vk.com/id446425943
Coking coal outlook
We forecast declining metallurgical coal prices
We forecast declining metallurgical coal prices, which could have a favourable impact on non-integrated steel producer margins and offset falling steel prices to some extent.
Our cautious view on metallurgical coal prices is driven by:
1)Slowing Chinese steel demand, which could weigh on steel input costs.
2)Metallurgical coal prices (spot at $221/t) are above cost support, which we calculate at around $150/t and even above our calculation of incentive prices ($180/t).
3)We forecast steel margins declining to long-term average levels. Our long-term steel price forecast may no longer support use of high-quality hard coking coal to the same extent.
Key upside risks
The following are key potential upside risks to our cautious outlook:
1)Faster-than-expected steel demand growth from India, which is short of met coal.
2)Limited number of new coking coal projects due to a long period of low prices and capital discipline in the sector.
Renaissance Capital
3 December 2018
Steel
Current prices above our calculation of incentive prices ($180/t)
We calculate that met coal prices are above their historical average price.
Figure 25: LT met coal price history 2018 real, $/t
Seaborne hard coking coal (2018 real), $/t |
LT average, $/t |
400 |
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350 |
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300 |
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250 |
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Spot*, 221 |
200 |
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150 |
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LT average, $/t, 139.7 |
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100 |
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50 |
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0 |
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30 06 1995 |
31 03 1996 |
31 12 1996 |
30 09 1997 |
30 06 1998 |
31 03 1999 |
31 12 1999 |
30 09 2000 |
30 06 2001 |
31 03 2002 |
31 12 2002 |
30 09 2003 |
30 06 2004 |
31 03 2005 |
31 12 2005 |
30 09 2006 |
30 06 2007 |
31 03 2008 |
31 12 2008 |
30 09 2009 |
30 06 2010 |
31 03 2011 |
31 12 2011 |
30 09 2012 |
30 06 2013 |
31 03 2014 |
31 12 2014 |
30 09 2015 |
30 06 2016 |
31 03 2017 |
31 12 2017 |
30 09 2018 |
*Priced at market close on 30 November 2018
Source: Bloomberg
18
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
We calculate met coal incentive price of $180/t
We calculate incentive prices in the following charts as the commodity price required for a project with industry-average cash costs and industry-average capital intensity to achieve a 10% IRR.
Figure 26: Expected average returns on new greenfield projects
|
Iron ore, |
Met coal, |
Thermal |
Zinc, $/t |
Aluminiu |
PGMs, |
Gold, $/oz Nickel, $/t |
Diamonds Copper, |
Mangane |
Steel, $/t |
|||
|
$/t |
$/t |
coal, $/t |
m, $/t |
$/oz |
, $/carat |
$/t |
se, $/mtu |
|||||
Capital intensity* |
170 |
300 |
120 |
5,000 |
6,000 |
3,000 |
3,500 |
40,000 |
550 |
20,000 |
7.00 |
1,500 |
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Long term prices |
60 |
150 |
80 |
2,600 |
2,150 |
1,078 |
1,250 |
14,000 |
206 |
6,300 |
5.20 |
466 |
|
Estimated average unit cash cost |
-35 |
-108 |
-62 |
-1,518 |
-1,708 |
-694 |
-670 |
-8,204 |
-142 |
-3,490 |
-4.38 |
-383 |
|
Estimated average EBITDA per unit |
25 |
42 |
18 |
1,082 |
442 |
384 |
580 |
5,796 |
64 |
2,810 |
0.82 |
83 |
|
EBITDA margin |
41% |
28% |
22% |
42% |
21% |
36% |
46% |
41% |
31% |
45% |
16% |
18% |
|
Maintenance capex |
-5 |
-9 |
-5 |
-551 |
-220 |
-80 |
-227 |
-2,000 |
-16 |
-1,102 |
-0.30 |
-50 |
|
Tax @ 30% |
-6 |
-10 |
-4 |
-159 |
-67 |
-91 |
-106 |
-1,139 |
-14 |
-512 |
-0.16 |
-10 |
|
Net profit |
14 |
23 |
9 |
371 |
155 |
213 |
247 |
2,657 |
33 |
1,195 |
0.37 |
23 |
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Annual returns on commissioned |
8.1% |
7.6% |
7.5% |
7.4% |
2.6% |
7.1% |
7.1% |
6.6% |
6.1% |
6.0% |
5.2% |
1.5% |
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projects |
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Estimated IRR (construction time and |
6.4% |
6.1% |
6.0% |
5.9% |
2.1% |
5.7% |
5.7% |
5.3% |
4.9% |
4.8% |
4.2% |
1.2% |
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limited life) |
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Implied incentive price (10% IRR) |
80 |
180 |
89 |
3,000 |
3,000 |
1,400 |
1,600 |
17,400 |
260 |
8,200 |
5.90 |
800 |
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*Cost of new greenfield project in $ per annual production unit. |
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Source: Company data, Thomson Reuters, Renaissance Capital estimates
We calculate average capital intensity at around $300/t
We calculate the average capital intensity for greenfield met coal projects at $321 per annual production tonne.
Figure 27: Capex per annual production unit schedule
Project |
Company |
Country |
First production |
Capex, |
Production volume, |
Capex per annual |
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date |
$mn |
mn tpa |
production unit, $/t |
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Benga |
Rio Tinto |
Mozambique |
2012 |
600 |
2.0 |
300 |
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Caval Ridge |
BHP Billiton |
Australia |
2014 |
1870 |
5.5 |
340 |
|
Moatize I & II, plus logistics |
Vale |
Mozambique |
2014 |
7,694 |
22 |
350 |
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Kestrel Mine Extension |
Rio Tinto |
Australia |
2014 |
2,000 |
6.0 |
333 |
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Grosvenor Phase 1 |
Anglo American |
Australia |
2014 |
2,000 |
5.0 |
400 |
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Quintette |
Teck |
Canada |
2014 |
858 |
3.0 |
286 |
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Appin Area 9 |
BHP Billiton |
Australia |
2016 |
845 |
3.5 |
241 |
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Average |
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321 |
Source: Company data, Renaissance Capital estimates
19
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
Conservative LT prices result in returns below WACC
Using our capital intensity and LT met coal price assumptions, we calculate that returns on greenfield projects do not incentivise new projects, as they come in below WACC.
Figure 28: Expected average IRRs on new greenfield projects
Internal rate of return, %
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
WACC, 9%
6.4% |
6.1% |
6.0% |
5.9% |
5.7% |
5.7% |
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5.3% |
4.9% |
4.9% |
4.8% |
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4.2% |
3.9% |
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2.1% |
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1.2% |
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Iron ore |
|
Met coal |
Thermal coal |
Zinc |
PGMs |
Gold |
Nickel |
Average |
Diamonds |
Copper |
Manganese |
Pigment |
Aluminium |
Steel |
|
Source: Renaissance Capital estimates
Growth in seaborne met coal supply
CRU forecasts net growth in met coal supply of 44.7mnt over the next five years (20182022). We calculate that this implies an average of 0.9% of global supply over the same period.
Figure 29: Seaborne supply growth, mnt
CY |
2018E |
2019E |
2020E |
2021E |
2022E |
Total |
Additions |
18.0 |
16.5 |
14.8 |
6.0 |
3.1 |
58.4 |
Depletion |
-0.4 |
-3.8 |
-7.5 |
-2 |
0 |
-13.7 |
Net change |
17.6 |
12.7 |
7.3 |
4.0 |
3.1 |
44.7 |
% of global demand |
1.7% |
1.2% |
0.7% |
0.4% |
0.3% |
1.7% |
Note: We calculate global metallurgical demand using the average consumption ratio of 0.8 tonnes of met coal per tonne of steel
Source: CRU
20
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
We calculate cost support at $150/t vs $221/t spot
Metallurgical coal (global seaborne supply of 632mnt)
Figure 30: 2018E metallurgical coal cash costs plus sustaining capex, $/t
240 |
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Spot price: $221/t* |
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200 |
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Incentive price: $180/t |
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160 |
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120 |
Average cash cost: $117/t |
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80 |
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BHP, 87 |
Mechel, 88 |
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Evraz, 79 |
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40 |
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*Priced at market close on 30 November 2018
Met coal trading at a 46% premium to the 90th percentile
Figure 31: Spot commodity price premium (discount) to 90th percentile
50% |
46% |
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40% |
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29% |
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30% |
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15% |
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20% |
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10% |
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10% |
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3% |
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0% |
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-10% |
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-7% |
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-20% |
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-30% |
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Met. Coal, $221/t |
Manganese ore, $7/t |
Gold**, $1224/t |
Iron ore, $67/t |
Copper, $6248/t |
Thermal coal, $85/t |
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159 |
179 |
Vale, |
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168 |
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Severstal, |
90th percentile: $151/t |
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South32, |
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70th percentile: $125/t 50th percentile: $118/t
Glencore, 118 |
Teck Resources, 119 |
Anglo American, 121 |
Source: Bloomberg, CRU, Renaissance Capital estimates
-13% |
-15% |
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-26% |
Aluminium, $1937/t |
Zinc*, $2568/t |
Nickel, $10984/t |
*Used commodity/company data for 2017
**Used commodity data for 3Q17
***PGM basket price calculated using 57% Pt, 36% Pd, 7% Rh. Note: Priced at market close on 3 October 2018
Source: Bloomberg, Company data, Renaissance Capital estimates
21
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
Met coal vs 90th percentile
Met coal price has traded at a 28% premium to the historical average of the 90th percentile on cost curves.
Figure 32: Met coal price vs cash costs at the 90th percentile |
Figure 33: Met coal price vs cash costs at the 90th percentile |
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Cash costs, $/t |
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Met coal average price. $/t |
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Met coal price premium relative to 90th percentile |
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290 |
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110% |
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84% |
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79% |
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Forecasts |
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90% |
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240 |
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70% |
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44% |
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49% |
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188 200 190 |
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38% |
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36% |
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162 |
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50% |
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34% |
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25% |
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190 |
101 |
112 |
138 |
125 |
132 |
158 |
143 |
135 |
118 |
126 |
126 |
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167 159 |
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17% |
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11% |
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15% |
7% |
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150 |
30% |
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$/t |
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Historical average, 28% |
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140 |
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10% |
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-10% |
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9%- |
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7%- |
20%- |
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-1% |
90 |
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-30% |
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40 |
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-50% |
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2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
2021E |
LT (real) |
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-70% |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
2021E |
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Source: Bloomberg, CRU, Renaissance Capital estimates |
Source: Bloomberg, CRU, Renaissance Capital estimates |
Room for EAF capacity growth to displace BOF
Only 9% of Chinese capacity is from EAF
We see downside risk to steel-making raw material demand should China move closer to the average steel mix, implying an increase in EAF capacity at the expense of BOF, which uses metallurgical coal. The CRU forecasts EAF capacity to grow to 13% of total steel capacity. We calculate that this could result in a 19mn t reduction in metallurgical coal demand.
Figure 34: Top steel-producing countries BOF capacity as a % of total capacity, kt Figure 35: Top steel-producing countries EAF capacity as a % of total capacity, kt
100% |
91% |
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100% |
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90% |
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90% |
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78% |
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80% |
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76% |
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71% |
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80% |
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67% |
67% |
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||
70% |
|
|
|
|
|
|
|
|
70% |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
60% |
|
|
|
|
|
|
|
|
|
|
60% |
|
|
|
|
|
|
|
|
|
|
|
|
50% |
|
|
|
|
|
|
43% |
|
|
|
50% |
40% |
|
|
|
|
|
|
|
32% |
31% |
|
40% |
|
|
|
|
|
|
|
|
|
|
||
30% |
|
|
|
|
|
|
|
|
|
20% |
30% |
|
|
|
|
|
|
|
|
|
|
|
|
20% |
|
|
|
|
|
|
|
|
|
|
20% |
10% |
|
|
|
|
|
|
|
|
|
|
10% |
0% |
China |
Brazil |
Japan |
Germany |
South Korea |
Russia |
India |
US |
Turkey |
Italy |
0% |
|
|
Source: World Steel Association
80% |
|
|
|
|
|
|
|
|
|
|
69% |
68% |
|
|
|
|
|
|
|
|
|
|
57% |
|
|
|
|
|
|
|
|
|
|
33% |
31% |
29% |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
24% |
|
|
|
|
|
|
|
|
|
|
21% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9% |
Italy |
Turkey |
US |
India |
South Korea |
Russia |
Germany |
Japan |
Brazil |
China |
Source: World Steel Association
22
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
Focus on renewables to curb coal capacity growth
China’s focus on reducing pollution, per the government’s ‘13th Five-Year Plan’, has been supportive of investment into other energy sources, such as solar and wind power, while envisaging a cap in energy generated by coal to 1,100GwH annually until 2020, thereby curbing coal capacity growth in the near term.
Figures 36 and 37 show the potential Chinese shift in energy generation capacity from 2016-2030.
Figure 36: 2016 Chinese energy mix, GW |
|
|
|
Figure 37: 2030 Chinese energy mix, GW |
Wind |
Solar PV |
|
|
|
9% |
|
Solar PV |
||
5% |
|
|
||
|
Gas |
|
17% |
|
|
|
|
||
Hydro |
|
Nuclear |
Hydro |
|
|
4% |
|||
|
2% |
16% |
||
21% |
|
|||
|
|
|||
|
|
|
|
|
|
|
|
Wind |
|
Coal |
|
|
16% |
|
40% |
Bioenergy |
Nuclear |
Gas |
|
6% |
||||
Coal |
1% |
4% |
||
|
||||
59% |
|
|
|
|
Source: International Energy Association |
|
Source: International Energy Association* |
||
EAF capacity aligned to China’s emission reduction targets…
Chinese PM 2.5 emissions are more than four times those of developed economies such as the US, UK and Canada at 49 micrograms per cubic metre. EAF capacity has lower emissions and a smaller footprint vs blast furnaces.
Figure 38: Global PM 2.5 emissions, micrograms per cubic metre
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
||
60 |
|
|
|
|
|
|
|
|
|
|
|
||
|
49 |
|
|
|
|
|
|
|
|
|
|
||
50 |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
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|
|
|
|
|
|
|
|
|
||
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
30 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
15 |
15 |
14 |
11 |
11 |
11 |
8 |
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||
10 |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
India |
China |
South Korea |
South Africa |
Italy |
Japan |
Russia |
Germany |
Brazil |
US |
UK |
Canada |
||
|
Figure 39: Global per capita CO2 emissions, tonnes |
|
|
|
|
|
|
|
|||||||||||
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.6 |
15.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes |
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
13.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
capita, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
10.6 |
9.3 |
9.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
per |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
emissions |
8 |
|
|
|
|
|
|
6.7 |
6.0 |
5.6 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
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|
|
|
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|
|
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||
|
6 |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5 |
|
|
|
|
|
|
CO2 |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
3.0 |
2.2 |
1.8 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US |
Canada |
South Korea |
Russia |
Japan |
Germany |
China |
UK |
Italy |
Total world |
ROW |
Brazil |
India |
|||||
|
|
|||||||||||||||||
Source: OECD |
Source: OECD |
23
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
… and scrap availability could further support EAF capacity
Majors sources of steel scrap include vehicles, steel structure, household appliances, railroad tracks, ships and farm equipment.
We note that in the US a major source of scrap is obsolete vehicles. China has grown to become the largest vehicle market globally at 29mn new passenger vehicles sold in 2017. New vehicle sales have shown a strong growth trend of 14.5% CAGR since 2005. These vehicles becoming obsolete could result in rising levels of Chinese scrap availability.
Figure 40: Chinese vs US new passenger vehicle registrations, mn units
|
|
|
|
|
|
China |
|
US |
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
28 |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
23 |
25 |
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
17 |
17 |
16 |
|
|
12 18 |
13 19 |
15 19 |
16 |
17 |
18 |
18 |
18 |
15 |
13 |
11 14 |
|||||||||||
|
|||||||||||||
|
|
|
9 |
9 |
|
|
|
|
|
|
|
|
|
10 |
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
Source: International Organization of Motor Vehicle Manufacturers
Chinese and Indian vehicle ownership lags other developing economies
Figure 41: 2015 number of vehicles per thousand people
|
700 |
|
616 |
|
|
|
|
||
|
|
|
|
|
perople |
600 |
|
552 |
|
|
|
|
|
|
thousand |
500 |
|
481 |
480 |
|
|
|
||
400 |
|
|
|
|
per |
|
|
|
|
|
|
|
|
|
vehiclesof |
300 |
|
|
|
|
|
|
|
|
Number |
200 |
|
|
|
100 |
|
|
|
|
|
0 |
|
|
|
|
|
|
|
381
307
129 |
119 |
115 |
99 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
17
Canada |
Germany |
France |
Japan |
US |
Russia |
Global |
ROW |
South Africa |
China |
India |
Source: World Bank, International Organization of Motor Vehicle Manufacturers,
24
vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
Key upside risks to our cautious metallurgical view
1)India’s reserve life is at least 2.2x less than the major coal producing countries
Figures 42 and 43 highlight India’s limited coal reserves, which have a life of below 100 years, while per capita reserves are significantly lower than those of Russia, the US and Australia.
Figure 42: Coal reserves by country vs reserve life (RHS) |
Figure 43: Top coal-producing countries ranked by coal reserves per capita, tonnes |
mnt
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450 |
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,118 |
|
|
|
|
250,000 |
250,916 |
242,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
1,000 |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
350 |
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
800 |
|
769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250 |
tonnes |
|
589 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
144,818 |
|
|
|
|
|
|
|
|
200 |
|
|
|
|
|
||||||
|
|
|
|
|
|
|
160,364 |
|
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
|
|
|
||
150,000 |
|
|
|
|
|
|
|
|
|
|
|
138,819 |
|
|
|
|
|
150 |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,728 |
100 |
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
74 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
United |
ROW |
Russia Australia |
China |
|
India |
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
Russia |
United States Australia |
China |
India |
||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
|
States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Source: BP June 2018 Statistical review |
Source: BP June 2018 Statistical review |
2)Limited new coking coal projects due to a long period of low prices and capital discipline in the sector
We calculate that around 56.3mnt (8.9% of FY18E global seaborne supply and 5.4% of global demand) of met coal projects are approved/planned between 2018 and 2021.
Figure 44: Coking coal projects
Company |
Project |
Region |
Date |
Volumes, mnt |
Approved projects |
|
|
|
|
Botswana |
Masama |
Botswana |
2018 |
3.0 |
Aspire Mining |
Nuurstei |
Mongolia |
2019 |
1.0 |
Riversdale Resources |
Grassy Mountain |
Canada |
2021 |
4.5 |
Prairie Mining |
Debiensko |
Poland |
2023 |
2.6 |
Prairie Mining |
Jan Karski |
Poland |
2023 |
6.3 |
Total approved projects |
|
|
|
17.4 |
Planned projects |
|
|
|
|
Vale |
Moatize |
|
2020 |
5.0 |
Ouro Mining |
Elko |
Pacific America |
|
1.5 |
Ouro Mining |
Heavener Project |
USA |
|
1.7 |
Aspire Mining |
Ovoot |
Mongolia |
|
10.0 |
Teck |
Elk Valley |
|
|
10.0 |
Vale |
Belvedere |
Australia |
|
10.0 |
Coal of Africa |
Makhado |
South Africa |
12M from approval |
0.8 |
Total planned projects |
|
|
|
39.0 |
Total |
|
|
|
56.3 |
Source: Company data, The Department of State Development, Manufacturing, Infrastructure and Planning.
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vk.com/id446425943
Renaissance Capital
3 December 2018
Steel
Asian met coal production is at the top of the cost curve which could provide cost support
Asian and North American met coal production is on average at the top of the cost curve. However, production from these regions accounts for more than 50% of global seaborne supply.
Figure 45: 2018E weighted average met coal cash costs net of by-product credits plus sustaining capex, $/t
Asia |
Australasia |
North America |
CIS |
Central and South America |
Africa |
Europe |
Other |
250
200
150
Average cash cost: $114/t
100
50
0
Note: Represents 632mnt of global met coal supply.
Source: Company data, Renaissance Capital estimates
China’s willingness to support thermal coal prices
We believe the Chinese authorities may regulate thermal coal prices in a range of around $70-100/t to maintain profitability for coal miners and electricity generators. This may result in metallurgical coal indirectly benefiting from regulatory measures put in place to support thermal coal prices, in our view.
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