in themarket.”

He said there have been numerous offers from US suppliersthis week for mid-vol blends at around $300/t CFR. With US-India freight at around $40/t, this nets back to $260/t FOB port.

Indian buys US low-vol cargo

Two weeks ago an Indian steel maker bought a prompt cargo of USlow-vol coking coal at $310-320/t FOB.

It is understood that the steel maker purchased Masseymaterial which will be delivered into Vizag to replace delayedAnglo and BHP Billiton cargoes which are under FM declarationsfollowing the Queensland floods. Freight from east coast US isestimated at $40/t, compared to around $20/t from Australia.

Most Indian steel makers have been purchasing coke to replacedelayed Queensland coking coal cargoes and slowing down theircoke ovens, but it is understood that the steel maker iscommissioning a new coke oven so is unable to bring the heatdown below 800 degrees C.

While some claim that the Massey material has similarchemical properties to Australian hard coking coal they point outthat the difference is the greater wall pressure the US coking coalexerts. While this can be blended down, a new coke plant shouldbe able to cope with this factor better than older plants, they say.

Despite the delays caused by the Queensland floods, Indianbuyers were last week pushing back on offers over $300/t FOB forAustralian hard coking coal and are supplementing their needswith coke. One trader in particular is believed to have sold over0.5mt of coke into India over the last month. In general, coke

Lead Stories


import prices over this period have ranged from under $520/t CFRto around $550/t CFR.

Elsewhere in India, MMTC is evaluating offers into its tenderfor 150,000t of mid-vol (28-30%) coking coal. The tender wasissued to replace delayed Austalian hard coking cargoes and is forthe trader’s own coke oven in Orissa, which supplies most of itsproduct to the Mittal Ispat steel mill.

It is understood that the three suppliers have offered USmaterial with prices between $320-330/t CFR. Freight is estimatedat around $40/t.

Further price direction is expected with the outcome of a SAILtender for 600,000t. It is understood that the only supplier to offerwas US-based XCoal.

Elsewhere Asian sources reported seeing Glencore offeringIndonesian coking coal recently with 24% vols at around $370/t FOB.

The IHS McCloskey Australian prime hard coking coal FOBmarker is assessed this week at $318.25/t, falling from $325.00/tlast week (February 4) and from $330/t on January 28.

Gunvor denies agreeing to buy Murmansk portRussian owned oil and coal trading company Gunvor deniedagreeing to buy Murmansk Commercial Sea Port (MCSP) Fridayafter numerous reports claimed a deal for the largest shipmentpoint for coal in northern Russia was progressing.

Industry sources told MCR Friday that Russian businessmanand owner of Gunvor, Gennady Timchenko, had acquired acontrolling stake in the Russian sea port. This was later denied toMCR by a spokesperson for Gunvor.

Following reports in the last week claiming a deal had beensigned, Russia’s Federal Antimonopoly Service (FAS) issued astatement saying it had not received an application requestingpermission to buy the port.

“The information provided by some mass media…does notreflect the reality,” FAS said in a statement, referring to reportsfrom Russian business daily RBC Daily and Reuters.

FAS pointed out that RBC Daily reported that Gunvor hadfiled an application seeking permission to buy MCSP, citing asource in the antimonopoly service and that Reuters reportedthat Timchenko agreed to buy MCSP for $250m.

MCSP saw coal throughput of 9.64mt in 2010, down26.14% from 12.16mt in the previous year. It handled a total of12.87mt of all cargoes last year, which was 14.8% less than in2009.

At the end of 2010 the port’s major shareholders were stateproperty agency Rosimushchestvo with 25.5%, the DutchSpecialized Project Investments with 34.97%, LateriumCommercial Limited with 12.68% and the MurmanskyTransportny Uzel management company with over 20%. Theport is subject to the golden share rule, according to which thegovernment can block the decisions of the shareholders.

Industry sources say that MCSP is actively up for sale. MCSPcould not be reached for comment.

Cerrejon strike averted as pay deal struckA threatened strike at Cerrejon’s operations in Colombia has beenaverted after the company and the Sintracarbon workers’ unionagreed a new deal on pay and conditions.

The country’s vice president Angelino Garzon acted as amediator at a meeting between the parties last Friday, after unionworkers had voted in favour of strike action. Negotiations initiallybegan on December 9.

The new deal will see workers’ salaries increasing by 6.5% forthe first year and CPI + 2% for the second year. Cerrejon’s last payoffer had been 6.3% for year one and CPI + 2% or 5%, whicheveris higher for the second year. The workers had been demanding a7% salary increase.

Other points agreed include a signing bonus for each worker ofabout $2,600, medical and higher education subsidies and travelallowances for medical treatment.

The results of a poll of 600 delegates at a general assembly heldon Saturday were 597 in favour of the company’s new proposal,with three workers voting for a strike.

Cerrejon, owned in equal parts by BHP Billiton, Xstrata andAnglo has never declared force majeure on its shipments. Paynegotiations with the union have taken place every two years overthe past 20 years and a deal has always been reached before strikeaction has been taken.

Cerrejon’s exports in 2010 were 31.35mt and are forecast at32mt for 2011.

Indonesia signs off traders’ licencesIndonesia is beginning to sign off traders’ licences enabling them tolegally begin exporting again under their own names fromKalimantan and Sumatra .

Bambang Setiawan, director general of coal, mineral andgeothermal at the energy ministry, told MCR, “I have alreadysigned more than 60 licences.” This was done last Friday, he said.

The 60 licences are of the type needed by traders to transportand trade FOB barge material.

Problems in receiving the necessary documents to export beganon January 5, when Indonesia’s trade ministry told surveyors towithhold export documents from aggregating traders who wereoperating under temporary licences.

Bambang Gatot, director for mineral and coal production, saidall traders who have now had their applications signed off, havebeen informed and they must come to his department to collectthem.

Tallies for the numbers of vessels stuck at ports aroundKalimantan and Sumatra varies, but it’s clear that some vessels thatwere previously blocked are able to leave. A trader who had twovessels stopped in port said he borrowed a permit in order to exportand the ships have now left.

But another, who is expecting a licence, said he has not yetreceived it and is not sure why.

Lead Stories


Physical spot values in need of directionAtlantic spot markets have dropped sharply over the past twoweeks, as European buyers appear content to run down stocks andIndian buyers remain confident of further decreases in RichardsBay values.

Spot business over the past two weeks in the DES ARA markethas struggled to gain traction. There has been a total of 0.29mt offixed price business since January 31, with the same Europeanutility/trader involved in most of the purchases. This week, Apriltraded at $118.50/t DES AR on Monday before slipping to$115.75/t DES Rotterdam on Thursday (see table), while Marchtraded at $120/t DES Rotterdam.

In the previous week, the April contract traded at $123/t DESAR, and March went through twice at $122.25/t and $125.25/tDES Rotterdam, both for 50,000t of Colombian.

DES ARA fixed price deals - Jan 31 - Feb 11 2011

Date $/t Delivery Origin Delivery Tonnes Notespoint

Jan 31 122.25 Mar 11 Col Rott 50,000* EFP

Feb 03 125.25 Mar 11 Col Rott 50,000* EFP

Feb 04 123.00 Apr 11 Col AR 25,000*

Feb 08 118.50 Apr 11 Col/Russ AR 40,000*

Feb 09 120.00 Mar 11 Russ Rott 50,000* EFP

Feb 10 115.75 Apr 11 ACPRS Rott 75,000* EFP

* Denotes trades on globalCOAL

EEFFPP - Exchange of Futures for Physical AARR - Amsterdam, Rotterdam AACCPPRRSS - Australian, Colombian, Polish, Russian, South African

Source: globalCOAL*

Commenting on the lack of business, some traders said thathigh stocks at European power stations, and the milder weather,especially in the UK, are reducing demand.

Richards Bay FOB fixed price deals - Jan 31 - Feb 11 2011

Date $/t Loading Tonnes Notes

Feb 01 121.50 Mar 11 50,000*

Feb 01 122.00 Mar 11 25,000*

Feb 04 120.00 Mar 11 75,000*

Feb 04 119.50 Apr 11 50,000*

Feb 07 118.00 Mar 11 25,000*

Feb 07 116.50 Apr 11 50,000*

Feb 07 116.00 Mar 11 25,000*

Feb 08 115.00 Mar 11 25,000*

* Denotes trades on globalCOAL

Source: globalCOAL*

There has been more trade activity seen in the Richards Baymarket, but it has been for lower volume 25,000t deals. This week,liquidity was good but it tailed off, with no deals seen afterTuesday. The March contract traded at $118/t and $116/t FOB onMonday before moving down to $115/t FOB on Tuesday. TheApril contract also traded on Monday at $116.50/t FOB for

50,000t. In the previous week spot values for March were higherand traded in a range of $120-122/t FOB, while April saw one dealat $119.50/t FOB.

One trader said that Indian buyers are pretty much in thedriving seat for this market and are confident that continuedabsence will see values fall further. Since the beginning of January,the API4 physical index has fallen from a high of $129.17/t FOB.Since then, only a handful of Indian cement producers have beenactive on the market. This week, Binani Cement was in the market50,000t for March delivery (see separate story).

Meanwhile, the Newcastle market has seen some volatility, andspot business has been livelier than in DES ARA and Richards Bay.Two March trades went through at $124/t and $128/t FOB on Thursday and Friday, respectively. However, one trader saidthat nothing has fundamentally changed in the market and hethought it was a buyer who was “caught really short and had to pay up”.

Outside the 90-day window, May changed hands twice at$118-119.50/t FOB. In the previous week, May traded at $125-126/t FOB and April dealt at $127/t FOB.

Newcastle FOB fixed price deals - Jan 31 - Feb 11

Date $/t Loading Tonnes Notes

Feb 01 128.50 Apr 11 25,000*

Feb 02 126.00 May 11 25,000* EFP

Feb 03 127.00 Apr 11 25,000*

Feb 03 125.00 May 11 25,000*

Feb 10 118.00 May 11 25,000* EFP

Feb 10 119.50 May 11 25,000* EFP

Feb 10 124.00 Mar 11 25,000*

Feb 11 128.00 Mar 11 25,000*

All globalCOAL EEFFPP - Exchange of Futures for Physical

Source: globalCOAL

Lead Stories


10th Anniversary

McCloskey European Coal Outlook Conference 2011

For updates please visitwww.mccloskeycoal.com/conferences

Sponsorship and exhibition opportunities are available at the10th Anniversary McCloskey European Coal OutlookConference 2011

If your company is interested in sponsoring or exhibiting at this

event, please contact:Julia Potter, Tel: +44 (0)1730 236169,


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May 18-19 2011 - Le Meridien Hotel, Nice, France

McCloskey Steam Coal FOB Marker Prices ($/t)

Port Feb 10 Jan 11 Jan28th Feb 11th

Australia - Basis 6,000kc NAR

Newcastle 93.68 132.01 125.25 120.75

Japanese reference price 70.25 98.00 98.00 98.00

China - Basis 5,800kc NAR

Qinhuangdao 112.90 139.05 138.72 138.72

Japanese reference price 81.20 115.50 115.50 115.50

Colombia - Basis 11,300Btu GAR

Puerto Bolivar - ARA 62.00 110.75 107.50 109.75

Puerto Bolivar - US 62.00 110.75 107.50 109.75

Russia East - Basis 6,700kc GAD

Vostochniy 91.25 125.50 125.00 123.00

Russia West - Basis 6,000kc NAR

Baltic 72.25 120.50 120.00 116.00

South Africa - Basis 6,000kc NAR

Richards Bay 83.00 123.07 116.44 114.89

Maputo 81.28 118.72 114.44 112.89

Petcoke (4.5-8% Sulphur)- Basis 7,500kc NAR

US Gulf 69.00 91.25 90.50 96.00

Indonesian , Sub-Bituminous - Basis 4,900kc NAR

South East Kalimantan 65.03 92.41 87.90 85.75

McCloskey Steam Coal CIF Marker Prices ($/t)

Port Feb 10 Jan 11 Jan 28th Jan 11th

NW Europe

US$/t 75.50 124.13 116.55 118.42

ARA euro marker

E/t 55.39 92.67 85.72 87.62

ARA FOB Barge marker

US$/t 77.64 126.70 119.55 121.42

Asian steam coal marker

US$/t 97.39 126.81 -- 121.58

Japan CIF steam coal marker

US$/t 105.41 137.68 -- 121.98

Source: McCloskey

McCloskey Daily Marker prices ($/t)

Mon Tue Wed Thu Fri Ave.

Feb 07 - Feb 11, 2011

NW Europe (CIF/DES ARA) 120.33 118.55 118.80 116.25 118.15 118.42

Richards Bay (FOB) 116.75 114.80 114.50 113.60 114.80 114.89

Jan 31 - Feb 04, 2011

NW Europe (CIF/DES ARA) 121.55 120.71 119.95 124.20 123.30 122.14

Richards Bay (FOB) 122.05 121.70 121.54 121.04 119.80 120.91

Source: McCloskey

International coking coal spot prices ($/t)

Grade Dec 2010 Jan 2011

US high ash high vol FOB 185.00 210.00

US low vol FOB 230.00 270.00

Australian prime hard FOB 232.65 298.75

ULV PCI FOB 175.00 235.00

Coke FOB Rizhao 435.00 525.00

Coke CIF ARA 445.00 480.00

China domestic coking FOR Gujiao 215.71 225.00

Source: McCloskey


The NW European, Richards Bay and Newcastle markers are produced every Friday.

The other FOB markers are produced with every issue of MCR - once a fortnight. The

Asian Steam Coal marker and The Japan CIF Steam Coal marker are produced once a

month.

For information on how these indices are compiled, visit the MCR homepage at

http://cr.mccloskeycoal.com and click on Index Pricing Methodology on the navigation

bar.

Data Page - Physical Prices

From May 4, 2010, the weekly McCloskey NW Europe CIF ARA and Richards Bay FOB

Marker Prices will be derived from a straight average of the daily McCloskey Marker

Prices.

A methodology for the daily McCloskey Marker Prices can be found on

www.mccloskeycoal.com.

Source: McCloskey

McCloskey NWE steam coal marker vs RBay FOB (US$/t)

• Market leaders on international coal reporting• Analytical style brings clarity and context

to news stories• Forefront of price reporting

McCloskey Coal PublicationsThe world’s premier source of news, analysisand data on the international coal industry.

For further information, please contact: Mat Newton, + 44 (0)1730 265 095, [email protected] www.mccloskeycoal.com

Data Page - OTC Prices


Source: + globalCOALARA = Amsterdam, Rotterdam, Antwerp

API= All Publications Index

RBCT = Richards Bay Coal Terminal,

South Africa,

Newc = Newcastle, Australia

API #2 (6,000kc NAR CIF ARA)

Duration Bid Offer Mid Point

Q2 11 112.30 112.80 112.55

Q3 11 113.30 113.80 113.55

Q4 11 115.20 115.70 115.45

Q1 12 115.80 116.30 116.05

Cal 12 116.15 116.65 116.40

Cal 13 117.15 117.65 117.40

Cal 14 120.05 120.70 120.38

Cal 15 122.95 123.65 123.30


Q2 11 112.25 112.75 112.50

Q3 11 112.35 112.85 112.60

Q4 11 113.30 113.80 113.55

Q1 12 113.15 113.65 113.40

Cal 12 113.25 113.75 113.50

Cal 13 113.10 113.60 113.35

Cal 14 114.40 115.05 114.73

Cal 15 116.80 117.45 117.13

globalCOAL SCoTA Newc Instrument+

globalCOAL SCoTA RB1 Instrument+


Mar-11 113.25

Apr-11 114.00 113.00 114.00

May-11 111.75

Jun-11 111.25

Q1'11

Q2'11

McCloskey Swap Indonesian Sub-Bit


Q111

Q211 81.65 85.35 83.50

Q311 80.65 85.15 82.90

Q411 80.25 85.25 82.75

Q112 79.85 85.65 82.75


Mar-11 128.00 122.50 125.25

Apr-11 122.25 130.00 126.13

May-11 119.00 118.00 118.50

Jun-11 117.50

Q1'11 115.00

Q2'11

API #4 (6,000kc NAR FOB RBCT)

OTC Round-up

Coal swaps have been volatilethroughout the week following Brentoil and physical markets. On Monday,API2 for March closed at $117.25/t,down $3.25/t on the previous session,while API4 for March finished on$115/t, a fall of $4.80/t.

The weaker trend extended intoWednesday with API2 for Marchclosing at $113.75/t, down $2.75/t onthe previous day, and API4 ended thesession on $111.95/t, a dip of $2.55/t.Contracts recovered on Thursday,with API2 for March finishing on$114.75/t, a gain of $1/t. API4 forMarch closed at $114/t, a gain of$2.05/t.

On Friday, API2 for March closed at115.75/t, up $1/t on the last close, butlower than last week’s $120.25/t,while API4 for March finished on$115/t, a gain $1/t on yesterday, butdown from $118.75/t last Friday.

In the Indonesian sub-bituminousswaps market, which is markedagainst the McCloskey IndonesianSub-Bituminous FOB marker, GingaPetroleum traded four contracts,March, April, May and June at thesame price of $84/t on Wednesday.The Q2 11 contract was valued todayat $84.38/t, compared to $84.50/t lastweek.

Last week, coal swaps saw hedgefunds return to the market, whichinjected some liquidity into contracts.On Monday, API2 for March closed at$119/t, up $2.75/t on the last session,while API4 for March ended the dayon $122.30/t, a gain of $3.80/t.Contracts reversed previous sessiongains on Tuesday, with API2 for Marchclosing at $117.25/t, a fall of $1.75/t,while API4 for March finished on$199.75/t, a decrease of $2.55/t.Contracts recovered on Thursday andAPI2 for March gained $2/t on theprevious day to finish on $121/t, whileAPI4 for March finished on $120.50/t,up $0.50/t.


Freight rates recover, but limited gains seen

Global freight rates have recovered slightly over the last twoweeks after seeing declines in the previous fortnight, but gains arelikely to be limited as a flurry of new vessels brings extra capacityonline.

“We’ve seen it appear to have bottomed out on the capesizesand panamaxes, mainly due to some improvement in iron ore andcoal availability,” one shipping source told MCR.

There is a near-term contago in the Forward FreightAgreements (FFAs) market, which means there are expectationsfor some improvement in freight rates, he said.

“But the extent of the expected increase is being capped by thearrival of a record number of new vessels. January was an all time

high for deliveries and there’s a lot more scheduled to be built thisyear,” he added.

Some 235-240 cape newbuilds are expected to join the fleetin 2011, as well as over 250 panamaxes, meaning the averagefleet size will be 14% larger than last year.

Spot cape rates on the Richards Bay to Rotterdam route werebeing marked by brokers at $8.75/t yesterday, which was in linewith the price two weeks ago. The last fortnight has seen priceshover within a range of $8.46-8.60/t, before ticking up to$8.75/t.

Prompt panamaxes on the same route were at $14.04/t, up$1.82/t from $12.22/t a fortnight ago. The last two weeks haveseen a gradual and steady climb in prices.

The Baltic Exchange Day Index closed at 1,136 pointsyesterday, largely in line with the level seen two weeks ago.

SSY Atlantic Capesize Index

Last year Last month Last week This week

Narvik/Rotterdam 5.50 4.80 3.60 3.65

Tubarao/Rotterdam 13.70 10.70 7.15 7.25

Richards Bay/Rotterdam 12.50 10.40 8.75 8.55

Hampton Roads/Rotterdam 12.90 11.10 7.90 8.10

Puerto Bolivar/Rotterdam 13.25 11.70 8.15 8.20

Nouadibou/Taranto P2 8.25 7.10 5.00 5.15

Tubarao/Japan 25.90 20.55 16.50 16.40

Tubarao/Beilun+Baoshan 26.25 20.75 16.80 16.50

T/C Trip Cont/Far East 8.40 6.54 3.00 2.75

T/C Transatlantic Round 5.48 3.53 0.80 0.80

CALCULATED INDEX 9,198 7,439 5,086 5,072

Change on Previous Week -1,972 -1,107 -649 -14

Change on Four Weeks Ago -1,868 -2,074 -2,353 -1,124

Change on Previous Year +3,312 -4,938 -6,084 -4,126

Change on Two Years Ago -7,307 +3,919 -800 -745

Source: SSY

Data Page - Freight Update

Weekly Coal Fixtures 2011

Date Name Flag Cargo Dwt Built Cargo Size Laycan Load Port Discharge Port Rate Terms Charterer

4-Feb TBN ABU Coal 300,000 1983 70000 18-28Feb newport news Hunterston $12.50 fio 30000sc/25000sc Klaveness Norway

2-Feb TBN ABU Coal 300,000 1983 150000 14-28Feb R Bay Mundra $8.95 fio scale/ Libra Shipping20000sc option 35000sc

2-Feb TBN ABU Coal 300,000 1983 70000 15-20Feb Ventspils Dunkirk $9.80 fio 25000sc/20000sc Vitol Bermuda

31-Jan TBN ABU Coal 300,000 1983 164000 19Feb-05Mar DALRYMPLE Pohang $8.25 fio scale/60000sc-45000sc Posco Engineering

31-Jan TBN ABU Coal 300,000 1983 159000 24Feb-05Mar prince rupert Kwang Yang $7.75 fio scale/45000sc60000sc Posco Engineering

Source: McCloskey

• Market leaders on international coal reporting

• Analytical style brings clarity and context to news stories

• Forefront of price reporting

McCloskey Coal PublicationsThe world’s premier source of news, analysisand data on the international coal industry.

For further information, please contact: Mat Newton, + 44 (0)1730 265 095, [email protected] www.mccloskeycoal.com

Clarksons Daily Coal Freight Report (Prompt Rates)

Route

(All to Rotterdam) Feb-10 Jan-11 Feb 4th Feb 11th

Richards Bay C 12.19 9.14 8.46 8.85

Richards Bay P 18.20 12.49 13.09 14.04

Puerto Bolivar C 14.56 8.88 8.17 8.59

Puerto Bolivar P 21.18 17.46 15.03 16.31

Maracaibo P 29.41 24.35 21.04 22.79

Ventspils P 10.43 8.24 7.24 7.70

Haypoint C 17.89 12.40 13.21 13.46

Dalrymple P 28.19 19.94 20.30 22.09

Banjarmasin C 13.19 9.15 9.69 9.86

Banjarmasin P 21.79 15.82 15.99 17.21

Baltimore C 16.01 9.73 8.95 9.40

Norfolk P 17.89 14.65 12.55 13.64

New Orleans P 23.01 18.91 16.24 17.64

Murmansk P 12.05 9.38 8.13 8.73

A Murmansk rate basis 12.8m draft and 12000 shinc loading rate

Note: Monthly freight rates are averages of all Friday daily rates for the month

Source: Clarksons


Data Page - Carbon/Sparks & Darks

Dark loses ground butstays ahead of sparkUK dark spreads have been hit by the fluctuating cost of coal anda slight softening in the power price over the past two weeks.Power prices softened on the back of milder weather and falling gasprices, whilst coal prices were being driven up by internationalconcerns, although they have since dropped back.

High coal prices look here to stay for the near term, although gasprices could start to soften as the UK moves closer to spring.Without any further prolonged cold snaps, gas is likely to becomeincreasingly competitive with coal as a generation fuel source verysoon.

The average UK day-ahead power price is at £46.42/MWh(Spectron-based) for week ending February 11. This is down 3%from the level it was at two weeks ago when it averaged£47.99/MWh.

Gas prices have also softened over the past fortnight, with theweekly average spot price (again Spectron-based) down 4% at54.33 pence/therm (ppt) from 56.47ppt (January 28). The currentpower price is 31% higher than it was a year ago, when February2010 baseload power averaged £35.51/MWh. The gas price is alsohigher, 51% above February last year’s average of 35.90ppt.

Such movements mean the dirty dark spread’s advantage overthe spark spread has weakened (and this is before carbon is takeninto account in the calculation). Therefore, the UK dirty darkspread is lower at £16.67/MWh for the week ending February 11,down 11% on £18.77/MWh a fortnight ago. The dirty spark isonly down 1% on where it was two weeks ago, at £8.70/MWhfrom £8.79/MWh. These movements mean the dark is now£7.97/MWh more profitable than the dirty spark, compared withtwo weeks ago when it held a greater advantage of £9.98/MWh.

February 11: Carbon prices have been moribund over the pastfortnight amid the fallout following the theft of millions of Eurosworth of certificates from a number of national carbon registries.

Trading was suspended for a short period whilst security wastightened, but confidence in the market took a significant knock.Trading has been resumed and auctions are once again taking place.However, time will tell what long term damage has been done.

Oil prices have been on the rise once again, but the specifics ofthe current situation in the carbon market have meant that carbonprices have not been in a position to necessarily track suchmovements. At the time of going to press, Brent Crude was tradingat $100.90/bbl, up 3% on its $97.80/bbl two weeks ago (28January).

European carbon permit prices for 2011 product are currentlytrading at €14.66/t (Spectron based). This is 0.7% lower than theirvalue a fortnight ago when they closed the week at €14.76/t.Further out, the 2014 product is also marginally lower than it wastwo weeks ago, down to €16.98/t (from €16.99/MWh on January28), which represents just a 0.1% fall.

The CER market has firmed moderately compared with where

Weekly average Sparks & Darks

28-Jan 04-Feb 11-Feb

United Kingdom £/MWh

Power (Spectron) 47.99 47.03 46.42

Gas PPT 56.47 54.78 54.33

Spark 8.79 8.99 8.70

Dark 18.77 16.91 16.67

Differential -9.98 -7.92 -7.97

Clean-Spark 3.61 3.78 3.60

Clean-Dark 6.85 4.90 4.91


Germany €/MWh

Power (EEX) 57.46 52.66 45.34

Gas €/MWh 22.55 22.03 21.98

Spark 11.57 7.83 0.60

Dark 23.36 17.43 10.15

Differential -11.78 -9.60 -9.55

Clean-Spark 5.54 1.74 -5.44

Clean-Dark 9.45 3.39 -3.76


Carbon

EUA €/t 14.69 14.83 14.69

Notes: Differentials are calculated by taking the spark away from the dark – therefore

negative numbers favour coal over gas and positive numbers favour gas over coal.

Spark spreads assume an efficiency of 49.13% whilst dark spreads assume an

efficiency of 36%. UK power and gas prices are from Spectron.

Source: McCloskey, EEX and Spectron

Carbon market view

Carbon & Sparks

Spot carbon prices have remained roughly the same over thepast fortnight, despite briefly firming a week ago. Thus, the

Forward EU carbon prices (€/t of CO2)

2011 2012 2013 2014

21-Jan 14.49 14.95 15.94 16.69

28-Jan 14.76 15.26 16.24 16.99

04-Feb 14.73 15.27 16.22 16.98

09-Feb 14.66 15.22 16.14 16.98

2 wk % chg -0.7% -0.3% -0.6% -0.1%

Source: Spectron

it was at two weeks ago. 2011 CERs are currently trading at€11.22t, up 0.4% from €11.18/t on January 28. 2012 CERsare now at €11.07/t from €10.98/t a fortnight previous, up0.8%.

The differential between EU carbon and CERs is currently€3.44/t for 2011 products and rises to €4.15/t for 2012products. This is a tighter differential for the 2011 productthan was reported two weeks ago when the margin was at€3.58/MWh. Further out the differential between 2012products is also tighter, compared with its margin a fortnightago of €4.15/t.


Data Page - Sparks & Darks

weekly average for EU carbon prices (Spectron based), isunchanged at €14.69/t for the week ending February 11, althoughthis is 14% higher than February 2010’s average of €2.90/t.

Clean spreads (those including the cost of carbon), still favourcoal, but only just. The clean dark is down 28%, to £4.91/MWh,from £6.85/MWh, two weeks ago. The clean spark is virtuallyunchanged at £3.60/MWh, from £3.61/MWh a fortnight ago.This gives the clean dark a narrow £1.32/MWh advantage overthe clean spark, compared with the £3.24/MWh advantage it heldtwo weeks ago.

German power prices have also softened over the pastfortnight, with the average baseload price for the week endingFebruary 11 down 21% to €45.34/MWh (Spectron based)compared with €57.46/MWh. Gas prices are lower also, down3% to €21.98/MWh, from €22.55/MWh. As a result, the dirtydark is down at €10.15/MWh from just €23.36/MWh. The dirtyspark is also lower, at €0.60/MWh, from €11.57/MWh afortnight ago. This puts the dirty dark €9.55/MWh ahead of thedirty spark. The clean dark (€-3.76/MWh) is €1.68/MWh aheadof the clean spark (€-5.44/MWh).

UK Dark and Spark spreads compared to Carbon prices

- 7 Jan to 11 Feb 2011

UK Spark/Dark Spread Differential - 7 Jan to 11 Feb 2011

Coal

G

as

UK Spark spreads, 7 Jan to 11 Feb 2011 UK Dark spreads, 7 Jan to 11 Feb 2011

German Spark/Dark spread differential - 7 Jan to 11 Feb 2011 Dirty German Dark and Spark spreads - 7 Jan to 11 Feb 2011

Coal

Gas

Philippines tenders for Naga complexThe Philippines state buyer, the Power Sector Assets andLiabilities Management Corporation (PSALM), has tendered for140,000t for 2011 deliveries to the Naga power plant complex.

The tender is broken down into two parcels. The first enquiryis for 55,000t of imported steam coal for unit one and the secondis an 85,000t enquiry for local blending product for unit two.

The imported material should have a c.v. of 5,210-6,640kcGAD, 18% max total moisture, 1% max sulphur and 11.7% maxash. The material will be evaluated to a reference coal with 6,050kcGAD, 0.34% sulphur, 18% total moisture and 3.4% ash.

The domestic material required is a 3,889-6,000kc GADproduct with 24% max total moisture, 1% max sulphur and 18%max ash. It will be evaluated to a 5,600kc GAD material, with 24%total moisture, 1% sulphur and 18% ash.

PSALM held a pre-tender conference on February 8 in MakatiCity for both tranches. The deadline for offers is February 21.

Offers should be made on a delivered basis to the Naga Cebucomplex and should be in Philippine pesos for material fromdomestic mines and in US dollars for imported coal.

PSALM has approved a budget for the imported material of$8.2m, which equates to an evaluated price of around $135/t CFR,assuming the total tonnage plus 10% optional tonnes is awarded.

The domestic blending tranche has a budget of Php499m orapproximately $11.34m, which translates to an evaluated CFRprice of Php5336.90/t or approximately $121/t. Again, this isbased on the tonnes tendered plus optional tonnage of 10%.

Coal suppliers are required to use geared vessels or barges.Imported material must be delivered monthly between March toAugust 2011, with the first two deliveries 8,500t each and theremainder 9,500t.

The domestic blending coal is to be delivered each month fromMarch to December 2011. The first shipment will be 8,500t, andthe rest will be at 8,000t/month.

In the meantime, PSALM has yet to resume the process ofauctioning off to the private sector the right to administer theplant, the independent power producer administrator contract.This includes the right to buy coal. No date has been set forresumption.

Indian cement buyer booksRichards Bay promptIndian cement producer Ultratech has booked 0.10mt of SouthAfrican steam coal for delivery spread over March and April ataround $140/t CIF west coast, basis 6,600kc GAD, according tomarket sources.

Ultratech had requested 0.25mt for delivery spread overFebruary, March and April. The cost of freight for handymaxvessels between Richards Bay and west coast Indian ports is

estimated at between $15-17/t, leaving a netback price of $123-125/t FOB Richards Bay.

Previously, Jaypee Cement bought a 50,000t Richards Bay cargofor first-half February delivery at around $145/t CIF west coastIndia, in late January. The freight cost for this deal was around $23-24/t, leaving a netback price of $121-122/t Richards Bay.

LEBA issues energymarket volume reportThe London Energy Brokers’ Association (LEBA) issued its firstregular volume report on the main European gas, power, coal andemissions markets on Wednesday, in a move likely to add moretransparency to coal trading.

For the coal market, API2 Rotterdam had a total over-the-counter (OTC) 2010 volume of 2.16bnt, but the total amountcentrally cleared on the exchange was 612.5mt, according to theindustry association. The average daily volume for OTC last yearfor API2 Rotterdam was 8.54mt, with the daily cleared amount at2.42mt.

The API4 contract saw total 2010 volumes of 884.75mt withcleared volume of 316.81mt. The average daily volume was 3.5mtwith average daily cleared volumes of 1.25mt, according to thereport.

“These volumes clearly demonstrate the importance of thebroking community to the resilience and liquidity of the Europeanenergy markets,” Alex McDonald, CEO of LEBA said.

“In future, regular monthly reports will add considerabletransparency to these markets and will serve to underline thegrowing depth and breadth of the European energy markets thatLEBA members operate in.”

On the ICE market, 2010 volumes for the Rotterdam contractwere 3.10bnt, while the Richards Bay full-year volume was1.48bnt.

LEBA represents wholesale market brokers, regulated by theFinancial Services Authority, in the OTC and exchange traded UKand liberalised European energy markets.

NSP tenders for up to 1mtCanadian generator Nova Scotia Power (NSP) has tendered for upto 1mt of low sulphur material for delivery between 2011-2015.

The tender has two options. Option A requires up to 0.2mt fordelivery over 2011, while option B requires 0.2mt/yr for deliveriesfrom 2012 until 2015.

The generator is seeking coal with 10,800Btu GAR minimumc.v., 30% minimum vols, HGI 45-55 (typical) and 0.65% sulphur(1.1% max).

NSP is accepting FOB or CIF offers. It is requesting fixedprices or indexed based offers on a combination of the API2 andBCI7 (Bolivar/Rotterdam freight rate), or API4 indeces.

Deadline is February 11 with validity until February 25, 2011. NSP burns 3.5mt/yr of solid fuel including 0.4mt/yr of

petcoke. Coal imports can reach up to 2.7mt/yr mainly from the


Markets-Steam Coal

Markets - Steam Coal


Markets-Steam Coal/Export Column

US and Colombia. Imports are delivered to the International Pierin Sydney for the Lingan power station and to Point Tupper MarineTerminal near Aulds Cove for the Point Tupper and Trenton plants.

Exxon offers high sulphurpetcoke cargoUS oil major ExxonMobil is offering a 45,000t high sulphur (4.5-5%) petcoke cargo for a March laycan in a tender, according tosources. The cargo is from its Baton Rouge oil refinery located inLouisiana, US Gulf. The deadline for bids is today.

Interest in the tender is strong, according to one trader, due toan international shortage of 4.5% petcoke, which is caused byongoing technical problems at Venezuela’s Petrocedeno refinery.

Supplies out of this refinery have been erratic for the past twoyears and this has led to a massive build in stocks. He estimates thatthere is around 5mt of 4.5% petcoke lying on the ground in thearea around the plant.

Petcoke traders Oxbow and Capex are understood to be inseparate high level talks with Venezuelan state-owned energyproducer PDVSA about taking over the operation and maintenanceof the refinery in exchange for a greater slice of its output.

India’s Binani Cementreturns to marketThe recent fall in Richards Bay spot prices has tempted regularopportunist buyer Binani Cement back into the market. Thecement producer is looking for 50,000t of steam coal for Marchdelivery into the west coast port of Navlakhi.

During the final week of January, Binani bought ex-stockmaterial, but the exact price was unknown. Binani typically importsup to 0.60mt/yr of steam coal into Navlakhi.

The last spot deal into India for Richards Bay material wasbooked by another cement producer, Ultratech, which bought0.10mt last week at $140/t CIF west coast, basis 6,600kc GAD.The freight cost for this deal was around $23-24/t, leaving anetback price of $121-122/t Richards Bay.

Jorf awards spot tenderMoroccan generator Jorf Lasfar is understood to have awarded itstender for delivery of two panamaxes in April and May, accordingto sources.

As with previous Jorf tenders, the price is being kept firmlyunder wraps. Some traders involved in the negotiations indicatedthat shortlisted offers of around $125-126/t CIF were rejected formulti-origin material. It is believed that Jorf awarded at between$124-124.50/t CIF Nador.

Jorf requested offers on a CIF basis into the port of Nador forits Jerada power station. It was looking for a 6,000kc NAR material,with 1% max sulphur.

Monthly throughput from key export ports (‘000t)

Port Dec-09 Dec-10 YTD 2009 YTD 2010

Australia

Abbot Point 1,748 1,682 15,242 17,421

Dalrymple Bay 5,484 3,982 54,225 62,700

Hay Point 3,901 2,480 35,008 36,379

Gladstone 5,163 5,693 58,017 61,701

Brisbane 479 634 6,291 7,561

Newcastle 9,271 8,485 92,810 95,079

Port Kembla 1,250 1,433 15,013 13,273

Total 27,296 24,389 276,606 294,114

Canada

Westshore 2,267 2,425 20,053 24,551

China

Qinhuangdao* 857 -- 7,602 --

South Africa

Richards Bay 5,551 6,154 61,156 63,288

Port Dec-09 Dec-10 YTD 2009 YTD 2010

United States**

Norfolk 2,366 2,268 24,792 28,606

Baltimore 715 1,237 5,750 12,443

New Orleans 444 1,028 4,266 8,487

Mobile 762 728 7,087 8,824

Total 4,287 5,261 41,896 58,360

* includes Qinhuangdao/Jintang/Huanghua ** To destinations excluding Canada

Source: McCloskey, RBCT, US FTD

Key port stocks (mt)

Port Nov Dec Jan

2010 2010 2011

ARA

Amsterdam (OBA) 1.80 1.60 1.40

Rotterdam (EMO) 2.10 2.80 3.00

Total 3.90 4.40 4.40

South Africa

Richards Bay 2.99 1.66 1.76

Maputo -- -- --

Durban -- -- --

Total 2.99 1.66 1.76

China

Qinhuangdao 0.10 0.41 0.78

Source: McCloskey

Kospo mulls offers into latest tenderKorea Southern Power (Kospo) was offered at least ninepanamaxes in its recent tender for one 4,500kc NAR min vessel forMarch to end-May delivery.

The generator tendered last week for material with 28% maxtotal moisture, 17% max ash and 1% max sulphur. The deadline istoday and offers, made on an FOB and CIF basis, must be validuntil February 11.

Trade sources said Goldman Sachs offered two Indonesianpanamaxes for March, Macquarie offered one Indonesian panamaxfor April and Glencore three Indonesian panamaxes for April andMay. Bulk Trading offered two Indonesian panamaxes andMercuria one panamax.

But the sources added that the list is incomplete, saying otheroffers came via an agent, but are hidden.

Kospo’s previous tender closed on January 12 and was awardedat $105-107/t FOB, basis 6,080kc NAR for March to end-Maydeliveries.

Some offers into the tender are thought to be lower than this andalso below the current IHS McCloskey Indonesian Sub-BituminousMarker, which stands at $87.80/t FOB, basis 4,900kc NAR.

The latest prices from South Korea are awards by KoreaMidland Power in a tender closing on January 21. Two pamamaxeswere awarded at $107/t FOB, basis 6,080kc NAR for February toend-May deliveries, and one trial cargo at a slightly lower price.

Vedanta tenders forFebruary, MarchIndia’s Vedanta has tendered again for 100,000-140,000t of steamcoal of any origin for delivery in February and March.

Vedanta is looking for a 5,400kc GAD min coal, with 25%max total moisture, 15% max ash and 1.8% max sulphur. Thematerial should be shipped in two parcels of 50,000-70,000t.

Offers had to be submitted by February 4 with validity untilFebruary 7. The material is to be shipped to the west coast ports ofNavlakhi, Kandla, Pipavav or Mundra.

In January the company tendered for 100,000t for Februarydelivery.

Indonesian market dips on increased activityIndonesian prices dipped again this week, with players returningafter a lunar New Year lull and most talk generally centring aroundlowering prices.

A low-sulphur cargo from a top five supplier was sold betweentraders at $84.80/t FOB, basis 4,900kc NAR for May. A small,reliable East Kalimantan supplier who last week sold in the verylow $90s FOB, on the same basis, values the market this week atapproximately $85/t FOB.

This chimes with other prices ideas heard into India, roughlyin the low- to mid-$80s FOB, basis 4,900kc NAR, and offers intothe latest South Korean tender, a one panamax enquiry from KoreaSouthern Power (Kospo) for 4,500kc NAR min for March to end-May.

Traders said Kospo is looking to buy at $100-103/t FOB, basis6,080kc NAR or $80.59-83.01/t, basis 4,900 NAR. Some offersabove $106/t FOB, basis 6,080kc NAR or $85.43/t FOB, basis4,900kc, were not shortlisted, but others at around $107/t FOB,basis 6,080kc NAR or $86.23/t FOB, basis 4,900kc NAR, were onthe shortlist.

Some say a two-tier market is evident, with Korean levelsmarkedly below other discussions. Traders and some producersreport discussions still taking place upwards of $86/t FOB, basis4,900kc NAR through to the low $90s FOB, basis 4,900kc NAR.

The IHS McCloskey Indonesian Sub-Bituminous Marker dropsthis week to $85.75/t FOB, basis 4,900kc NAR from $87.80/tFOB on the same basis.

Pan Asia ups itsKalimantan resourcesPan Asia, an ASX-listed minnow with a concession in Indonesia’sSouth Kalimantan, adjacent to Bumi Resources’ Arutmin mine,said the latest phase of exploration has seen resources rise, albeitfrom a low level.

The company said resources are 53.2mt, up from 30.7mt. Of the53.2mt, 22.4mt are indicated resources and 30.8mt inferred. PanAsia is looking at the possibility of an underground mine, hence theuse of Polish contractor Kopex, which has underground experience.

The material, however, is relatively high sulphur. Pan Asia saidexploration so far puts the material at 6,566kc GAD, with 6.41%total moisture, 13.52% ash and 1.52% sulphur.

Mechel bags loan to expand mineRussian producer Mechel has agreed a loan deal to fund expansionof the Sibirginskaya mine, which is owned by its Southern KuzbassCoal Company subsidiary.

Transcreditbank has agreed to provide a $210.4m loan tofinance equipment acquisition, construction of the surfacecomplex’s buildings and the second phase of excavation at themine, which will bring capacity to 2.4mt/yr.

The increase of production volumes at the Sibirginskaya minewill be achieved gradually, with the second phase scheduled tocome onstream in October 2014.

Sibirginskaya is currently operating at 1.2mt/yr, with theplant’s ultimate reserves set at over 90mt.

Stanislav Ploshchenko, Mechel’s Chief Financial Officer, said:“This deal testifies to the legitimate confidence banks have in

Markets-Steam Coal/Mining


Mining

Mechel. When the Sibirginskaya mine’s second phase is launched,it will double the production capacity of the plant producingvaluable coking coal grades, which makes this project particularlyimportant.”

Raspadskaya Jan output hits 0.6mtProduction of semi-hard and hard coking coal from Russia’sRaspadskya mine exceeded the 0.6mt/month mark in January forthe first time since an accident closed the mine down in May lastyear.

Total 2010 output from the mine fell by 32% compared with2009 to 7.16 mt as a result of the methane explosion on May 9.

The mine’s coal output in the fourth quarter of 2010 increasedby 15% compared with the third quarter to 1.27mt.

A new longwall is expected to start up “very soon” atRaspadskaya, the Kemerovo regional representative in the Russianparliament’s upper chamber, the Federation Council, SergeyShatirov said in Moscow.

Shatirov added that Raspadskaya would begin stableproduction of coking coal after the second long wall is restarted.Raspadskaya announced in December last year that productionhad started on a new face at the mine.

Gennady Kozovoy, Raspadskaya’s CEO, commented then: “Ahuge amount of work of the whole team of the mine preceded thecommencement of the longwall. I would like to thank all theworkers of the enterprise, that were not afraid of hard manual workand every day continue to do their best to reconstruct theRaspadskaya mine as soon as possible.

“The key goals for 2011 are recommencement of production atall seams of Raspadskaya mine as well as maintaining competitiveadvantages of the company. All these goals for Raspadskaya’s teamare achievable”.

Golden Energy Mines plans IPO and stake saleIndonesian conglomerate Sinarmas is forging ahead with a Jakartalisting and stake sale of Golden Energy Mines, its Sumatra andKalimantan coal mining division.

Golden Energy Mines told MCR it intends to have completedthe listing by June, and is also in talks with more than 10 investorsfrom India, China, South Korea and Japan to sell 20-30%.

Golden Energy Mines owns concessions in Jambi, Sumatra andin South Kalimantan. Group production in 2010 of 2.2mt wassplit equally between the two concessions, and a total 8mt istargeted for 2011, again equally split.

This represents a large step up for 2011 production; thecompany said it produced 525,000t in December alone andbelieves the 2011 figure is achievable.

The company believes it has an optimum production level infive to seven years of 40mt/yr, with production weighted towards

the larger South Kalimantan site - coal contract of works BorneoIndobara.

From Jambi, the company said it produces a 4,500-4,600kcGAR material, with 20-25% total moisture, 20% max ash and 1%sulphur. From Borneo Indobara, a 4,000kc GAR material isproduced, with 35-36% total moisture, 6-7% ash and 0.5%sulphur.

Sinarmas completed a full purchase of Borneo Indobara late in2007, having earlier in the year taken on 50% of the mine, located7km from the South Kalimantan coast.

The owners prior to Sinarmas said at the time they intended toboost production to 5-6mt in 2008, 6-7mt in 2009 and 7-8mt in2010. As is often the way with production targets in Kalimantan,this failed to materialise.

Western Coal inks newRidley terminal dealCanada’s Western Coal has signed a deal with Ridley Terminalswhich it indicates will ‘underpin’ a lift in Canadian output to6mt/yr over the next two years.

But Western, under an agreed $3.3bn takeover bid from US-based Walter Industries, gave almost no details of the deal, save tosay the company was Ridley’s largest customer.

The 6mt/yr production figure compares with Canadian outputrunning at around 3.6mt/yr in the company’s latest Septemberhalf. Increased output is expected following Western’s recent re-opening of the Willow Creek mine in British Columbia.

The majority of Western’s high quality metallurgical coal fromCanada is exported to meet growing demand from steel makers inthe Asia-Pacific basin.

Ingeominas haltsconcession awardsThe Colombian Institute of Geology and Mining (Ingeominas),has decided to stop awarding mine concessions for six months fromFebruary.

Speaking at the Fenalcarbon Mining Conference in Bogota,Colombia’s minister of mines and energy, Carlos Rodado Noriega,said that Ingeominas will be transformed into the National Agencyof Minerals (ANM) this year because of its increased workload.

He said that back in 2002, there were 3,000 mining titles,whereas in 2010 the number of titles was 9,000. There are still16,000 to be approved. This has affected Ingeominas’ capacity toregulate and oversee these titles.

Because of this, the government decided to redesign it andcreate the new ANM to regulate and oversee increased minerals’production. For now, the award of new concessions has been frozenfor six months to allow for the reorganisation of Ingeominas.

According to Ingeominas there are at least 3,000 illegal and6,000 legal mines in Colombia and the creation of ANM will helpexpedite the eradication of illegal mines.

Mining


Firestone inks Eskom off-take dealAustralian-quoted Firestone Energy has sealed an off-take dealwith state-controlled generator Eskom to supply the Matimbapower station from its thermal coal joint venture with local group,Sekoko Resources, in South Africa’s Limpopo region.

Firestone said the company had signed what it termed a‘binding MOU’ with Eskom to supply 525,000t/yr from April2012 to March 2015, 1mt/yr for the following four years toMarch, 2019, 2mt for the following year and 2.3mt/yr from April,2020 to March, 2032.

The company said the MOU would assist with raising fundsfor further development of its joint venture coal areas in the region.

Teck lifts earnings butwarns on strike impactCanada’s Teck Resources has heightened concerns that its 2011operations face impact from industrial disruption at both theElkview and Fording mines, after posting a hefty earnings increasein its coal division for the latest year.

But the company has also foreshadowed a potential lift to30mt/yr annual met coal output by 2013 – up around 20% oncurrent levels near 25mt/yr – if it can successfully re-open themothballed Quintette mine in British Columbia.

A Teck statement showed the company declared net coalearnings of C$1.69bn (US$1.71bn) for calendar 2010, up 32.2%on C$1.28bn for calendar 2009 following a strong Decemberquarter when net earnings hit C$544m, 148% higher year-on-yearthan C$219m previously.

The latest annual result came on sales of 23.17mt, up 17.2% y-o-y against 19.77mt previously. The company’s average FOB pricereceived rose to $181/t, 15.2% higher y-o-y than $157/tpreviously. Average FOB price for the final quarter reached $200/t,43.9% higher y-o-y than $139/t previously.

Teck last month issued adjusted output guidance in response tobad weather, forecasting output of 5-5.5mt for the current Marchquarter and 24.5-25.5mt for 2011, but the earnings statement saidthese estimates were without accounting for labour disruptions.

“With high coal inventories at our mine sites, we do not expectthe strike at our Elkview mine (which begn on January 30) to affectour coal sales guidance for the first quarter of 2011,” the statementsaid.

“But it is likely to affect our sales for the full year. The unionlabour agreement at our Fording River operation expires on April30, 2011.”

Teck said contract price increases for coal in the year reflecteda jump from levels negotiated during the global financial crisis andthe move to quarterly pricing which ‘more closely reflectsprevailing market prices.’

The company confirmed it had agreed prices with contractcustomers for the current January-March quarter ‘at or aboveUS$225/t’ FOB for best quality products. Teck expects average

FOB selling prices for the current quarter in the range $206-211/tacross all products.

On the Quintette mine, which has been closed since 2000, thecompany expects to complete a feasibility study by mid-2011.“Assuming the results of the study are positive and developmentproceeds, the mine could be in production by 2013 at an annualrate of approximately 3 million tonnes per year,” Teck said.

“The combined effects of capacity expansion…and a restart ofQuintette could result in total steelmaking coal productioncapacity in excess of 30 million tonnes per year.”

The statement showed Teck kept cost increases minimal, withthe total, including transport and depreciation at C$115/t for theyear against C$113/t for 2009, with the company citing higherstrip ratios, diesel imposts and contractor charges.

Teck said the cost increases were partially offset by higheroutput levels and the company expected unit production costs tobe in the range C$59-63/t for 2011.

Bad weather contributed to increased transport costs in thefinal quarter, with higher rail surcharges and coal handlingproblems caused by high moisture in product from the Greenhillsmine. Use of the Ridley terminal for some shipments also increasedtransport costs which are forecast to average C$30-34/t for 2011against C$32/t for 2010.

The statement said the company’s Greenhills mine had beenproducing high moisture coal since June 2010, when an explosionhit the dryer plant. Repairs on the plant were not completed untila few days ago.

But problems persist with handling Greenhills product,compounded by low coal inventories at the port. “This will placepressure on sales volumes for the first quarter of 2011, which istypically a difficult railing period due to weather-related challengesand avalanche risks,” the statement said.

“Furthermore, Westshore Terminals experienced a mechanicalfailure of its shiploader in January, 2011, that significantlydisrupted coal loading operations for a two-week period.”

Teck Coal results

Three months ended Year ended Dec 31 Dec 31

2010 2009 2010 2009

Production (000’t) 6,028 5,354 23,109 18,930

Sales (000’t) 5,950 5,368 23,167 19,767

Average sale price

US$/t $200 $139 $181 $157

C$/t $204 $151 $188 $177

Operating expenses (C$/t)

Cost of product sold $54 $52 $59 $55

Transportation $35 $30 $32 $32

Depreciation and amortization $23 $28 $24 $26

Operating profit summary ($ millions)

Before depreciation

and amortization $679 $372 $2,248 $1,795

Depreciation and amortization (135) (153) (558) (517)

After depreciation and amortization $544 $219 $1,690 $ 1,278

Source: Teck statements

Mining


Hunnu delineates moreMongolian met coalAustralian-quoted Hunnu Coal has announced first delineation ofa met coal resource – reportable to stock exchange standards - at itsTsant Uul met coal resource, near the producing Tavan Tolgoicoking coal fields in the South Gobi region of Mongolia.

Hunnu said latest drilling had delineated a resource of 90mt atTsant Uul, bringing the company’s total reportable met andthermal resources in Mongolia to more than 400mt, including theUnst Khudag and Tenuun-2 prospects.

Hunnu is planning more drilling at Tsant Uul, plus a bulksampling programme for potential off-take partners, and is seekingpermits for a potential production start late this year.

FM declared on New Hope mineQueensland thermal shipper New Hope Corp. has declared forcemajeure on some export coal contracts because of damage to therail connection with Brisbane terminal.

A New Hope statement said that while all its mines were backto normal operation after a brief flood closure last month, flooddamage to track had forced rail operator QR National to declareFM on rail services to New Acland, the biggest of the company’smines.

New Hope said QR was unable to give a definitive date forresumption of services, but an ‘indicative date’ was mid-April thisyear. Meanwhile, the company is examining alternative transportarrangements for New Acland.

These involve trucking 50,000t/week to West Moreton whichstill has a rail connection to Brisbane. But the company is stillwaiting on formal approval for the trucking option.

Meanwhile, Northern Energy (NEC) has again rejected NewHope’s improved cash takeover bid for the company, claiming itrepresents a ‘substantial’ discount on true value. NEC saidshareholders controlling about 24% of the company’s shares hadindicated they would not accept the bid.

New Hope has raised its bid to A$1.75/share (same in US$)from A$1.50/share previously, lifting its value to about A$225m.The bidder has also removed most conditions and extended theoffer until February 22.

The higher offer came with a warning the Northern had under-estimated the task of funding its developments.

Whitehaven into red slipsNew South sales thermal and met producer, Whitehaven Coal, hasrevealed the combined impact of wet weather and ‘legacy’ contractswill push the company into the red for the December half.

Revelation of the depth of Whitehaven’s problems wasawkwardly timed, coming just as it is effectively conducting an

auction for ownership of the company. A separate Whitehavenannouncement said the company had received ‘a number ofproposals,’ but they are non-binding for now.

The statement said the company had now invited ‘a selectedshort-list of parties’ to complete detailed due diligence and submitbinding proposals. But the company again warned that the processwas expected to take ‘a number of months’ and may not result inany binding proposals.

Last year, Whitehaven responded to persistent takeoverspeculation – involving the usual list of potential bidders, i.e.Xstrata, Peabody, Shenhua, Yanzuou, Noble and others - byeffectively setting up a ‘data room,’ allowing a formal process fordue diligence and potential proposals for a corporate deal.

Back on financials, Whitehaven said the company had lost anestimated 3,800 production hours in the latest half because of badweather. This had cut 1.2mt from output, forcing the company topurchase coal to service legacy contracts which continue to operateat prices below A$70/t (same in US$).

A further 0.72mt of legacy contracts have been cash settled.The statement indicated the company had been forced to pay ‘spotrates’ up to around $130/t for coal to settle the contracts, with afurther 0.72mt of contracts cash-settled in the half.

The company’s overall net loss for the half is estimated atA$38-43m compared with a profit of A$83.5m in the previouscorresponding half. But Whitehaven expected to recover to a netprofit of A$50-55m in the June half.

Siberian Anthracite teamsup with Hyundai SteelSiberian Anthracite, the only coal mining company in Russia’sNovosibirsk region, has signed a cooperation pact with SouthKorea’s Hyundai Steel, the coal miner said.

Siberian Anthracite’s Chairman, Dmirty Shatrokhin, said hiscompany did not want to limit its cooperation with Hyundai Steeljust to the supply of products.

“We want to involve Hyundai Steel in as many of our projectsas possible. Hyundai’s experience in sea port construction isvaluable to us and we want to cooperate in this area,” he said.

Shatokhin added that Siberian Anthracite was consideringbuilding export port facilities on the Russian Pacific coast.

Siberian Anthracite produced 2.3mt in 2010, double theamount produced the year before. This year’s target is 3mt.

Russia’s January outputup, exports downRussia produced 27.2mt of all types of coal in January, 2.3% morethan in January 2010, the energy ministry said.

Total deliveries of Russian coal to all clients, both domestic andforeign, increased by 0.2% in the month to 25.96mt comparedwith January 2010.

Russia’s total coal exports in January were 6.85mt, 2.2% downon January 2010’s figure.

Mining


Russia’s Kuzbass region produced 14.9mt of all types of coal inJanuary, up 1.4% from January 2010, although coking coal outputfell by 4.5% on the year to 4.2mt, the Kemerovo regionaladministration said.

Coal shipments to all clients in January reached 15.3mt, 0.7%more than in January 2010. Exports totaled 6.6mt, 6.5% morethan a year ago, while mine stocks stood at 11.5mt at the end ofthe month.

Miners who saw a fall in output in January were: Belon by0.37mt; Raspadskaya by 0.36mt; Yuzhkuzbassugol by 0.32mt;Kuzbassrazrezugol by 0.13mt; Sibuglemet by 0.11mt and SevernyKuzbass by 0.12mt.

The following miners increased their output: Zarechnaya by0.38mt; Yuzhny Kuzbass by 0.13mt, Kuzbass Fuel Company by89,000t, Taldinskaya by 88,000t, SUEK-Kuzbass by 86,000t andStroyservice by 34,000t.

Meanwhile in 2010 the Kuzbass Fuel Company (KFC)increased total coal production by 11% year-on-year to 6.80mt,having achieved its annual production plan.

Coal sales volumes increased by 15% year-on-year and reached8.54mt against 7.41mt in 2009. The pick-up in sales was driven byexport volumes, which increased by 39% year-on-year to 3.75mt.

The share of export sales increased from 36% in 2009 to 44%in 2010. The domestic sales volume remained virtually stable at4.79mt compared to 4.71 mt in 2009.

In August 2010 the Company launched its first coalenrichment plant “Kaskad” and started to produce enriched coalby processing high-ash coal and diluted raw coal, which hadpreviously been dumped as waste.

From September to December 2010 the plant produced 0.2mtof export quality coal. All this resulted in increasing the share ofcoal processing products from 50% in 2009 to 63% of totalCompany production volume in 2010.

The company’s largest export markets remained the same withPoland (46% of export volume), China and South Korea (together- 43%).

Meanwhile, Coeclerici Coal & Fuels says it plans to increasecoal output at the Korchakolsky surface mine to 1mt/yr by 2012.

In 2010 Coeclerici invested $6m in the mine and a similaramount is expected to be pumped into operations this year. Themine has reserves of 17mt of steam coal, which will last until 2026,after which the company plans to increase reserves.

Coeclerici also intends to buy another coal mining asset in theKemerovo region. 90% of the coal produced by the Korchakolskymine is exported to Europe.

BHPB to sell unexploitedSA coal assetsBHP Billiton is selling off its undeveloped coal prospecting rightsin South Africa, in a move that is bound to revive a view in somequarters that the company doesn’t have a long-term commitmentto coal in South Africa.

BHPB said the disposal will allow it to focus “on demandswithin existing operations” and that “other industry members

would be better positioned to develop these prospecting rights,potentially converting them into mining rights”.

It is understood the company owns nine prospecting rights inSouth Africa through wholly-owned subsidiary, BHP BillitonEnergy Coal South Africa (BECSA). Those up for sale are locatedmainly in Mpumalanga, with one each in the Waterberg,Theunissen and Newcastle areas.

BECSA said it “remains committed to the South Africaneconomy as evidenced by its recently completed large investmentsin its mining operations.” These include a $975m investment inthe Douglas Middleburg Optimisation project and a $450minvestment in the Klipspruit mine.

BECSA owns and operates the Douglas, Middelburg, Khutalaand Klipspruit mines. In the 2009-2010 financial year these minesproduced 30.46mt of thermal coal, rising from 29.90mt in 2008-2009. BHPB is one of the largest shareholders in the Richards BayCoal Terminal.

Adaro meets downgraded2010 output forecastAdaro, Indonesia’s second largest supplier, produced 42.2mt in2010, up from 41mt in 2009, and in line with downgraded outputguidance of 42-43mt.

In October the company reduced its full year productionforecast from 45mt after heavy rain hampered output, delayedshipping and triggered a large demurrage bill.

Fourth quarter production ticked up marginally to 10.36mtfrom 10.22mt in the third quarter, but remains down on the firstand strongest quarter, in which Adaro posted production of11.36mt.

Approximately 32.09mt was exported in 2010, up from31.5mt in 2009.

Adaro said it is still exploring opportunities at the sevencontracts of works it holds with BHP Billiton, is looking for otheracquisition targets and intends to take a stake in an internationalconsortium to bid on power plants in Java and Kalimantan.

“By moving into power Adaro intends to make investmentsthat will provide good returns, reliable cash flow and create asignificant base demand for Envirocoal-Wara,” the company said.

Mozambique ready to export this yearMozambique is on course to begin exporting coal this year fromthe developing Moatize basin, according to Riversdale’s HenriquePinheiro.

Speaking at the McCloskey South African Coal Exports conferencein Cape Town, Pinheiro said that Vale would be the first to exportbut that Riversdale will not be too far behind, probably in Q4.

Pinheiro clarified that Riversdale’s Benga mine is due tocomplete construction by August and the coal handling andpreparation plant will be ready by September.

Mining


At the Beira port, dredging work is expected to be completedby July. Phase 1 at Beira has been completed, allowing it to ship2mt/yr. He said the government is planning a new coal terminal atBeira with capacity to ship 18-24mt/yr.

The Sena rail line to Beira has also been completed, with aninitial 2mt/yr capacity. This could ramp up to 6mt/yr, withRiversdale and Vale sharing the line at 2mt and 4mt/yr respectively.

The Moatize basin holds large deposits of hard coking coalwith similar qualities to premium Australian grades, as well asexport quality steam coal.

Rio Tinto recently offered to buy Riversdale for approximately$4bn, which Pinheiro said is ‘almost certain to be accepted’ within days.

Bayan signs with newSingapore cogen plantIndonesia’s Bayan Resources has signed a contract to supply13.36mt of sub-bituminous material to a cogen plant in Singapore.

Bayan said that the material will be supplied over 15 years toTP Utilities, a subsidiary of Tuas Power, itself a subsidiary ofChina’s Huaneng Power International.

The plans for Singapore to build a 102MW cogen plant weresidelined by the financial crisis, but then reignited early last yearwhen the company said construction would begin in April 2010.

Deliveries of the low-sulphur, low ash material will begin in themiddle of 2012, as construction of the plant, which is being builtby Marubeni, is expected to be completed by the end of the year.

The plant will burn 80% coal and 20% palm kernel shells andwill supply industrial customers with electricity.

Spanish generators drop ECJ appealIberian generators Endesa, Iberdrola and Gas Natural Fenosa havedropped their appeal in the European Court of Justice (ECJ)against the Spanish government’s “mining law”, which permitsstate-aid to domestic coal producers.

The mining law forces Spanish generators to burn domesticcoal over imported material, which has a higher energy value, inorder to help safeguard jobs in extraction industries.

MCR suggested two weeks ago that the three generators woulddrop the court case once an acceptable deal was agreed on theminimum electricity price that will be paid by the government tothose burning domestic coal. It is understood that final fees oncapacity payments and power tariffs are still under discussion,although no other details were available.

One source familiar with the case said that he expects all 10power plants to burn domestic coal as early as next week, once RedElectrica - the Spanish grid operator - finalises its technicalrequirements. He said that some plants such as Iberdrola’s 515MWGuardo facility had not burned domestic coal in over a year.

The net effect of the law is expected to see imports decrease thisyear to around 3-4mt, compared to 8.5-9mt in 2010.

However, domestic coal will not be getting a free rein in powergeneration. Electricity production from domestic coal should notexceed 23.40TWh/yr, which is around 9% of nationalconsumption. The law will expire on December 31, 2014 at thelatest, and can be withdrawn from the statute books at an earlierstage if market conditions change.

Previously, the same three generators lost an appeal in thedomestic high court over the Christmas period, but were givenleave to take the case to the ECJ. A decision by the ECJ wasexpected last Friday, but the generators decided to drop the case.

E.ON to keep ageing coal plants running E.ON Energie’s veteran coal units at Datteln - two 95MW unitscommissioned in 1964 and a 113MW unit commissioned in 1969,and the 123MW Shamrock station at Herne, commissioned in1957 - will probably not close at the end of 2012 as was originallyplanned.

Their output was to be replaced by a new 1.1GW unit beingbuilt at Datteln. But building work on the project has beenvirtually brought to a standstill after the local land-use plan wasdeclared invalid in September 2009.

As a result, the old coal units will have to continue operatingbeyond 2012 to secure supplies to customers, says E.ON.

The Datteln units deliver power to Deutsche Bahn, Germany’sstate owned railway company, and both the Datteln and Shamrockunits also supply district heating. Their joint coal use amounts toaround 0.65mt/year.

An E.ON Energie spokesman told MCR an application waslodged with the district government in October 2010 to rescindclosure of the old plants in case the new unit is not commissionedin 2012.

The company invested a one digit million Euro figure inretrofitting the units by the end of 2010 to meet federal emissionsprotection ordinance requirements for them to continue operatingafter 2012.

The district government has not yet approved the applicationbut E.ON Energie commissioned expert legal opinion which, itsays, concluded that rescinding the closure decision under thecircumstances is legally acceptable.

JPU nukes below 70% for second straight monthJPU nuclear utilisation remained below 70% for the secondconsecutive month in January, according to reported METIfigures.

They showed overall utilisation reached 66.1% in the latestmonth, down slightly on 67.9% for December last year and 70.8%for January 2010.

Lowest performing individual JPU in the month was Chubu,at just 4.3% of capacity, but both Shikoku and JAPC performed atbetter than 100% of rated capacity for the month.

Power


Power

Power/Steel

Issue 252 - January 28 2011 21 © IHS Global Limited

German nuclear extension challengedThe first appeal challenging Germany’s law extending the lifetimesof the country’s 17 nuclear reactors has been lodged at the federalconstitutional court.

More cases have been heralded by federal states and industryand environmental organisations. If the nuclear extension law isoverturned, the outlook for coal-fired generation should take aturn for the better.

The appeal was put before the court on 1 February 2011 by aHamburg-based legal firm on the initiative of environmentalorganisation, Greenpeace.

Lead lawyer on the case, Ulrich Wollenteit, told MCR thefederal constitutional court tends to turn its attention swiftly tovery controversial issues and could return with a judgementwithin the year, or at any rate in 2012.

If the law is overturned, the Neckarwestheim 1 reactor will be closed immediately since its generation quota, as set by the previous nuclear phase-out law, will have been exhausted, saidWollenteit. The unit generated 2.2TWh in 2010, down from4.8TWh in 2009, equivalent to 0.7-1.5mt of coal burn.

The controversial nuclear lifetime extension law took effect inthe autumn last year. It extends the operating times of Germany’solder nukes - those commissioned before 1980 - by eight years,and younger reactors - commissioned from 1980 - by 14 years,or an average 12 years.

Since then, plans for new coal-fired power stations have been abandoned and replacements for old coal plants havebecome increasingly unlikely. A government scenario predictedthat coal generation capacity would fall to 21.3GW in 2020 ifnuclear lifetimes are extended compared with 28.5GW if thenuclear phase out had been maintained.

Scenarios of coal capacity to 2050

Reference (without nuclear lifetime extensions) Nuclear lifetime extension of 12 years

2008 2020 2030 2040 2050 2020 2030 2040 2050

Coal capacity GW 30.7 28.5 18.0 17.9 10.9 21.3 18.2 18.9 14.8

Of which CCS GW — — — 2.5 4.9 — 1.8 5.1 10.4

Full load hours /year 4547 4326 4999 5259 6473 3386 3419 3744 4801

Total GWh per year 139,593 123,291 89,982 94,136 70,556 72,123 62,256 70,761 71,055

Nuclear capacity GW 20.4 6.7 0.0 0.0 0.0 20.4 20.4 12.1 0.0

Source: EWI/GWS/Prognos/MCR

Polish coke plant poisedfor 33% output risePolish coke plant Koksownia Czestochowa Nowa (KCN) isundergoing a widespread investment programme that will see thecompletion of a new coke oven battery by mid-2011, with anannual production capacity of 410,000t of blast furnace coke.

KCN’s current coke oven battery has a capacity of 275,000t/yr,meaning the plant’s coke output could jump by 33% as a result ofthe new investment.

“It is not our strategy to compete with the biggest Polish cokeproducers, but our aim is to supplement our offer with newproducts,” the company told MCR.

The plant currently sells 80% of its production to EuropeanUnion countries including Germany, the Czech Republic, Franceand the Slovak Republic. The remaining 20% is sold to domesticcustomers in Poland. So far all deliveries have been via rail, but thecompany has not ruled out transporting via the seaborne marketwhen the new plant is operational.

The structure of sales will be similar when the new capacity isonline because KCN has already contracted its expectedproduction within long-term agreements. There are no currentplans to sell any via the spot market.

The plant’s coking coal is currently sourced solely fromPoland’s Jastrzebska Coal Company (JSW) and is under a long-

term contract. JSW is the largest producer of hard coking coal inthe EU and has plans to expand its current reserves to 930mt fromits documented reserves of almost 530mt, according to JSW.

KCN is also considering the option to import around 10% ofits high quality coal requirements from offshore sources. But thecompany told MCR that would only be possible when marketprices stabilise to a level that is “economically reasonable”.

Once the new coke oven battery is operational in mid-2011,KCN plans to begin the construction of a second new coke ovenbattery. This will allow the company to produce foundry coke,used in the production of fluid raw iron, with grain sizes of +80mm, +100 mm or any other grain fractions. The chambers of thefoundry coke battery will be 520mm wide.

KCN claims such materials are in short supply on the marketand can be adapted specifically to customer requirements. It plansto wrap up its investment round by the middle of 2013.

Eisenhüttenstadt furnace starts up again ArcelorMittal’s German Eisenhüttenstadt steel mill fired up thesmaller of its two blast furnaces on 7 February after a two-monthshut down.

In 2010, the small furnace, which has output capacity of0.55mt/yr, operated from February until the beginning ofDecmber when it was taken out of action because of the weaker

Steel

market at the end of the year. The larger blast furnace, which hascapacity of 1.7mt/yr, has been operating continuously at fulloutput, according to the company.

The steel mill’s coke consumption is expected to increase thisyear from around 0.6mt in 2010, but is unlikely to reach the 0.8mtused in 2008. Similarly, PCI use will be stepped up from about0.28mt in 2010 but remain below the 2008 level of 0.33mt.

Nippon and Sumitomoconfirm merger plansNippon Steel and Sumitomo Metal Industries have confirmedplans to merge by late next year, marking the first majorrationalisation in the industry for almost a decade.

The deal, which may face some objections from Japan’scompetition regulator, The Fair Trade Commission, would create acompany accounting for about 40% of the country’s steel market,but only around 3% on a world basis.

A joining of the companies, respectively Japan’s largest andthird-largest steel makers, would bring around 38mt/yr of crudesteel output under one management, ranking second on a worldscale after ArcelorMittal.

It would be the industry’s first major link since JFE Steel wascreated in 2002 via the merger of Kawasaki and NKK. Nipponand Sumitomo have held cross shareholdings and managed co-operative ventures for some years.

Matola doubles export capacityCoal throughput rates at the Matola terminal in Mozambique havebeen boosted by the commissioning of a third stacker reclaimer.

Craig Grinyer of terminal operator Grindrod told theMcCloskey South African Coal Exports conference in Cape Town thatthe new equipment has increased coal throughput capacity to4mt/yr from 2mt/yr previously.

The new stacker reclaimer nearly triples Matola’s daily loadingrate to 25,000t from 9,000t. It is capable of loading 2,500t/hour,compared to just 800t/hour for the terminal’s other two stackerreclaimers.

It is the latest investment at Matola, which has also benefittedfrom a $21m channel dredging exercise, increasing its draft to 11mand allowing it to take large panamax vessels of up to 80,000dwt.This has also eliminated the need for vessels to wait at anchoragefor a favourable tide, which previously meant berthing delays of upto 12 hours.

Grinyer also said it is in the final stages of a feasibility study toexpand total export capacity to 16mt (coal and magnatite), from5.5mt/yr (4mt coal, 1.5mt magnetite). Construction is earmarkedto begin in early 2012, pending successful financing and boardapproval.

Rhine restrictions keep ARA stocks stableCoal stocks at ARA ports remain stable overall, as ongoingproblems on a section of the River Rhine continue to create atransport bottleneck, according to shipping sources.

The movement of barges on the river Rhine past a capsizedtanker, which is carrying sulphuric acid, is continuning to berestricted until the end of today at least.

The logjam of barges, barge trains and other vessels that builtup on the river after the tanker capsized near St. Goarshausen on13 January has largely been cleared, the inland shipping authority,Wasser- und Schifffahrtsamt Bingen, said.

Around 420 vessels have been allowed to travel downstreampast the accident spot, almost eliminating the jam upstream of theaccident spot.

But as work continues to salvage the vessel and deal with thesulphuric acid in its tanks, the shipping authority and the waterpolice are still restricting river traffic, calling up groups of waitingbarges each day to travel downstream past the accident spottowards Duisburg and the ARA ports.

Barges heading upstream from the ARA ports via Duisburgtowards southern Germany have only been allowed to pass between18.00 and 20.00 in the evening.

The movement restrictions have led to stocks at the main coalterminals remaining fairly static.

At Europe’s largest coal terminal, operated by EMO inRotterdam, thermal coal stocks were 2mt on Tuesday, down0.10mt on the previous week, while met coal stocks are stable at 1mt.

EMO had a reasonable shipping schedule this week, with threethermal capes and one met coal cape berthing.

Meanwhile, at OBA’s terminal in Amsterdam, thermal stockswere stable week-on-week, with 1mt on the ground, while met coalinventories are also unchanged at 0.40mt. Staying in Amsterdam,the Reitlanden terminal had 1mt of steam coal on the ground, alsostable on the previous week.

Finally, in Antwerp, Sea-Invest’s terminal had combinedthermal and met coal stocks of 1.65mt on Tuesday, unchangedweek-on-week.

Corferrocarare promotesCarare railroad developmentCorferrocarare, the corporation created to develop the Cararerailroad in Colombia is currently working on the project’s legal andfinancial structures.

Speaking at the Fenalcarbon Mining Conference in Bogota thisweek, Jorge Gabriel Taboada, Corferrocarare’s new managingdirector, said that the project has already been included by thecentral government in the country’s Master Transportation Plan.

Prefeasibility technical and financial studies are already inplace and all required environmental licences are in the works.The project will have three different modes of investment - from

Steel/Transport & Logistics


Transport & Logistics

Transport & Logistics/Markets-Metallurgical Coal


the government, the private sector, as well as via ‘ship or pay’contracts.

Once Corferrocarare presents the project to the Ministry ofTransportation, it expects that the government will organise atender for construction.

The Carare railroad is designed to allow transportation ofmainly high quality metcoals produced in the Boyaca,Cundinamarca and the Norte de Santander departments in theinterior of the country to the Caribbean ports. These coals arecurrently trucked 1,000km to ports on the Caribbean.

Meanwhile, a truckers’ strike that started a week ago has startedto affect coal transportation to the ports of Santa Marta,Barranquilla, Cartagena and Buenaventura in Colombia, and toports in Venezuela.

The National Association of Truckers (ACC) has ordered itsaffiliates to stop transportation because they are discussing newfreight rates with the Ministry of Transportation.

It is thought that at least 0.25mt of coking coal and cokeproduced in the departments of Norte de Santander,Cundinamarca and Boyaca have been affected since the strikestarted a week ago.

Cerrejon, Drummond and Glencore have not been affected bythis industrial action because they rail all of their coals from themines to the ports.

Coal shortages continue at Oz terminalsCoal shortages continued to constrain operations at keyQueensland terminals this week as mines and rail servicesattempted to re-establish throughput levels following theDecember-January floods and last week’s cyclone.

Supply to Dalrymple Bay and Hay Point terminals remainedwell below capacity levels, with vessel berthing line-ups remaininghighly changeable. At Gladstone, the terminal is understood to bemoving closer to capacity levels, but waiting times remain lengthyfor some vessels.

Coal supply to Brisbane terminal remains cut for rail repairswhile the vessel queue at the major Newcastle terminal complexcontinued to ease, although this was partially due to issues withcoal availability, compounded by recent wet weather.

Australian vessel queues

Port Queue Wait (days)

Abbot Point 1 1

Dalrymple Bay 21 N/A

Hay Point 16 N/A

Gladstone 12 7-40

Brisbane 0 0

Newcastle

PWCS 32 10-15

NCIG 3 2-6

Pt Kembla 2 2-5

Source: IHS McCloskey

Transnet targets 70mt railingsTransnet Freight Rail (TFR), operator of the coal line to RichardsBay, is confident it will rail 70mt to RBCT this year as it looks tobuild on the improvements it made in 2010.

TFR achieved railings of 62.86mt last year, rising from 61mt in2009. And although it missed its 65mt target, TFR’s DivyeshKalan told the McCloskey Coal Export Conference in Cape Townthat he is confident TFR has enough momentum to reach 70mtthis year.

Kalan said TFR would have easily achieved 65mt had it notbeen for a prolonged strike by rail workers in the middle of last yearand a significant derailment in December. These incidents, he said,cost railings of 2mt and 1mt respectively.

With 70mt in railings targeted, it is almost certain that shipperswill aim for a similar export figure out of Richards Bay this year, asthe terminal can operate at up to 91mt/yr throughput.

Western Coal claims‘above market’ PCI pricingCanada-based Western Coal has disclosed recent PCI selling pricesup to $191/t FOB, but the company still suffered an earnings dipin the October-December quarter, reflecting currency changes andshipment delays.

Western, in what may be its last earnings report before the$3.3bn agreed merger with US-based Walter Energy, disclosed netincome for the quarter of C$20.4m (US$20.7m), down 15.0% onC$24.0m for the December quarter of 2009.

A statement said strengthening of the C$ against the US$ andbad weather which disrupted operations at Ridley terminal hitlatest results. But earnings for the nine months to December hitC$81.4m, up 175.0% year-on-year against C$29.6m previously.

Average realised FOB prices for the company’s export-basedCanadian operations in the latest quarter rose to US$180/t fromUS$177/t a year earlier. But costs also rose markedly, totallingC$123/t against C$112/t previously.

Western said the company had negotiated FOB hard cokingcoal prices in the $221-225/t range for the current January-Marchquarter – in line with the Australia-Japan hard coking ‘benchmark.’For PCI, the company negotiated FOB prices in the $180-191/trange.

This peak PCI price is higher than reported market settlementsand suggests Western may have negotiated prices with somecustomers after the impact of the recent Queensland floods becameapparent. In contrast, Australian producers mostly settled late inDecember, before the worst of the floods.

Western’s total sales in the latest quarter, including its US andUK operations, rose to 1.22mt, up 51.5% on 0.80mt previously.For the nine months to the end of December, sales reached 3.81mt,up 78.1% on 2.12mt previously.

Markets - Metallurgical Coal

ICG posts higher Q4 10revenue, costs increaseUS producer International Coal Group (ICG) saw its fourthquarter 2010 coal sales revenue increase to $243m, up from$231m in the same period a year earlier, on the back of higher salesprices. Revenue from coal sales for the full year was $1.07bn, amarginal increase on 2009’s figure of $1bn.

Despite the rise in revenue, the amount of coal sold from all ofits operations in Central and Northern Appalachia and the IllinoisBasin, fell year-on-year. In Q4 2010, the company sold 3.54mst(short tonnes), down from 3.83mst in Q4 2009.

And for the full year 2010, ICG sold 16.34mst, down on16.83mst seen in 2009. Output in Q4 10 was broadly stable year-on-year at 3.6mst. However, ICG said that there were someweather-related disruptions to the railways, which delayed 0.10mstof shipments and cost the company $5m.

ICG said that met shipments of 0.57mst, represented a 64%increase over the fourth quarter of 2009. For 2011, the companyexpects to produce and sell between 16.1-16.7mst of combinedthermal and met coal.

ICG saw its operating costs increase across all of its operations,but this was compensated for by higher sales prices. The rise incosts was partly due to greater regulatory pressure from the USauthorities in terms of health and saftey requirements following theUpper Big Branch mine tragedy.

The cost of coal sales per ton increased to $53.95/st in Q4 10,up from $48.18/st seen for the same prior-year period. This costpressure was seen throughout the year, with the cost of sales per tonrising to $52.03/st in 2010, up from $49.44/st in 2009.

Meanwhile, coal sales revenue per ton was $68.61/st in Q4 10,up from $60.29/st for the same prior-year period, and for 2010 itwas $52.03/st, compared to $49.44/st previously.

In its outlook for 2011, ICG said it has restricted its exposureto near term supply contracts in anticipation of improving pricesfor met and thermal coal prices in the coming months.

The impact of the flooding in Australia continues to impactglobal met markets, while thermal coal is expected to improve oncedomestic generators finish taking material from inventory andcontinued growth in the US economy.

ICG has 2.5mst of thermal and 1mst of met coal for sale in2011, while its committed tonnage includes 12.9mst of combinedmet and thermal at an average realised price of $72.25/st.

Massey slumps into thered ahead of Alpha mergerUS-based Massey Energy has crashed deep into the red anddisclosed major charges on the fatal Upper Big Branch minetragedy last year in what will probably be its swansong annualresults before the merger, announced last week, with rival AlphaNatural Resources.

Massey declared a net loss of $166.6m for calendar 2010,against a $104.4m profit in 2009. A large proportion of the deficitwas incurred in the December quarter, with the company reportinga $70.1m net loss against a $24.4m profit for the same quarter of2009.

But the latest results excluded a $166.5m charge against costsincurred in the Upper Big Branch accident, with the companyasserting that inclusion in the mainstream results would distortcomparability between periods.

The company said in a statement that, in line with an earlierwarning, its final quarter was hit by regulatory enforcement, staffshortages and higher strip ratios, causing lower mine productivity.Inconsistent rail services also led to shipment delays.

This, added to costs associated with the departure of long-serving CEO, Don Blankenship, helped to push overall cash costsof production up to $60.05 per short ton (st), 19.0% higher year-on-year, than $50.48/st for 2009.

But revenue/ton was also higher at $70.27/st, up 11.1% y-o-yagainst $63.26/st previously. Tons sold in the year rose marginallyto 37.1mst, against 36.7mst in 2009.

“Deep mine production in the fourth quarter was negativelyimpacted by lost shifts due to both regulatory enforcement actionsand challenging labour market conditions,” the Massey statementsaid.

“Qualified and experienced underground miners are inincreasingly high demand as the price for metallurgical coalcontinues to rise. As a result, Massey experienced delays hiringpersonnel to staff several new underground sections that wereplanned to partially offset production lost at the Upper Big Branchmine.

“Massey has added production shifts on two Saturdays permonth at certain underground and surface operations in order tomeet anticipated production requirements until staffing delays canbe resolved and surface mine productivity improves.”

Despite the results, Massey remained upbeat on the 2011outlook, indicating favourable price trends for both thermal andmetallurgical coal.

Arch lifts earnings on highersales, improved marginsUS-based Arch Coal overcame some production issues to boost netearnings for calendar 2010, thanks mainly to improved marginsacross its Central Appalachian (CAPP), Powder River and WesternBituminous operations.

Despite an earnings forecast downgrade earlier this month,Arch declared full year net income of $158.9m in 2010, up276.5% on $42.2m declared for 2009. The company sold 161.3mshort tons (st) of coal for the year, up 29.1% on 125.0mst in 2009.

But Arch’s average sales price dipped to $18.52/st in the latestyear against $19.51/st previously. But costs fell faster to an averageof $15.91/st in the latest year against $17.88/st previously. Thatleft overall operating margin at $2.61/st, up 60.1% year-on-yearagainst $1.63/st previously.

Corporate


Corporate

Corporate


Despite a slower-than-expected final quarter, mainly reflectingsome transport issues and idling of the Mountain Laurel operation,Arch was upbeat on 2011, saying Mountain Laurel output wouldbe made up as the year progresses and the outlook was strong forboth met and thermal prices.

CSN buys more ofRiversdale, Rio extends bidBrazilian steelmaker CSN has bought more shares in Australian-quoted Riversdale Mining, just as Rio Tinto has extended theclosing date for its cash takeover bid for the Australian group.

CSN has disclosed it spent a further A$87.8m (same in US$)on February 9, to lift its stake in Riversdale from 17.6% to19.9%, after earlier this week disclosing that it had outlaidA$76.2m to lift its stake from 16.3%.

Late last year, CSN held just 13% of Riversdale, so its recentpurchases cap an active buying program, suggesting the companyhas an agenda in the takeover situation, although its exact natureis not yet clear.

Most of the disclosed shares were purchased at prices belowthe A$16/unit being offered by Rio, taking advantage of a recentdip in Riversdale shares as investors are apparently starting todiscount the chances of a rival suitor emerging.

This may mean CSN has simply grabbed an opportunity forshort term profits in accepting the Rio bid, but it could alsosignal that the Brazilian mill may become a ‘spoiler’ in Rio’saspirations for full control of Riversdale.

With India’s Tata Steel holding around 22% on Riversdale,CSN’s buying means the two steel makers now hold well over40% of in the company, making Rio’s task of reaching 50%-plusa difficult assignment.

Meanwhile, Rio today disclosed it would extend the closingdate of its Riversdale offer by a fortnight to March 4. The Riodisclosure pointed out that it is two months since Riversdale firstindicated the possibility of a takeover and no alternative offer hasyet emerged.

New Hope makes final bid for NEC Queensland thermal producer, New Hope Corp., has againraised its takeover bid – for the second time in as many weeks –for smaller industry colleague Northern Energy (NEC).

But this time, New Hope says the bid is final and has backedthis by declaring that the offer is unconditional and will not beextended beyond the new closing date of February 25.

The bid has been raised from A$1.75/share (same in US$) toA$1.85/share, which New Hope said is a premium of more than90% on NEC’s share price before the bid was launched. NewHope also repeated its view that NEC may have trouble fundingits planned developments.

Xstrata averages $204.30/t FOB for HCC Xstrata Coal more than doubled operating earnings fromAustralian coking coal in calendar 2010, but thermal coal earningsdipped from all locations.

And the company has warned that the full impact of theQueensland floods on future earnings has yet to be fully assessed,with the speed of operational recovery not yet certain.

An Xstrata statement showed coking coal earnings jumped to$801m, up 134.2% on $343m declared for 2009. An earlier filingshowed the company averaged $204.30/t FOB for Australian hardcoking coal sales in calendar 2010, a 40.7% increase on $145.00/taveraged for 2009.

That filing showed Xstrata lifted Australian hard coking outputto 7.7mt in the year, up 20.1% on 6.4mt produced in 2009, thanksmostly to a full year of production from the Oaky No. 1 mine,slightly offset by lower output from the Tahmoor mine which washit by industrial action.

The company also boosted semi-soft output to 6.6mt in theyear, 6.5% higher year-on-year than 6.2mt previously. The averageprice received rose to $137.30/t FOB, 12.1% higher y-o-y than$122.50/t FOB averaged for 2009.

But the filing said severe weather in the December quarter cut3.1mt from Australian thermal output which totaled 37.8mt, 8.0%lower y-o-y than 41.1mt previously. Australian thermal pricesreceived averaged $85.70/t FOB, up 6.7% y-o-y against $80.30/tFOB previously.

The company averaged $74.40/t FOB for export South Africancoal in 2010, 9.3% higher y-o-y than $68.10/t FOB previously.Output dipped to 17.7mt, down 15.2% on 20.8mt previously,mainly reflecting planned closure of the Southstock mine andunusually wet weather in the Witbank region.

The filing said this was partly offset by the ramp up of theGoedgevonden mine, on schedule for slated output of 7mt/yr bylater this year.

Thermal coal output from the Cerrejon venture in Colombiaeased to 10.1mt in the latest year, down marginally from 10.2mt in2009, reflecting bad weather, with the average price received alsoeasing to $72.60/t, down 1.2% y-o-y against $73.50/t previously.Prodeco output was excluded from the figures after it was divestedin March, 2010.

Xstrata’s earnings filing showed Australian thermal and semi-soft operations remained the company’s largest profit contributorin the year, but operating earnings dipped to $1.06bn, down19.5% y-o-y against $1.32mt previously. The statement said theresult largely reflected a stronger A$ against the US$.

In South Africa, Xstrata Coal’s declared earnings dipped to$102m, down 8.1% y-o-y against $111m previously. The divisionwas hit by rail constraints and production issues, but the statementsaid results recovered strongly in the second half-year.

Coal earnings from Colombia eased to $254m, 5.6% lower y-o-y than $269m previously, with the statement citing heavy rainfalland higher costs, slightly offset by higher production volumes.

The results meant operating profits from coal totaled $2.23bnin the year, up 8.7% y-o-y on $2.01bn previously, and ranking coalas the company’s second highest earning division after copper.

Xstrata CEO, Mick Davis, described the company as ‘in themidst of a fundamental transformation,’ with major expansionprojects designed to boost overall volumes by 50% by 2014 over2009 levels.

In an analyst presentation, Davis asserted that the companywas focused on rapid organic growth rather than acquisitions,although he cautioned that Xstrata still retained capacity fortakeovers if opportunities presented themselves.

The company’s planned organic coal initiatives include the8mt/y Mangoola thermal mine, the 8mt/yr Ulan West andRavensworth thermal/semi-soft expansions and a 3mt/yrexpansion of the Newlands mine – all in Australia - and the4mt/yr new ATCOM East thermal mine in South Africa.

Xstrata output and prices (mt)

Year ended 31.12.10 Year ended 31.12.09

Total consolidated production 79.9 84.7

Total thermal coal 65.6 72.1

Australian thermal 37.8 41.1

South African thermal** 17.7 20.8

Americas thermal* 10.1 10.2

Total coking coal (Australia) 7.7 6.4

Total semi-soft coking (Australia) 6.6 6.2

Average received export FOB coal price ($/t)

Australian thermal 85.7 80.3

South African thermal 74.4 68.1

Americas thermal 72. 6 73.5

Australian coking 204.3 145.0

Australian semi-soft coking 137.3 122.5

* Excludes Prodeco

** Mpumalanga is included in 2010 production reporting. For financial reporting Mpumalangawill be excluded from Xstrata Coal’s ex-mine results as it is classified as an Asset Held for Sale

DTJV is included in 2009 production reporting. For financial reporting DTJV will be excludedfrom Xstrata Coal’s ex-mine results to 1 July 2009 due to the DTJV re-structuring

Source: Xstrata statements

Xstrata Coal earnings summary ($m)

2010 2009

Operating profit 2,216 2,038

Coking Australia 801 343

Thermal Australia 1,059 1,315

Thermal South Africa 102 111

Thermal Americas 254 269

Source: Xstrata statements

Rio held to minor coalearnings lift for 2010Rio Tinto has announced a minor lift in overall coal divisionearnings for calendar 2010, despite a sizeable increase in hardcoking coal output, with the company citing impact from theappreciation of the A$ against the US$ in the year.

The company declared underlying earnings of $1.19bn fromits export coal division in the year, up just 1.8% on $1.17bndeclared for 2009. That lagged the increase in gross revenue, at$5.65bn, up 16.1% year-on-year against $4.87bn previously.

As previously reported, the company lifted hard coking coalproduction to 8.97mt in the year, up more than 20% y-o-y against7.47mt previously. Semi-soft output was also higher at 3.08mt, up7.2% y-o-y against 2.89mt previously. But thermal output dipped9% on the same basis from 20.22mt to 18.43mt.

The statement provided no break-down of met and thermalcoal profits and said overall average coal prices were lower in thelatest year “due to the absence of higher carryover prices from 2008that were reflected in the first quarter of 2009.”

The result left coal lagging among Rio’s divisions, with thecompany indicating an overall $9.5bn boost from higher prices inthe year, pushing overall net earnings to $14.3bn, up 194.3% on$4.87bn declared for the previous year.

But exchange movements reduced earnings by $1.17bn, a goodproportion of this appearing to impact the coal division. However,the company is showering shareholders with benefits, boosting itsdividend 20% and announcing a $5bn share buyback.

Kemerovo Koks postpones London IPOThe Kuzbass-based iron and coke producer Kemerovo Koks saidlast week that it had decided to postpone its IPO in Londonbecause of the unfavorable situation on the financial market.

The company had earlier set a price range of $6.25-8 perordinary share, with the company’s market capitalisation assessed at$2.1-2.6bn.

The IPO was being coordinated by CitiBank, UBS and VTBCapital.

Venezuela’s exports toincrease by 2-2.6mtVenezuelan exports are forecast to increase from 3.83mt exportedlast year to between 5.8 and 6.5mt in 2011.

Carbones del Guasare’s production target for 2011 is put at4mt from 2.2mt last year, and exports are targeted to grow by thesame amount. Guasare is the operator of Paso Diablo, the largestmine in Venezuela.

Carbones de la Guajira, the operator of the Mina Norte mine,the second largest in Venezuela, is targeting 1mt in production thisyear, from just 0.75mt in 2010.

The company had production problems last year because of alack of equipment and spare parts, after being shut down almost allof 2009. Last year’s production was targeted at between 1-1.2mt,but lack of spare parts for mining equipment and transportationproblems from the mine to the port were the main causes forreduced output.

Corporate/Trade


Trade

Trade


Exports of Colombian material through Venezuelan ports byFrontier and Millinton are forecast to reach between 0.4-0.45mtfor Frontier, and between 0.2-0.25mt for Millinton.

Korea’s steam/met importgrowth continuesSouth Korea’s coking coal imports reached 18.51mt in 2010, upnearly 20% on 15.48mt seen in 2009, while steam coal importswere 92.67mt, up from 80.89mt in 2009.

Coking coal imports increased by 66% year-on-year inDecember 2009 to 1.93mt, the highest monthly total of 2010, ledby a surge in Australian deliveries. Steam coal imports, meanwhile,fell 8% y-o-y to 7.03mt for the same month.

South Korea’s intake of coking coal from Australia was 1.34mtin December, up over 100% on last year’s 0.66mt, and higher thanNovember’s level of 0.87mt. Total 2010 imports from this regionwere 10.31mt, up from 8.22mt seen in 2009.

The second biggest supplier of coking coal to South Korea inDecember last year was Canada with 0.29mt, down 18% onDecember 2009’s level of 0.36mt. In November, South Koreareceived 0.33mt from Canada, from where it imported 3.78mt forthe whole of 2010, down 17% on 2009’s level of 4.55mt.

South Korea’s steam coal imports did not reflect the impressivemonthly y-o-y growth seen in coking coal. The two biggestsuppliers of steam coal, Indonesia and Australia, saw growth slow.

South Korea received a total of 3.59mt from Indonesia, broadlystable on December 2009’s level of 3.60mt. In the previous month,intake was 3.22mt. However, intake for 2010 saw an increase of21% y-o-y to 40.71mt, compared with 33.50mt in 2009.

Deliveries from Australia in December fell to 2.32mt, downfrom 2.44mt previously, and 2.52mt seen in the previous month.In 2010, South Korea received 30.44mt from Australia, a decreaseof 1.27mt on 2009.

Turkish imports see weak end to 2010Turkish steam coal imports continued to slow in December lastyear, marking the sixth consecutive month of year-on-year decline,according to figures from the Turkish Statistical Institute.

Turkey imported a total of 1.88mt of steam coal in December,down from 1.93mt seen for the same month a year earlier, buthigher than November’s level of 1.37mt. In 2010, imports from allregions were 16.07mt, up 6% on 2009’s total of 15.11mt.

Russia took the lion’s share of the Turkish market, and importsfrom there were 1.26mt in December, up 0.20mt on December2009, and higher than 0.73mt seen in November. In 2010, Russiasupplied 9.78mt, up from 8.81mt in 2009.

Recent logistical issues at Black Sea ports seen throughout Q4,caused by a shortage of railcars in Russia, meant exports to Turkeywere struggling to keep pace with demand. However, the latestfigures for December mean that this issue has partly been resolved.

Colombia was the second major supplier to Turkey anddelivered 0.22mt in December, down 30% on the same prior-yearperiod, but higher than November’s level of 0.47mt. Total importsfrom Colombia in 2010 were 2.84mt, up 2% on 2.78mt seen in2009.

There was a big fall in imports from South Africa in Decemberto 0.19mt, down from 0.49mt in December 2009, but higherthan November 2010’s level of 0.12mt. Deliveries from SouthAfrica in 2010 were 1.82mt, down 29% on 2009’s level of 2.56mt.

Coking coal imports in December saw strong y-o-y growth to0.92mt, up 58% on 0.58mt, previously. However, total imports for2010 were up a more modest 9% y-o-y to 4.97mt, compared with4.55mt in 2009. The US was the lead supplier in 2010, with2.49mt imported from this origin, up 83% on 1.35mt seen in2009.

Indonesia’s exports rise 39mt in 2010Indonesia exported 240.16mt in 2010, an increase of 38.68mtfrom 201.48mt in 2009 and 178.43mt in 2008, according toshipping data.

December proved the strongest export month of 2010, with22.75mt shipped. The December increase is accounted for byanother step-up in deliveries to China.

Throughout the year, deliveries to swing buyer Chinadominated Indonesia’s export portfolio. In 2010 deliveries toChina represent just over one quarter, or 25.69%, of Indonesia’stotal exports for the year, up from 16.61% in 2009.

Exports to China reached 61.69mt in 2010, almost double the33.47mt delivered to China in 2009. December deliveries to Chinawere 7.29mt, up from 5.6mt in November and 7.05mt inDecember 2009.

Deliveries to India are increasing at a more sustainable pace, asthe country steadily increases its coal-fired generation capacity.Shipments in 2010 were 37.21mt, up from 32.26mt in 2009 and22.95mt in 2008. December deliveries to India were 2.6mt, flat onNovember and just down from 3.16mt shipped in December2009.

Exports to South Korea came to 35.4mt in 2010, up from29.59mt in 2009. Deliveries picked up in the final month of theyear to 3.17mt from 2.33mt in November, but remain off aJanuary high of 3.52mt.

To Japan, Indonesia shipped 29.98mt in 2010, almost flat on29.32mt in 2009, but off 32.9mt exported in 2008. Decemberexports to Japan rose to 3.34mt from 2.61mt in November and2.96mt in December 2009.

And to Taiwan, exports finished 2010 at 19.61mt from21.29mt in 2009 and 21.91mt in 2008. December deliveries were1.64mt, flat on November and down from 1.95mt in Decemberlast year.

Indonesian exports to other significant Asian buyers also rose.To Thailand, Indonesia exported 9.78mt in 2010 compared with8.85mt in 2009, to the Philippines 9.31mt in 2010 versus 6.4mtin 2009 and to Malaysia 11mt versus 9.22mt in 2009. Deliveries

to Hong Kong dipped, however, to 7.64mt in 2010 from 9.35mtin 2009.

Outside Asia, Italy remains Indonesia’s biggest market, taking5.13mt in 2010 and 4.89mt in 2009. Exports to the Netherlandsdipped to 2.69mt from 3.11mt, to Spain plummeted to 1.15mtfrom 4.05mt and to the US edged up to 2.15mt, versus 2.03mtin 2009.

By port, the most dramatic increase was seen at Samarinda;deliveries from the East Kalimantan hub surged to 69.95mt in2010 from 46.06mt in 2009. From Taboneo, the Adaro-dominated anchorage in South Kalimantan, exports rose to46.42mt from 37.16mt.

Shipping data comes with a note of caution. Vessels can bemissed or destinations changed, but the data is believed to be agood indicator of general trends.

Chile’s 2010 imports rise to 6.32mtChile’s bituminous and sub-bituminous imports reached 6.32mt in2010, up 1.2mt (23.5%) from 5.1mt in 2009, according to anMCR survey.

This increase was equally shared by bituminous and sub-bituminous imports. Total bituminous imports were 4.65mt in2010, from 4.05mt in 2009, while sub-bituminous were 1.66mt in2010 from 1.06mt in 2009.

Deliveries of bituminous material from Colombia in 2010 hit3.49mt or 75% of the total, followed by 0.72mt from the US and0.43mt from Australia. In comparison, imports of Colombianwere 3.88mt in 2009, followed by 0.12mt from the US.

Sub-bituminous imports were 1.66mt in 2010, with the USreaching 0.89mt (54% of the total), followed by Indonesia at0.7mt (42%) and Australia with just 71,000t. Imports in 2009were 0.58mt from the US and 0.48mt from Indonesia.

This year imports of bituminous and sub-bituminous materialare forecast to grow by as much as 3-3.5mt if all the coal-firedpower projects scheduled for start up in Chile come on line.

Chile’s imports by country (t)

Bituminous 2009 2010

Argentina 50,991 13,603

Australia 0 425,245

Colombia 3,875,931 3,492,034

USA 121,675 722,686

Total bituminous 4,048,597 4,653,568

Subbituminous

Australia 0 71,247

USA 482,001 892,992

Indonesia 584,178 697,735

Total subbituminous 1,066,178 1,661,974

Total bit + subbit 5,114,775 6,315,542

Source: McCloskey

Ukraine’s Jan coking coalimports reach 0.82mtUkraine imported 0.82mt of washed and unwashed coking coal inJanuary, up 56% on January 2010 imports, steel producers’association Metallurgprom said today.

December 2010 coking coal imports were even higher at0.86mt. Coking coal deliveries from domestic mines to cokeproducers were around 1.6mt in January, flat to December’s levels.Coking coal stocks at coke producers’ storage facilities on February1 were around 0.6mt.

In January, Ukraine’s coke producers supplied steel smelterswith 1.29mt of coke, which was 99% of requirements. Also, some9,000t of coke was imported in January.

Meanwhile, Ukraine produced 1.67mt of coke in January,9.7% more than in the same month a year earlier.

In 2010, Ukraine’s coke output increased by 6.8% on the yearto 18.58mt.

Japan’s 2010 imports show strengthJapanese demand for met and steam coal imports was strong in2010, with both grades seeing year-on-year increases, according tocustoms statistics.

Japan imported 51.82mt of met coal in 2010, up nearly 16%from 44.80mt seen last year. However, December imports weredown by a third to 2.97mt, compared with 4.40mt in December2009. This was also much lower than November’s intake of4.17mt.

Japan’s biggest supplier – Australia - saw its share of the marketincrease by nearly 15% y-o-y to 40.40mt in 2010, up from35.19mt in 2009. In December, however, intake from Australiawas 3.40mt, down nearly 4% on the same prior-year period, andlower than November’s 3.29mt. The severe flooding inQueensland, which peaked in December, impacted met coalshipments.

Canada was the second biggest supplier of met coal in 2010 toJapan, and imports from there were 8mt, up 22% on 2009’s levelof 6.59mt. Deliveries in December were also up 33% y-o-y to0.75mt, and higher than November’s level of 0.53mt.

Meanwhile, steam coal imports from Australia and Indonesia,the major supply hubs, recorded y-o-y gains in 2010. Japanimported a total of 125.25mt in 2010, up 11% on 112.84mt in2009 and its intake in December was 11.39mt, up 11% on theprevious year. The top 10 power generators in Japan consumed4.59mt in December, due to higher overall power demand fromindustry and lower nuclear performance.

Deliveries from Australia were up 15% to 76.87mt in 2010,compared with 66.82mt in 2009. In December, Japan imported7.81mt from this country, up 34% from 5.81mt seen in December2009, but lower than the previous month’s level of 6.53mt.

Japan’s second biggest supplier - Indonesia – delivered 32.99mtin 2010, up nearly 6% on 31.26mt seen in 2009. However,

Trade


Trade


intake in December was lower at 2.45mt, a fall of 9% on the same prior-year period, and down from the previous month’s levelof 3mt.

Australian year-end cokingfigures defy the Big WetDespite the onset of the devastating extreme weather inQueensland in the last month of 2010, December hard coking coalshipments had a good month, rising 0.5mt to 8.9mt, helping toincrease total hard coking shipments for all of 2010 by 18.1mt to101.8mt, according to customs statistics.

However, combined semi-soft and PCI shipments dropped1.1mt from December 2009 to 4.6mt. Such had been the strengthof growth in the previous 11 months in 2010, that the year endedwith a PCI and semi-soft rise of 6.9mt, with the year closing at57.0mt.

Steam coal shipments also rose in December, from 12.4mt inDecember 2009 to 12.7mt, lifting full year loadings from 139.0mtto 141.3mt. Total Australian shipments in 2010 were 300.1mtcompared with 273.4mt the previous year.

The biggest surprise on the hard coking side was the major fallof shipments into China, down 5.8mt to 13.0mt (semis and PCIalso fell, dropping 2.9mt to 8.8mt).

Elsewhere, the biggest growth was into India (up 5.2mt to25.8mt), which placed India fractionally behind Japan (26.7mt, a

4.8mt rise) as Australia’s biggest hard coking coal customer. Thelargest European destination (4.2mt after a 2.0mt rise) was theNetherlands.

For semis and PCI Japan’s rise of 2.4mt to 9.4mt left it by farthe largest destination.

Steam coal’s picture partly mirrors the met coal story. Japanoverwhelmingly dominant – at 69.8mt, up 9.0mt on the previous12 months – and China falling back to 14.5mt from 15.8mt in2009. As remarkable as anything, Australia shipped almost nothingin 2010 to Europe – just a single 72,716t shipment to Sweden.

Semi-soft reverses 5-month fall at NewcastleSemi-soft shipments rose in January from Newcastle’s majorterminal complex, ending five straight months of monthly year-on-year falls, according to a filing from operator, PWCS.

It showed the complex shipped 1.58mt of coal designated‘coking,’ (mostly semi-soft) in the latest month, up 12.2% on1.40mt shipped for January 2010. Thermal shipments alsoincreased in the month, reaching 6.85mt, 6.6% higher y-o-y than6.43mt previously.

The result was a strong start to the year for overall PWCSshipments, at 8.43mt, up 7.6% y-o-y against 7.83mt previously.However, latest shipments still under-performed the 9mt declaredminimum throughput level for the complex.

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The European markets have again continued their volatility over the last year. The New Year has beendominated by the Queensland floods and their immediate and long-term effects on the market.

Sponsorship and exhibition opportunities are available at the 10th Anniversary McCloskey European Coal

Outlook Conference 2011

If your company is interested in sponsoring or exhibiting at this event, please contact:

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10th Anniversary

McCloskey European Coal Outlook Conference 2011May 18-19 2011 - Le Meridien Hotel, Nice, France

Coal Equities Bulletin


International Coal Company share prices

Change on

Name Last 1 Mth YTD 12 Mths

Global Diviersifieds

BHP Billiton 46.74 5.2% 3.3% 17.3%

Rio Tinto 88.38 4.8% 3.4% 31.9%

UK/Europe

Anglo American 34.06 5.6% 2.1% 44.3%

Bhp Billiton 25.34 2.4% -0.6% 34.4%

Rio Tinto 47.08 7.3% 4.9% 48.0%

Xstrata 14.84 -0.1% -1.5% 44.2%

Xstrata N 22.95 1.5% 4.8% 34.6%

Pure Coal Companies

Australia

Calendon Resources Plc 1.56 2.3% 2.6% 122.9%

Centennial Coal - - - -

Coal & Allied 122.00 -1.4% 1.7% 49.6%

Cockatoo Coal Limited 0.55 12.2% 3.8% 67.3%

Coal of Africa Limited 1.50 -11.2% 7.1% -37.0%

Gloucester Coal 13.00 5.9% 5.3% 76.6%

Macarthur Coal 12.71 -7.0% -0.7% 35.2%

Northern Energy Corporation Ltd 1.77 5.1% 3.2% 49.6%

New Hope Corporation 4.80 -5.0% -1.0% 17.1%

Riversdale Mining Limited 15.85 -4.8% -6.8% 114.8%

Sedgman Limited 2.28 11.2% 0.0% 85.4%

Whitehaven Coal 7.08 4.1% 5.4% 53.9%

Other Australian (Non Pure Play)

Aquila Resources Limited 9.50 0.4% -3.6% 19.0%

Straits Resources - - - -

Wesfarmers 1.72 -24.8% -23.8% 28.0%

China 33.50 7.4% 4.7% 20.8%

Yanzhou Coal 22.40 -9.1% -5.7% 49.5%

Yanzhou Adr 29.20 -7.4% -4.6% 49.1%

China Shenhua Energy Co - H 31.15 -7.0% -4.4% -1.3%

Asia

Adaro Energy 2,350.00 -6.0% -7.8% 28.4%

GCM Resources Plc 2.32 -7.4% -10.4% 113.8%

Aneka Tambang 2,250.00 -1.1% -8.2% 15.4%

Aneka Tambang 1.37 0.0% 0.4% 19.7%

Banpu Public Co Ltd 740.00 -8.6% -6.6% 37.5%

Bumi Reources 2,725.00 -9.9% -9.9% 18.5%

Semirara Mining Corp 213.80 14.9% 15.6% 350.1%

UK/Europe

UK Coal 0.49 14.4% 20.7% -12.7%

North America - US

Arch Coal 33.35 -3.2% -4.9% 58.8%

Alpha Natural Resources Inc 54.09 -16.3% -9.9% 29.3%

Peabody Energy 62.71 1.9% -2.0% 48.0%

James River Coal Co 21.24 -16.5% -16.1% 33.9%

Consol Energy 49.39 -3.2% 1.3% 6.1%

Massey Energy 63.43 12.1% 18.2% 58.4%

North America - Canadian

Grand Cache 10.12 -10.8% -3.3% 77.9%

Northern Energy & Mining 1.11 -3.5% 0.0% 105.6%

Teck Cominco Ltd 63.22 4.5% 2.3% 74.3%

Sherritt Intl 8.90 3.6% 5.1% 30.5%

Western Canadian 12.26 -1.8% -0.3% 253.3%

Source Credit Suisse

Investors remaincautious on coal sharesSignificant selling of coal shares continued on world markets inthe latest month, with investors cautious on the outlook despitecontinuing strong corporate activity in the sector.

That meant the MCR coal share list, compiled by CreditSuisse, had another variable trading session, with gains andlosses roughly even, with some investor sentiment caughtbetween takeover optimism on one hand and a number of profitand production warnings on the other.

Australian producer Whitehaven was one example, with itsshares gaining 4% on the month after the company almostsimultaneously issued a profit warning and a statementindicating it had short-listed potential bidders for the company.

US-based Massey Energy was another, its shares rising 12%on the month following a merger proposal from rival AlphaNatural Resources. But Massey also released a statementshowing it had slumped into the red for the latest year,reflecting continued problems flowing from the Upper BigBranch mine tragedy.

Alpha shares dipped more than 16% on the merger news,with several other US stocks, including Arch, James River andConsol, also down on the month. But Peabody bucked thetrend, with a small monthly gain.

In Canada, the trend was also haphazard, with WesternCoal down slightly amid the agreed take over from the US-based Walter Group but Teck Resources up almost 5% afterreporting higher 2010 earnings, laced with a warning onindustrial action at two of its major sites.

Elsewhere among Canadian stocks, Sherritt also put in arise, but Grand Cache and Northern Energy were both downon the month. However, all Canadian stocks are still sitting onmajor gains for the latest 12 months.

The Asian sector was the weakest over the latest month,with only Semirara managing a rise, while Shenhua, Yanzhou,Adaro, Banpu, Bumi and GCM all took hits. But, as inCanada, almost all Asian stocks are strongly positive on a 12-month view.

The diversified commodity majors were strong on themonth, save for the smallest of declines on Xstrata’s UK quote,paradoxically following a big 2010 earnings lift by the company.Rio Tinto, BHP Billiton and Anglo all put in rises on themonth ahead of earnings reports this month.

There were a few casualties in the Australian sector, withStraits Resouces losing almost 25% on the month after acorporate reconstruction, and Riversdale down almost 5% asinvestors discounted the chances of a rival offer to the RioTinto takeover bid.

Coal & Allied and volatile Coal of Africa all lost ground onthe month, as did New Hope, still struggling with flood damageto its rail connections, and Macarthur Coal. But Cockatoo,Gloucester and takeover target Northern Energy were all firmon the month, as was the energy conglomerate, Wesfarmers.

In Europe, UK Coal continued its uptrend, putting onalmost 15% on the month and wiping out a good proportion ofits losses over the past year.

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11.02.11

Contents

Lead

Split mooted shippers on monthly met pricing 1

Semi-soft settles, but it’s complicated 2

Merger mania: Alpha grabs weakened Massey 3

South African rail misery returns 3

Russian rail and SUEK enter Mongolian race 3

Premium met coal falls, spot remains scant 4

Gunvor denies agreeing to buy Murmansk port 5

Cerrejon strike averted as pay deal struck 5

Indonesia signs off traders’ licences 5

Physical spot values in need of direction 6

Markets-Steam Coal

Philippines tenders for Naga complex 12

Indian cement buyer books Richards Bay prompt 12

LEBA issues energy market volume report 12

NSP tenders for up to 1mt 12

Exxon offers high sulphur petcoke cargo 13

India’s Binani Cement returns to market 13

Jorf awards spot tender 13

Kospo mulls offers into latest tender 14

Vedanta tenders for February, March 14

Mining

Pan Asia ups its Kalimantan resources 14

Mechel bags loan to expand mine 14

Raspadskaya Jan output hits 0.6mt 15

Golden Energy Mines plans IPO and stake sale 15

Western Coal inks new Ridley terminal deal 15

Ingeominas halts concession awards 15

Firestone inks Eskom off-take deal 16

Teck lifts earnings but warns on strike impact 16

Hunnu delineates more Mongolian met coal 17

FM declared on New Hope mine 17

Wet weather, legacy contracts push Whitehaven into red 17

Siberian Anthracite teams up with Hyundai Steel 17

Russia’s January output up, exports down 17

BHPB to sell unexploited SA coal assets 18

Adaro meets downgraded 2010 output forecast 18

Mozambique ready to export this year 18

Power

Bayan signs with new Singapore cogen plant 19

Spanish generators drop ECJ appeal 19

E.ON to keep ageing coal plants running 19

JPU nukes below 70% for second straight month19

German nuclear extension challenged 21

Steel

Polish coke plant poised for 33% output rise 21

Eisenhüttenstadt furnace starts up again 21

Nippon and Sumitomo confirm merger plans 22

Transport & Logistics

Matola doubles export capacity 22

Rhine restrictions keep ARA stocks stable 22

Corferrocarare promotes Carare railroaddevelopment 22

Coal shortages continue at Oz terminals 23

Transnet targets 70mt railings 23

Markets-Metallurgical Coal

Western Coal claims ‘above market’ PCI pricing 23

Corporate

ICG posts higher Q4 10 revenue, costs increase 24

Massey slumps into the red ahead of Alpha merger 24

Arch lifts earnings on higher sales, improved margins 24

CSN buys more of Riversdale, Rio extends bid 25

New Hope makes final bid for NEC 25

Xstrata averages $204.30/t FOB for HCC 25

Rio held to minor coal earnings lift for 2010 26

Kemerovo Koks postpones London IPO 26

Trade

Venezuela’s exports to increase by 2-2.6mt 26

Korea’s steam/met import growth continues 27

Turkish imports see weak end to 2010 27

Indonesia’s exports rise 39mt in 2010 27

Chile’s 2010 imports rise to 6.32mt 28

Ukraine’s Jan coking coal imports reach 0.82mt 28

Japan’s 2010 imports show strength 28

Australian year-end coking figures defy the Big Wet 29

Semi-soft reverses 5-month fall at Newcastle 29

Investors remain cautious on coal shares 30

�

Documents

Shipping Intelligence Report