International W2E Market Bulletin

Trade in global Waste-to-Energy (W2E) markets and the Alternative Energy Index (AEI)

Contact: info@savageresource.com
Copyright 2016 www.savageresource.com All Rights Reserved
Issue 17 5 July 2016
 Editorial
The global energy complex is a mixed basket of power and heat generation, supply
networks and logistics and distribution systems existing in both regulated and de-
regulated environments fed by various fuel sources enabling power trading and the
integration of carbon credits and renewable tax incentives. For RDF and SRF to be
recognised as a sustainable source of energy to feed into the global complex requires
transparency and standardisation of product. This in turn enables market participants
to manage the risks associated with global power and heat generation, distribution
and supply by using hedges, swaps, futures, and other financial instruments. The
W2E/AEI price index produced by International W2E Market Bulletin enables the
market to function cohesively, and to plan ahead and include RDF and SRF in the fuel
mix. Benefits include all market participants being able to comply with their national
waste hierarchy schemes and adhere strictly to CSR and environmental policies.
W2E/AEI can be found on Pages 14 & 15 in this issue.
 Global Investment - Renewables
The cost of renewables is falling, by 2040 more than $7.80 trillion will be invested
in renewable and waste-to-energy power generation worldwide, out of a total of
$11 trillion, according to fresh analysis by Bloomberg New Energy Finance. There is
nearly $1 trillion invested in renewables at the moment versus around $1.2 trillion
in oil and gas, according to various estimates. The report says that power
generated from renewables and waste-to-energy will be the dominant energy
source for power production in Europe by 2040 and in the U.S. by 2040. Fossil fuel
use is expected to peak in 2025.
 Market Commentary
Trade in the alternative fuel energy complex continues to be challenging in the EU.
RDF and SRF stocks in the main consuming sectors continue to be near capacity and
burn rates are for heating and industrial demand are low. Cement production in Spain
and Portugal is lower and inventories are high. The Polish market continues to
develop and more SRF material is expected to be shipped there. Industrial consumers
in the Netherlands, such as Shell, are not expected to take any more than contractual
tonnes and this is a familiar theme in the market. In the RDF market, stocks are full in
Sweden, Germany and Holland at CHP plants and there is limited capacity to take spot
shipments. Fees for RDF and SRF are under pressure and are rising (see price table
Page 6). (cntd ) ..
 Market Commentary

.. (contd from Page 4).

Freight rates via ocean, truck and container are also increasing which is cutting into
margins further. The post-Brexit environment is more concerned with currency, but it
is having no immediate impact, as market fundamentals trump European politics. In
other alternative fuel markets, TDF (Tyre Derived Fuel) is becoming very competitive
against thermal coal and petroleum coke. Material is available and is assessed at about
$20/t CIF Marmara, Turkey, basis 7,500 kcal/kg NAR.
 European Physical RDF & SRF Spot Price Markers
Gate Fees Paid / A positive (+) indicates price paid by Receiver

UK Loadports (handysize) Freight () CFR (RDF) CFR (SRF)

Rotterdam 6.10 84.00 88.00
Amsterdam 6.00 83.75 87.00
Antwerp 6.10 83.00 86.00
Terneuzen 5.95 81.50 86.25
Dunkirk 5.20 80.90 86.00
Hamburg 5.25 88.00 90.00
Esbjerg 6.70 90.00 92.50
Inkoo 7.50 89.50 92.50
Gothenburg 8.25 89.00 92.00
Malmo NA NA NA
Riga 9.5 90.00 93.00
Sines 8.40 88.00 91.00
Gijon 8.70 87.00 92.00
Tarragona 9.75 NA NA
Mundra 30.00 NA +25.00
Casablanca 25.00 NA +26.00
 International Projects & Supply Deals

China

Chinas Silk Road Fund, solely owned by Beijing Enterprises Holdings, wants to invest in
German firm EEW Energy from Waste. The three companies signed a cooperation
framework agreement. Silk Road said it wants to work with relevant partners to
support the solid waste treatment business in China, Germany and other parts of
Europe, in particular in Poland and the Netherlands.
 International Projects & Supply Deals

UAE - Dubai

Dubai plans to build one of the largest waste-to-energy plants in the Middle East. The
Dubai Municipality is building a $545m facility to convert solid waste into energy. The
plant will take three years to build and is expected to come on-line in 2020 and will
used some 2,000 tonnes of municipal solid waste every day, producing 60MW of
power. Dubai wants to reduce landfill waste by 75% over the next five years.
 International Projects & Supply Deals

India

Indias ACC Wadi Cement is trialling SRF sourced from the UK. The material has a heat
content of 4,000 kcal/kg NAR. More cement companies are trialling SRF material and
with a lack of waste infrastructure in India, it has potential as an alternative fuel to the
increasing capricious thermal coal market.
 International Projects & Supply Deals

Hong Kong

A new waste-to-energy plant in Hong Kong which opened in mid-May is attempting to

source up to 3 mt/yr of alternative materials, including RDF/SRF for consumption at
the plant. It will provide enough electricity to provide power for 4,000 homes and will
produce up to 2MW of surplus power, which will be sold to the grid. Hong Kong
sources its RDF/SRF from the UK, Germany, USA, China and Japan. It handles about 6
millions of tonnes of plastic per year. Hong Kong has three landfill sites, but municipal
waste is putting pressure on these sites. Hong Kong is trying to reduce its per capita
municipal solid waste disposal rate from 1.27 kg per day to 1 kg or below by 2017, and
further down to 0.8 kg or below by 2022.
 International Projects & Supply Deals

Japan

Japans Hitachi Zosen is looking at mergers and acquisitions to strengthen its waste-to-
energy plant business and expand into South Asia and the Middle East. It has set aside
40bn yen ($393m) for mergers and acquisitions over the next three years. President
Takashi Tanisho said the companys focus is on the environment and green energy, and
that waste-to-energy is an attractive M&A target.
 International Projects & Supply Deals

Sweden

N+P Alternative Fuels (Netherlands) has signed a five-year contract to supply Swedens
HC Milj, a subsidiary of Heidelberg Cement, with its Subcoal pellets. The material will
be supplied from N+Ps production site in the Netherlands. The Subcoal is produced
from using non-recyclable paper-plastic waste fractions, mainly sourced from the
Netherlands, the UK and Germany. The heat content is about comparable to some
bituminous coals, and it can be handled in the same way and can be used alongside
solid fuels.
 International Projects & Supply Deals

United Kingdom

Scottish & Southern Energy will later this year begin work on a second waste-to-
energy plant in West Yorkshire. The Ferrybridge Multifuel 2 project will generate
enough electricity to supply 170,000 homes in an investment worth 360m. The
multifuel power station will produce low carbon electricity through use of waste
derived fuels such as municipal solid waste, commercial and industrial waste and
waste wood.
 W2E/AEI RDF & SRF About The Index
W2E/AEI is a benchmark index for Alternative Fuels (AF), currently RDF and SRF, representing different
specifications (semi-processed, processed) in accordance with standardised regulations.
W2E/AEI indices currently cover the visible geographic trading hubs. Expanding Global Supply v Demand
requires an index to be used as a benchmark for trade in developing the expanding regions and countries.
W2E/AEI indices can be used for valuations of assets and trading; the index creates price transparency
enabling investment in infrastructure.
RDF & SRF are Commodities. No different than oil, coal, gas. The index assists valuing the commodity as an
asset facilitating trades by allowing exposure to AF fuel prices and enabling correlation to other similar
asset classes or commodities, such as carbon fuels (liquid, solid, gas).
Energy Markets function by measuring gas or coal carbon value against Power values and Spark Spreads.
W2E/AEI indices enable spread trading and risk management for AFs.
Methodology used to report the index is based on reported trades for the delivery hub, global supply v
demand and, freight costs. The basket of tonnage-weighted information is topped and tailed providing a
robust index.
W2E/AEI adopts similar principles to other indexes; W2E/AEI will not influence AF pricing; it reflects value
and provides a standardised trading instrument (SWFTA) for AFs (currently RDF & SRF) providing market
driven opinion on the current and future direction of AF prices. Like other indices W2E/AEI has no
influence over prices, compared to Futures where physical delivery is used as a settlement.
 W2E/AEI RDF & SRF
Indices CV (NAR) Delivery Price
W2E-RDF1 12 15 Mj/Kg DAP ARA 105.25
W2E-RDF2 16 18 MJ/Kg DAP ARA 83.58
W2E-SRF1 14 18 Mj/Kg DAP ARA 87.00
W2E-SRF2 18 - 22 Mj/Kg DAP ARA 69.60
Detailed SSP (Standard Specification Parameters) for each quality are
available to the International W2E Market Bulletin subscribers.
Quality variance from the SSP is reflected in the penalty/premium value
(+/-) in the standard contract price clause (Euros).
 Solid Fuel Prices
Delivery Period Thermal Coal Pet Coke
2016 6000 net kcal/kg 7000 net kcal/kg
1% S 5.0 - 7.0 % S
CIF ARA FOB US Gulf
Ex Russia
January 45.00 23.50
February 44.00 22.00
March 44.90 21.95
April 45.75 28.00
May 44.80 29.90
June 48.00 36.00
July (MTD) 50.00 42.00
Monthly Averages
 Solid Fuels Thermal Coal

Prices in physical coal markets are being stoked by activity in financial swaps. The
price increase in higher CV coals is pushing up demand for lower spec material.
Prices for Russian coal are assessed at $54/t CIF ARA, basis 6,000 kcal/kg NAR, up
$7/t on the last issue. Demand for lower volume Russian cargoes is strong,
especially for lower spec 5,700 kcal/kg NAR material. USA coal has been sold into
Europe, based on the recent increases in financial swaps, which has seen Cal 17
contracts move closer to $60/t CIF ARA. Financial coal swaps continue to support
physical coal CIF ARA.
Thermal coal inventories are rising at the main ARA terminals and are about
4.30Mt, and are also increasing at Polish and Russias Baltic ports. The UK is not
expected to see any new deliveries of coal in second-half of 2016.
(cntd).
 Solid Fuels Thermal Coal

Elsewhere, buyers of Mozambique coal are facing delays, due to the ongoing
logistical issues on the Sena rail line. Vessels at Beira and Nacala faced delays of up
to 20 days, starting mid-June. Stocks at Beira and Nacala are also low. In South
Africa, planned maintenance on the railway line, is now scheduled for 14 days,
instead of 10 from July 11, which means no coal deliveries to Richards Bay Coal
Terminal. There is 4Mt on the ground at the terminal, which is enough to get
through the maintenance period.
 Solid Fuel - Pet Coke

There is shortage of spot cargoes loading out of the United States Gulf of Mexico
for the next 60-days, while demand from India, and Turkey remains strong. This
shortage is pushing up prices to highs not seen since the third quarter of 2015. A
spot deal for a Supramax loading out of the US Gulf was done in the high $40s/t
FOB, basis 7,500 kcal/kg NAR this week. There are spot enquiries in Argentina,
Egypt, India and Turkey, but supplies are limited. Indian buyers are turning to
domestic petcoke albeit short in supply. China is also buying out of the west coast
of India and is paying $58/t FOB for 2-3% material in a Supramax. Since the last
W2E Bulletin, deals have closed at $40/t, $41/t and $41.70/t FOB, basis 7,500
kcal/kg NAR for July loadings. Supramax costs in the US Gulf basin are rising,
vessels are not ballasting in the region, as more long-haul trips are being booked.
 European Logistics / Freight / North Sea Coasters

Enquiries for smaller coal vessels are improving, as low stocks in northwest
Europe, indicates a just-in-time buying strategy from industrial buyers. Grain
exports from Russian and Ukrainian ports are also seeing some ships divert to a
basin that can secure better returns. Fertilizer and scrap metal shipments are also
improving out of Baltic Sea ports, which is pushing up rates in the North Sea basin.
Container enquiries from the UK are also improving for destinations outside the
EU, such as India, but prices are very high. Rates for containers in trucks have
edged lower to 45-49/t.
 Trade

England

Exports of waste from England fell for the second consecutive month in May,
according to the Environment Agency. Exports were 231,693 tonnes in the month,
falling from 276,759 tonnes in April and 327,200 tonnes in March. However,
exports remain above year-ago levels. Netherlands remained by far the biggest
destination (114,432 tonnes), followed by Germany (47,824 tonnes), Sweden
(27,847 tonnes), and Denmark (20,398 tonnes). Top 5 exporting companies were:
Biffa (32,532 tonnes), N&P Alternative Fuels (26,507 tonnes), SITA UK Ltd (20,278
tonnes), FCC Recycling (14,526 tonnes), Seneca Environmental Solutions (14,080
tonnes).
 Trade

England RDF / SRF Exports (tonnes)

600,000

500,000

400,000

300,000 2014
2015
200,000 2016

100,000

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Environment Agency

 Regulatory

Perus Ministry of Finance has enacted Impuesto Selectivo al Consumo (ISC) a

Selective Consumption Tax that will see a $17/t charge on bituminous coal and
anthracite which is used for electricity and cement production. The Selective
Consumption Tax (ISC) was implemented the first week of May after more than
five years of planning. Cement producers and power generators were exempted
from the tax in the original proposal, but these two industries are the biggest
consumers. As such, the new decree includes both sectors.
 International W2E Market Bulletin & W2E/AEI Terms of Use

The accompanying materials were prepared by International W2E Market Bulletin and W2E/AEI and
are not to be redistributed or reused in any manner without prior written consent, with the exception
of client internal distribution as described below.
International W2E Market Bulletin and W2E/AEI strives to be supportive of client internal distribution
of its information, including but not limited to graphs, charts, tables, figures, and data, are not to be
disseminated outside of a client organization to any third party, including a clients customers, financial
institutions, consultants, or the public.
Content distributed within the client organization must display International W2E Market Bulletin and
W2E/AEI legal notices and attributions of authorship.
Disclaimer: Information prepared by International W2E Market Bulletin and W2E/AEI may not be
relied upon by receivers of the report or other third parties. If the information is relied upon by any
person, International W2E Market Bulletin and W23/AEI does not accept, and disclaims, all liability for
loss and damage suffered as a result.

Subscription Cost - 985.00 per year (24 Issues)

Contact: info@savageresource.com
Copyright 2016 www.savageresource.com - All Rights Reserved