IHS McCloskey Coal Report (Mar 22, 2013) Summary

Indonesian Coal Market Indonesian thermal market softens on muted buying i. Recent rains and heavy seas have left many Indonesian producers with a backlog in their order books, leading to some requests from suppliers to push shipments back from April to May. ii. 4,700kc NAR cargoes were being valued at around $62/t, basis 4,700kc NAR. However, an offer for a June loading panamax was heard at $60.50/t FOB, on the same basis, indicating some degree of backwardation. iii. Lower c.v. trades were heard at $62/t FOB, basis 5,000kc NAR; $43/t FOB, basis 4,200kc GAR; and $48/t FOB, basis 4,500kc GAR, all for loading in April. iv. This week the IHS McCloskey Indonesian Sub-Bituminous FOB marker is $63.25/t, basis 4,900kc NAR, which is lower than last weeks $64.15/t. Chinese Coal Market China thermal prices drift lower as demand remains sluggish i. Chinas import and domestic thermal markets continued to drift lower over the week, on the back of weak industrial activities and subsequently sluggish power demand, which is in contrast to the usual strong economic performance at this time of year. ii. Domestic trades out of Qinhuangdao (QHD) this week were captured in the range of $96.44-98.03/t FOB, basis 5,500kc NAR (inclusive of VAT). iii. Lower c.v. material traded between $82.89-83.69/t FOB, basis 5,000kc NAR. In the less active 5,800kc NAR market, value appears to be around $103.24-103.62/t FOB. iv. In the sub-bituminous market an Indonesian panamax was traded at $74.00/t CFR, basis 5,000kc NAR, into GZ in May, while another May arrival panamax with lower typical c.v. was done at $72.00/t CFR, basis 4,700kc NAR, also into GZ. Atlantic Coal Market Atlantic spot prices nosedive to two-year lows i. Atlantic spot prices lurched downwards this week in the biggest market moves seen this year, with the European delivered market sinking to its lowest level for over two years and, along with FOB Richards Bay prices, fell below $80/t in the prompt month. ii. This week, the April contract traded at $79.40/t DES Rotterdam. This is down from last weeks highest bid of $86.90/t DES AR and lowest offer at $86.50/t DES AR, with no deals done last week. The McCloskey Coal DES ARA marker price finished the previous week on $86.17/t. iii. Colombian exports hit a 10-year low in February at 2.89mt due to various supply disruptions including the 32-day strike at Cerrejon and the 23-day suspension of loadings at Drummonds port. iv. In the Richards Bay market, this weeks price fall to sub-$80/t FOB has triggered some interest in India and China, but nothing firm has emerged so far. Prices have fallen over $4/t during the past week.

News Digest i. Atlantic spot prices lurched downwards this week in the biggest market moves seen this year. The European delivered market sank to its lowest level for over two years, while both DES ARA and FOB Richards Bay prices fell below $80/t in the prompt month. Newcastle FOB prices again dipped below the strategic $90/t mark, basis 6,000kc NAR this week, as another slide in sentiment took hold. Chinese bids have been moving back in line with international price woes. Indonesian prices have also generally softened. Noble Group subsidiary Noble Resources has acquired a stake in Australia-listed Indonesia-focused miner Pan Asia. PT TCM is developing a high c.v. thermal coal project in South Kalimantan, Indonesia, which is 75% owned by the company. Indonesias second largest thermal coal producer Adaro has sseen its revenue drop 6.6% year-on-year (y-o-y) to $3.72bn from $3.99bn. The miner put the fall down to decreased sales volumes and a lower average selling price because of challenging market conditions. New restrictions have been introduced by Indonesias Ministry of Forestry (MOF) which legal experts expect will cause great confusion for miners and investors. Indian logistics provider Bothra Shipping Service is constructing a sixth berth, dedicated to thermal and coking coal movements, at its Kakinada operations. The berth, with a capacity of 8mt/yr, will be capable of unloading 2,400t an hour, have a stockpile capacity of 1.04mt, and will be operational from May. Taipower has bought nine Indonesian sub-bituminous panamaxes covering supply from May through to August this year. Freight Outlook i. Despite cape rates having remained relatively flat, rates for supramax vessels out of the US Gulf to Europe rose to $27-28/t, up $4/t over the last two weeks. ii. Supramax rates have also been rising for voyages out of Indonesia to east coast India, with recent fixtures suggesting a rate of $13.50/t into west coast India, from around $11.50/t a fortnight ago. iii. Panamax rates in Asia have been firming also, with a reason for this being the repositioning of some Asian vessels into the Atlantic to support South American grain shipments.

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McCloskey Steam Coal FOB marker prices McCloskey Key Physical Prices (USD/t) Mar 22nd Mar 15th 63.25 64.15 Indonesian Sub-bit FOB marker - 4,900 Kcal NAR 87.90 89.15 Newcastle FOB marker - 6,000 Kcal NAR 81.49 83.61 Richards Bay FOB marker - 6,000 Kcal NAR 73.00 77.75 Columbian FOB marker - 11300 Btu GAR 74.83 79.00 U.S. (East Coast) FOB marker - 6,000 Kcal NAR

Year High 80.40 118.95 107.17 97.00 84.90

Year Low 58.90 78.05 79.87 73.00 74.83