WORLD MARKET FOR METALLURGICAL COAL

L. F. SARCINELLI GARCIA CARLOS HEITOR M. DE FARIA SAGE CONSULTORIA TÉCNICA LTDA.

BELO HORIZONTE, MG, BRAZIL SEPTEMBER 2013

Coal proved reserves at the end 2012 The coal reserves are distributed in the five continents.

USA

237,295

27.6%

Russia

157,010

18.2%

China

114,500

13.3%

India

60,600

7.0%

Australia

76,400

8.9%

Ukraine

33,873

3.9%

Kazakhstan

33,600

3.9 %

75% of the reserves are located in five countries: USA, Russia, China, India and Australia.  Around 50% of the coal reserves are of bituminous coals and anthracites, and the balance 50% are of low rank coals: lignite and subbituminous. Considering the current production level the reserves guarantee 109

South Africa

30,160

3.5%

years of production.

Poland

5,709

0.7%

Brazil

4,559

0.5%

Total

860,938

100.0%

Countries

Source: BP 2013

Reserves (billion t)

Share of Total

World coal production 1995-2012e (billion t) Expected increase of coal production Annual average 2010-40: 1.2% a.a. Source: U.S. Energy Information Administration - EIA

6,84

7,21

7,61

7,83

2011

2012e

6,01 4,57

4,65

1995

2000

2005

Source: International Energy Agency - IEA

2009

2010

Major coal production countries Coal production in 2012e (million t)

3.549 Between 2010 and 2012, China increased coal production in around 410 million t

935 595

China Source: IEA

USA

India

443

Indonesia

421

354

Australia

Russia

259 South Africa

Coal participation on electric generation in selected countries - 2008/09. Several countries in the world are heavily dependent on coal for electricity 93%

90%

79%

76% 69% 45%

South Africa

Poland

Source: World Coal Association

P. R. China

Australia

India

USA

Major steel production countries Crude steel production in 2012 (million t) 709

107

China

Japan

Source: World Steel Association

89

USA

77

71

69

India

Russia

Korea

43 Germany

Major pig iron/blast furnace iron production countries Pig iron/blast furnace iron production in 2012 (million t) 654

81

China

Japan

Source: World Steel Association

51

42

42

32

27

Russia

India

Korea

USA

Germany

Major coking coal production countries Coal production in 2012e (million t)

510

Total coking coal production : 983.8 million t

147 81

75 47

Source: IEA

China

Australia

USA

Russia

India

31

21

Canada

Mongolia

Major coal export countries Exports in 2012e (million t) Total coal exports: 1,255.3 million t Steam coal exports: 962.7 million t Coking coal exports : 290.1 million t

383 302

134

114 82

74 35

Source: IEA

Major coking coal export countries Exports in 2012e (million t) Total coking coal exports : 290.1 million t

142

63

31

Source: IEA

19

18

3

3

Major coal import countries Imports in 2012e (million t)

289

Total coal imports: 1,276 million t

184 160 126 65

Source: IEA

45

45

Major coking coal consuming countries Consumption in 2012e (million t) Total consumption of coking coal: 976.2 million t

579

84

Fonte: EIA

56

52

32

27

19

Major PCI coal consuming countries Consumption in 2012e (thousand t) Total consumption of PCI coal: 43,468 thousand t

12593 9310

Data for China not available

4604

3772

2877 1808

Source: IEA

1479

World coal flows by import regions 2011-2040 (million t)

Year 2011 2040

Europe million t 223.1 248.2 (+11%)

Americas Year million t 2011 55.0 2040 115.8(+111%)

TOTAL Year 2011 2040

million t 1027.0 1593.7 (+55%)

Year 2011 2040

Source: EIA

Asia million t 738.0 1229.7 (+67%)

World coking coal flows by import regions 2011-2040 (million t)

Year 2011 2040

Europe milion t 60.5 60.2 (-0.4%)

Americas Year million t 2011 21.0 2040 45.6(+117%)

TOTAL Year 2011 2040

million t 258.6 395.4(+53%)

Year 2011 2040

Source: EIA

Asia million t 173.2 289.6 (+67%)

World coal flows by export regions 2011-2040 (million t)

Canada Year millions t 2011 33.4 2040 47.2 (+41%)

USA Year million t 2011 97.3 2040 153.5 (58%)

Colombia + Venezuela Year million t 2011 71.7 2040 101.9(+42%)

Total Year 2011 2040

million t 1027.0 1593.7 (+55%)

Source: EIA

Poland + Eurasia Year million t 2011 87.5 2040 133.4 (+52%)

Year 2011 Southern Africa 2040 Year million t 2011 70.0 2040 127.5 (+82%)

China + Vietnan Year million t 2011 39.6 2040 22.0 (-44%) Indonesia million t 337.6 416.2 (+23%)

Year 2011 2040

Australia million t 281.6 508.7 (+81%)

World coking coal flows by export regions 2011-2040 (million t)

Canada Year millions t 2011 27.7 2040 38.4 (+39%)

USA Year million t 2011 63.1 2040 60.7 (-0,4%)

Poland + Eurasia Year million t 2011 11.1 2040 23.0 (+107%)

Year 2011 Southern Africa 2040 Year million t 2011 0.9 2040 30.5 (+3260%)

Total Year 2011 2040

million t 258.6 395.4 (+53%)

Source: EIA

China + Vietnan Year million t 2011 3.6 2040 1.1 (-70%) Indonesia million t 19.1 19.1 (0%)

Year 2011 2040

Australia milion t 133.3 222.6(+67%)

Source: OCDE – An assessement of the supply-demand balance for the main steelmaking raw materials – 74th Steel Committe Meeting – July 2013

COKING COAL – PRICE EVOLUTION

Source: TSI

Source: OCDE – An assessement of the supply-demand balance for the main steelmaking raw materials – 74th Steel Committe Meeting – July 2013

BRAZIL – Existing steel plants based on coke blast-furnaces/BOF Plant

Location City/State

Crude Steel Production Capacity /year (103 mt)

Remarks

-

Blast furnaces operating only with charcoal since January 2011.

Aperam

Timoteo/MG

ArcelorMittal Monlevade

J. Monlevade/ MG

1,200

No coke batteries.

ArcelorMittal Tubarão

Serra/ ES

7,500

Includes SOL COQUERIA

Gerdau AÇOMINAS

Ouro Branco/MG

4,500

USIMINAS Ipatinga

Ipatinga/ MG

5,000

USIMINAS Cubatão

Cubatão/ SP

4,500

CSN

Volta Redonda/ RJ

5,600

CSA

Rio de Janeiro/ RJ

5,000

TOTAL

Sources: BSM and SAGE

33,300

JV TKS(73,13%) Vale (26,8%) Start-up: 2nd Half 2010 (BF#1)

BRAZIL - Existing coke plants Production capacity/year – ROO dry basis

Plant

Nominal Production Capacity /year (103 mt)

ArcelorMittal Tubarão

3,250

Gerdau AÇOMINAS

1,811

USIMINAS Ipatinga

1,874

USIMINAS Cubatão

1,700

CSN

1,655

CSA

2,000

TOTAL

12,290

Sources: BSM and SAGE

Remarks

Includes SOL COQUERIA (heat recovery)

Production capacity estimated for 2015 after revamping coke plant #2.

Heat recovery

BRAZIL 2009/2011 Coking coal and PCI Coal consumption(103 mt) 2009

2010

2011

- Coking coal

10,575

12,450

11,724

- PCI coal

2,307

3,178

2,696

Total metallurgical coal

12,882

15,628

14,420

Remarks:  All coal consumed by the Brazilian Steel Mills (BSM) is imported.  During this period, some mills consumed pet coke; in 2011, BSM consumed around 1 million mt of pet coke - coke blend and for injection in BFs.  During this period , there were imports of coke; In 2011, CSN imported around 550,000 mt of BF coke. Sources: BSM; IABr; SAGE

BSM with coke blast furnaces/BOF 2011 crude steel and coke production and coal consumption (103 mt) Plants

Coke Production ROO

Metallurgical coal consumption/ year (e) 1

PCI coal consumption/ year (e)

739

-

-

-

AM Monlevade

1,145

-

-

90

AM Tubarão 3

5,354

2,870

3,837

637

Gerdau AÇOMINAS

3,740

1,475

1,911

476

USIMINAS Ipatinga

3,688

1,509

1,470

364

USIMINAS Cubatão

3,008

1,520

1,435

369

CSN

4,874

1,531

1,950

595

CSA

3,147

801

1,121

TOTAL

25,695

9,706

11,724

Aperam

Crude Steel Production

1

1, 2

(e)

165 2,696

USIMINAS (Ipatinga and Cubatão) and G. Açominas consumed pet coke in the coke blend and for injection. 2 Including anthracite fines injection. 3 Including Sol Coqueria

Sources: BSM; IABr;SAGE

(e)

BSM with coke blast furnaces/BOF Estimated coking coal and PCI coal consumption When operating at nominal capacity(103 mt) 2009

2010

2011

Operating at nominal capacity

- Coking coal

10,575

12,450

11,724

16,517

- PCI coal

2,307

3,178

2,696

5,484

Total metallurgical coal

12,882

15,628

14,420

22,001

At this stage it was considered that when operating at nominal capacity, BSM would consume around 760,000 mt of pet coke.

Sources: BSM; SAGE

BSM with coke blast furnaces/BOF Current production capacity and estimated coal consumption when operating at nominal capacity (103 mt) Plants

Coking coal consumption/ year(e)

PCI coal consumption/ year (e)

Crude Steel Production Capacity /year

Coke Production Capacity/year ROO

AM Monlevade 1

1,200

-

AM Tubarão

7,500

3,250

4,592

1,391

Gerdau AÇOMINAS

4,500

1,811

2,491

657

USIMINAS Ipatinga

5,000

1,850

2,369 2

743

USIMINAS Cubatão

4,500

1,700

1,900

654

CSN

5,600

1,655

2,339

936

CSA

5,000

2,000

2,826

922

TOTAL

33,300

12,266

16,517

5,484

1

Only PCI coal - coke supplied by AM Tubarão

2

2013

181

Source: BSM; SAGE

BRAZIL- steel production expansion programs Steel mills with coke blast furnaces/BOF Estimated coal consumption Selected projects (I)

Project under construction Plants

C. S. PECEM2

GF

Crude Steel Production Capacity /year (103 mt)

Coking coal consumption/ year(e) (103mt) 1

PCI coal consumption/ year(e) (103mt) 1

Estimated Start-up

3,000

1,830

550

2015

GF - Green Field 1

Consumption based on the production capacity. No utilization of pet coke. 2 Joint venture Vale, Posco and Dongkuk

BRAZIL - steel production expansion programs Steel mills with coke blast furnaces/BOF Estimated coal consumption Selected projects (II)

Projects under analysis Plants

AM Monlevade 1

BF

Crude Steel Production Capacity /year (103 mt)

Coking coal consumption/ year(e) (103mt)

PCI coal consumption/ year(e) (103mt) 1

1,200

-

180

BF – Brown Field 1

Additional capacity.

BRAZIL - steel production expansion programs Steel mills with coke blast furnaces/BOF Estimated coal consumption Selected projects (III)

Coke plants under analysis Plants

CSN 2, 3

BF

Coke Production Capacity /year - ROO (103 mt)

Coking coal consumption/ year(e) (103mt) 1

550

720

BF – Brown Field 1

Consumption based on the production capacity. No utilization of pet coke. 2 Additional capacity. 3 Revamping of CSN coke plant #3

BSM potential coal consumption (103 mt) Coking coal

PCI coal

Total

Existing mills operating at nominal capacity

16,517

5,484

22,001

Project under construction

1,830

550

2,380

-

180

180

720

-

720

19,067

6,214

25,281

Projects under analysis CSN coke plant TOTAL

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