Coal Supply-Demand and Price Trend

1 IEEJ: May 2008. Coal Supply-Demand and Price Trend February 4 (Monday), 2008. Atsuo Sagawa, Chief Researcher The Institute of Energy Economics, Japan Coal Group, Strategy and Industry Research Unit IEEJ: May 2008. Global Consumption of Coal Coal demand has increased since 2002, particularly in Asia. Global coal consumption in 2006 was billion tons ( billion tons excluding brown coal). Up to 2030, coal consumption is expected to grow at the annual rate of , driven by the growth of demand especially in Asia and the increasing demand for coal in the power generation sector. The largest growth in coal consumption is expected in China and India, followed by South Korea, Taiwan and other Southeast Asian countries. Trend of coal consumption by area Outlook for coal consumption by area (in reference case). (million tons) (million tons). 9,511. 10,000 10,000. 8,752. 9,000 9,000. 7,999 1,384.

2 8,000 8,000. 7,271 1,393. 6,550. 7,000 Central/South America 7,000 1,409 1,728. 5,834 6,261. 5,577 and Middle East 5,533 1,400 1,551. 6,000 6,000. 4,638 4,790 5,155 Africa 1,377 1,355. 4,630 1,341. 5,000 1,299 5,000 1,263. 1,314 1,330. 1,322 Europe and 1,181. 4,000 1,092 4,000. 1,298 1,292 1,279 Former USSR. 1,107. 1,084 1,073. 1,059 6,001. 3,000 North America 3,000 5,429. 1,037 1,033 1,049 4,882 ( ). 4,275 ( ). ( ). 2,000 3,596 2,000 3,688 ( ). 2,940 3,189 Asia and Oceania 2,894 ( ). 2,549 ( ). 2,080 2,097 2,252 ( ) ( ) ( ). 1,000 ( ) ( ) 1,000. ( ) ( ). 0 0. '00 '01 '02 '03 '04 '05 '06* '04 '10 '15 '20 '25 '30. Note: Figures for 2006 are estimated. Source: IEA, "Coal Information 2007". 2. Source: EIA, "International Energy Outlook 2007". IEEJ: May 2008. Global Trading of Coal Trade volume has been increasing as demand has grown. Trade volume is expected to grow further, particularly in Asia.

3 Trend of export volume and export ratio Outlook for coal trade (in reference case). 900 45 (million tons). 1,055. 800 40. 1,000 57. 700 35 880 290. Metallurgical coal 198. Coal exports (million tons). 600 30 50. Coal export ratio (%). 800 244. 730. 593. 566. 500 25 167 116. 544. 58 206. 510. 467. 469. 426. 400 20 600 129 67. 349. 365. 369. 327. 173. 306. 304. 296. 290. 261. 765. 258. 300 15 56. 209. 212. 187. 187. 193. 196. 162. 137. 133. 125. 143. 200 10 400 Import area: 175. Steaming coal America 636. 222. 222 523. 201. 203. 198. 199. 194. 192. 193. 191. 190. 189. 189. 189. 182. 184. 178. 181. 181. 100 5. 158. 156. 152. 146. 139. 139. 137. 126. 476 Europe 200 382. 0 0. 289 Asia '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06*. Exports (metallurgical coal) Exports (steaming coal). Export/production ratio (all coal) Export/production ratio (metallurgical coal) 0. Export/production ratio (steaming coal) 2005 2015 2030.

4 Note: Figures for 2006 are estimated. Source: EIA "International Energy Outlook 2007" 3. Source: IEA "Coal Information 2007". IEEJ: May 2008. Major Coal Exporters and Importers of the World Trend of export volume by country Trend of import volume by country (million tons) (million tons). 250 250. Australia Japan Indonesia South Korea 200 200. Russia Taiwan South Africa China Britain 150 150. Colombia Germany United 100 States 100 India Canada China Kazakhstan 50 50. United Vietnam States Poland Russia 0 0. '06*. '80. '82. '84. '86. '88. '90. '92. '94. '96. '98. '00. '02. '04. '06*. '80. '82. '84. '86. '88. '90. '92. '94. '96. '98. '00. '02. '04. Note: Figures for 2006 are estimated. Source: IEA "Coal Information 2007" 4. IEEJ: May 2008. Trend of Steaming Coal Prices (Australian and South African Coal Prices). Prices have been rising since June 2003 and reached historical highs in July 2004.

5 Subsequently, prices fell as supply capacity was expanded to meet the demand particularly in Australia and Indonesia, and fluctuated in the 40-50 dollar/ton range. However, prices began to rise again sharply from June 2007. US$/t . 110. 100. 90. 80. 70. 60. 50. 40. 30. 20. 10. October-03. October-04. October-05. October-06. October-07. April-03. July-03. April-04. July-04. April-05. July-05. April-06. July-06. April-07. July-07. January-03. January-04. January-05. January-06. January-07. January-08. Barlow Jonker Index RB Weekly Index Annual contract Price of Australian steaming coal for Japan Notes: Barlow Jonker Index : a spot Price for steaming coal, FOB Newcastle, Australia. RB Weekly Index : a spot Price for steaming coal, FOB Richards Bay, South Africa. 5. Source: Barlow Jonker, "Coal Fax"; Global Coal data; etc. IEEJ: May 2008. Trend of Metallurgical Coal (hard Coking Coal) Prices Metallurgical coal prices rose sharply in 2005 (2004 in the case of Chinese coal).

6 Prices fell in the two subsequent years as the supply capacity was expanded in response to high prices. However, fears of a supply shortage grew in the market in 2007, and it was reported that the spot Price for export to India exceeded the Price in 2005. (US$/t). January-03. January-04. January-05. January-06. January-07. January-08. July-03. July-04. July-05. July-06. July-07. April-03. October-03. April-04. October-04. April-05. October-05. April-06. October-06. April-07. October-07. From Queensland, Australia, to Japan From Australia to Europe From China Annual contract for sales to Japan Source: Barlow Jonker "Australian Coal Report" and "China Coal Report" ; etc. 6. IEEJ: May 2008. Major Drivers of Coal Price Rising (Demand Side). Growth in supply capacity unable to match growth in demand Growth of demand and imports by Asia Growth of demand in existing importers (such as South Korea, Taiwan and Japan).

7 Growth of imports by new importers (such as India and China). Global consumption of coal Global imports of coal (year-on-year increment) (year-on-year increment). (million tons) (million tons). 500 70. 450 Others Others 60. Asia Asia 400. Global 50 Global 350. 300 40. 250 30. 200 20. 150. 10. 100. 0. 50. 0 -10. -50 -20. 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006. Note: Figures for 2006 are estimated. Source: IEA "Coal Information 2007". 7. IEEJ: May 2008. Major Drivers of Coal Price Rising (Demand Side). South Korea: Imports in 2007 amounted to million tons (up million tons from the previous year): steaming coal million tons (up million tons) and metallurgical coal million tons (up million tons). Taiwan: Imports in 2007 amounted to million tons (up million tons from the previous year): steaming coal million tons (up million tons) and metallurgical coal million tons (down million tons).

8 Coal imports by South Korea Coal imports by Taiwan (year-on-year increment) (year-on-year increment). (million tons) (million tons). 9 7. 8 Anthracite Anthracite Steaming coal 6 Steaming coal 7 Metallurgical coal Metallurgical coal 6 Total 5 Total 5. 4. 4. 3 3. 2. 2. 1. 0 1. -1 0. -2. -3 -1. 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007. Source:Korea Trade Statistics 8. Source:Bureau of Energy, Ministry of Economic Affairs IEEJ: May 2008. Major Drivers of Coal Price Rising (Demand Side). China: Imports in 2007 amounted to million tons (up million tons from the previous year): steaming coal million tons (up million tons), metallurgical coal million tons (up million tons) and anthracite million tons (up million tons). India: Imports in 2006 amounted to million tons (up million tons from the previous year): steaming coal million tons (up million tons) and metallurgical coal million tons (up million tons).

9 Imports in 2007 from January to June amounted to million tons (up million tons). India increased its imports from Indonesia (steaming coal), Australia (metallurgical coal) and South Africa (steaming coal). Coal imports by India Coal imports by China (year-on-year increment). (year-on-year increment) (million tons). 12. (million tons). 15 10 Steaming coal Anthracite Metallurgical coal Steaming coal 8. 12 Total Metallurgical coal Total 6. 9. 4. 6. 2. 3 0. -2. 0 2001 2002 2003 2004 2005 2006 2007. -3 Note: The import volume in 2007 is compared with 2006 by the 2001 2002 2003 2004 2005 2006 2007. sum of from January to June. 9. Source: TEX report, etc. Source: IEA, "Coal Information 2007" and TEX report IEEJ: May 2008. Major Drivers of Coal Price Rising (Demand Side). Japan: Imports in 2007 amounted to million tons (up million tons from the previous year): steaming coal million tons (up million tons), metallurgical coal million tons (up million tons) and anthracite million tons (down million tons).

10 Coal imports by Japan (year-on-year increment). (million tons) Anthracite Steaming coal 14. Metallurgical coal 12. Total 10. 8. 6. 4. 2. 0. -2. -4. 2001 2002 2003 2004 2005 2006 2007. -6. Source: Japan Trade Statistics 10. IEEJ: May 2008. Major Drivers of Coal Price Rising (Supply Side). Growth in supply capacity unable to match growth in demand Bottleneck of transportation infrastructure in Australia (export infrastructure capacity unable to meet growth in export demand): Extraordinarily ship congestion at Australian ports due to the above issue Controlling the export volume to solve the ship congestion Australia unable to increase supply in the face of rising export demand + rising FRT prices: Concentration of coal export demand in Indonesia Indonesia reducing export volume for spot sales (inability to respond flexibly to demand). Ship congestion at Australian ports Number of ships 80.