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Coal Trader International Monday, March 9, 2009

POSCO settles low-vol PCI contracts DAILY SNAPSHOT

at $90/mt FOB: sources Daily Physical Coal Trading, Mar 6
South Korea’s biggest steelmaker POSCO has settled the
($/mt) (`/mt)
first low-volatile PCI coal term contracts for the 2009 fiscal
year, finalizing deals with several Australian suppliers at CIF ARA coal 58.50 46.61
Richards Bay coal 57.00 45.42
$90/mt FOB, sources in Japan told Platts.
Newcastle coal 61.00 48.61
The PCI suppliers involved also agreed to cancel
POSCO’s outstanding 2008 tonnages, which were priced at Freight, RB to ARA* 9.00 7.17
an average $240/mt to $245/mt FOB and were supposed to Virtual Freight 1.50 1.20
be carried over starting April this year, sources in Japan Freight Differential 7.50 5.98
said.
From April 2009, POSCO will not load any low-vol PCI ARA coal, carbon-adjusted 88.70 70.68
cargoes priced at 2008 levels, a source in Japan confirmed. * Weekly freight rate courtesy of SSY
Suppliers of low-vol PCI, or pulverized coal injection,
were in Japan last week to kick off negotiations with
Japanese steel mills, the Japanese source said. Talks to
Spreads (Forward month), Mar 6
settle 2009 contract prices between market leader ($/MWh) (/MWh)
Macarthur Coal of Australia were understood to have been
advancing with steel mills in Europe and north Asia while Dark Spread (35% efficient coal plant)
BHP Billiton-Mitsubishi Alliance representatives were said UK 25.85 £18.30
Germany 19.98 `15.92
to be currently in negotiations in Tokyo with Japanese
buyers for hard coking coal contracts. Clean Spread (35% efficient coal plant)
The low-vol PCI coal suppliers have informed their UK 13.17 £9.33
Japanese customers that $90/mt FOB was settled as a 2009 Germany 7.30 `5.82
contract price with POSCO, a Japanese source said.
Heat Rate (Minimum efficiency to pay fuel cost)
“It is a price [$90/mt] that the Japanese mills will now
have to consider,” the Japanese source said. (Btu/kWh) (%)
Previously, the source said Japanese steel mills will not Gas, UK 10868 31.41 %
likely accept a price of $90/mt to $95/mt for low-vol PCI Gas, Germany 9646 35.39 %
material because thermal coal prices were already close to
$60/mt. and some other Brazilian mills were heard closing
But the POSCO settlement appears to have changed transactions, a market source told Platts.
their pricing position, a source in Japan said. Low-vol material of up to 25% vol (dry basis), 9% ash
An investment bank analyst said the plunge in demand (dry), and 0.8-0.9% sulfur (dry) fetched around $140/mt
for PCI meant the volumes contracted were key for the FOB Cartagena while mid-vol coking coal of between 26%-
producers. Macarthur said last month it is expecting to 29% vol content, 9% ash and sulfur at 0.8-0.9% traded at
boost sales of thermal coal to compensate for the lower around $130/mt FOB Cartagena, the source said. Blends of
demand for PCI from steel producers. roughly 26-30% vol content, 10% ash and sulfur of 0.9%
traded around $120/mt FOB Cartagena and a cargo of
Colombian PCI was recently done at $87.50/mt FOB Santa
Brazil mills buy some Colombian Marta, according to the source. Colombian pulverized coal
injection material typically contains 0.7% sulfur, 8% ash
coking coal at $140/mt and 30% to 35% volatile matter.
Brazilian steel mills that have recently trimmed purchases This material is mined in the north of the country,
of Colombian coking coal owing to the recent global where Colombia’s steam coal deposits are found, while
slowdown were heard buying a few handymax cargoes of coking coal deposits are found in the center, near Bogota,
low-volatile and mid-vol material at about $140/mt FOB without developed access to the main Caribbean ports.
and $130/mt FOB respectively. Colombia had planned to export as much as 400,000
ArcelorMittal’s Companhia Siderurgica de Tubarao unit (continued on page 3)

The McGraw Hill Companies

 COAL TRADER INTERNATIONAL MONDAY, MARCH 9, 2009

Platts Coal Industry Markers Daily Coal Price Trends Physical

Max Max High/Low
kcal/kg sulfur ash CIM Change Spread ($/mt)
CIF ARA 6,000 NAR 1.0% 16% 58.06 -4.78 0.96 250
Richards Bay FOB 6,000 NAR 1.0% 16% 56.96 -2.74 1.41 Europe CIF ARA Newcastle
Newcastle FOB 6,300 GAR 0.8% 13% 62.48 -3.90 15.00 Richards Bay CIF Japan
Kalimantan FOB (K1) 5,900 GAR 1.0% 15% 63.33 -0.67 8.00 210
Kalimantan FOB (K2) 5,000 GAR 0.8% 8% 52.33 0.76 11.50
CIM participants: Andalan Tiga Berjaya, Asia Pasific Coalindo, Banpu, Berau, 170
BHP Billiton, Bintang Batubara, Bloomfield, Britmar Asia, Bulk, Bunge, Cargill,
Coal & Oil, Electrabel, Ensham, EnBW, Essent, Global Business Power, Hokuriku,
Hoping, Korea South-East, London Commodity Brokers, National Power Corp.,
Nuon, RBS Sempra, RWE 130

Discards: CIF ARA, 1; Richards Bay, 2; Newcastle, 2; Kalimantan One, 4;

Kalimantan Two, 3. 90
Note: Prices in $/mt for 90-day forward delivery.

Platts Weekly 90-day Forward Benchmark Coal Price Assessments

50
Mar-08 Jun-08 Aug-08 Nov-08 Mar-09
06-Mar-09 06-Mar-09
($/mt) (`/mt)
Atlantic
PLATTS FORWARD CURVE
CIF ARA (6,000 kcal/kg) 57.75 46.02 Platts Forward Curve
FOB Richards Bay (6,000 kcal/kg) 57.00 45.42
FOB Bolivar (6,300 kcal/kg) 57.50 45.82 PFC – CIF ARA ($/mt)
FOB Bolivar (6,450 kcal/kg) 58.00 46.22 81
Poland Baltic (6,300 kcal/kg) 51.50 41.04
Russian Baltic (6,400 kcal/kg) 51.00 40.64
Pacific 74
FOB Newcastle (6,300 kcal/kg) 63.00 50.20
FOB Gladstone (6,500 kcal/kg) 66.00 52.59
FOB Qinhuangdao (6,200 kcal/kg) 87.00 69.32 67
FOB Kalimantan (5,900 kcal/kg) 60.00 47.81
FOB Kalimantan (5,000 kcal/kg) 50.00 39.84
Russia Pacific (6,300 kcal/kg) 73.00 58.17
60
CIF Japan (basket price) 80.00 63.75
CIF Korea West (6,080 kcal/kg) 71.00 56.57

(For complete specifications,including sulfur & ash, consult methodology at www.platts.com) 53

Mar-09 Apr-09 Q2-09 Q3-09 Q4-09 Q1-010 2010 2011
globalCOAL Daily Forward Curves Physical
Richards Bay 1 and Newcastle standard contracts (Physical)
PFC – FOB Richards Bay & FOB Newcastle ($/mt)
74
Best Bid Best Offer Best Bid Best Offer FOB Richards Bay
Phys RB1™ (FOB RBCT Low Vol) Phys Newc™ FOB Newcastle

68
Apr-09 54.50 59.00 58.50 65.00
May-09 NQ NQ 59.00 NQ
Jun-09 NQ NQ 55.00 62.00
62
Jul-09 NQ NQ NQ NQ
Aug-09 NQ NQ NQ NQ
Source: globalCOAL 56
Assessment notes: All coal prices in US$/mt unless otherwise noted. All coals 1%
sulfur maximum. Platts assessment and CIM bases: ARA, CIF, 6,000 kcal/kg NAR;
Richards Bay, FOB, 6,000 kcal/kg NAR; Bolivar, FOB, 6,300 kcal/kg and 6,450 kcal/kg
GAR; Newcastle, FOB, 6,300 kcal/kg GAR; Kalimantan, FOB, 5,900 kcal/kg and 5,000 50
kcal/kg GAR; Qinhuangdao, FOB, 6,200 kcal/kg GAR; CIF Japan, 6,080 kcal/kg NAR; Mar-09 Apr-09 Q2-09 Q3-09 Q4-09 Q1-010 2010 2011
CIF Korea West, 6,080 kcal/kg NAR. TFS bases: API#4®is Richard Bay, FOB, 6,000
kcal/kg NAR; API#2®is ARA CIF, 6,000 kcal/kg NAR. TFS API#2®and TFS API#4®are
registered trademarks of Tradition Financial Services. However, TFS no longer derives Graphs are created using Platts Forward Curve – Coal data.
the indices from a basket of published prices; publishers The McCloskey Group, Argus The forward curve in coal will provide eight assessments comprising two prompt
Media, and (for API#4®) South African Coal Report have taken over index derivation months, four prompt quarters and two calendar years.
and have dropped the “TFS” from the original name TFS APIs. While Platts believes
index specifications remain unchanged, readers are advised to contact those PFC–Coal is also available in computer-readable Platts Dispatch format. To see a
organizations directly for information on index methodologies. globalCOAL basis: sample and find information on how to subscribe go to www.risk.platts.com. For
Richards Bay 1™ (RB1) is an FOB standard physical coal contract for a minimum of questions about subscribing, please contact support@platts.com. For questions
6,000 kcal/kg NAR coal. Phys Newc™ is an FOB standard physical contract for a about the content of PFC–Coal, please contact James O’Connell at +44-20-7176-
minimum of 6,000 kcal/kg NAR coal. Platts pricing methodologies at www.platts.com. 6661, Gareth Carpenter at +44-20-7176-6656, or e-mail coal@platts.com.

2 Copyright © 2009, The McGraw Hill Companies

 COAL TRADER INTERNATIONAL
mt of coking coal last year and has potential to increase
production with further investment to improve transport
infrastructure and consolidate mines.
Freight lifts physical but week ends
on limited activity
The week ended on a quiet note in the Atlantic
physical steam coal market Friday, with European delivered
prices edging up on the previous day’s levels, supported by
slightly stronger freight.
“Panamax freight rates have been stronger the last
couple of days but it’s more of a temporary issue than a
structural issue,” said one physical coal trader.
“The market wants to go down, the general trend is
getting interrupted by some of these bear market rallies
but I think it’s just a matter of time,” said one European
trader.
A May delivery 50,000 mt DES AR generic origin cargo
was bid at $59/mt and offered at $60.50/mt on the
globalCOAL platform.
In the South African FOB market, a Richards Bay
panamax for April was bid at $57/mt offscreen with no
offer.
On an index-linked basis, a 150,000 consignment of
DES AR multi-origin coal for delivery throughout Q3-09
traded on the globalCOAL platform at a $1.30/mt
premium to the CIF ARA index, API2.
One trader said he had been surprised by a string of
recent prompt European FOB barges deals done at higher
levels in the last couple of days. Some shipments have
traded at $4/mt premiums to API2.
“People aren’t bringing coal into Europe at the moment
and are selling from their stocks to get a better price for
it,” said one market source.
Platts assessed the prompt month April CIF ARA price
at $58.50mt, up $2/mt, Richards Bay FOB at $57/mt, up
$0.50/mt, and Newcastle FOB at $61/mt, unchanged.
Swaps end day touch firmer
Coal swaps started the day softer but had retraced
losses and ended the day mildly up on Thursday’s closing
levels, closely tracking oil and equities amid small
volumes, sources said. European delivered API2 (CIF ARA)
swaps gained about $0.50/mt, with a slight expansion in
implied freight levels between the API4 (Richards Bay FOB)
swaps heard.
API2 Cal-10 opened lower, trading as low as $72.60/mt,
$1/mt off the overnight close, and then came back to go
]
Coal Trader International
Copyright © 2009 The McGraw-Hill Companies, Inc. Coal Trader International is published every business day. No reproduction permitted without express written authorization
Prices indexes and assessments are based on material collected from actual market participants. Platts makes no warranties, express or implied, as to the accuracy,
adequacy or completeness of the information and assumes no liability in connection with any party's use of it. Contact our editors at: coal@platts.com. For subscriptions,
customer support: support@platts.com, or phone: +1-212-904-3070 (N. America), +44-20-7176-6111 (Europe), +65-6530-6430 (Asia), +54-11-4804-1890 (Latin America)
The McGraw Hill Companies
3 Copyright © 2009, The McGraw Hill Companies
MONDAY, MARCH 9, 2009
through at $74/mt by end of day. API2 Cal-11 traded as
low as $78.25/mt, down $0.75/mt, before going through at
$79.60/mt. $0.60/mt firmer on overnight levels. API2 Q2-
09 prices didn’t make quite such a solid recovery, closing
only a touch higher than overnight levels after a steeper
initial drop of $0.90/mt.
GlobalCOAL swaps were higher over the day than
previous closing levels. Q2-09 Newcastle swaps went
through three times at $61/mt, $1.25/mt higher, and
Newcastle Q3-09 swaps were done at $61.25/mt, $1.50
firmer on Thursday’s close.
Teck considers securities linked to
coal to boost capital: report
Teck Cominco is mulling issuing securities to pension
funds based on as much as 20% of the company’s coal
production in a bid to raise capital and help pay back $9.4
billion in outstanding debt, a local report in Canada said.
The securities would offer interest payments and have
some exposure to coal prices but wouldn’t give the holder’s
any stakes in the mines, the report said. A media contact
at the Vancouver-based company didn’t return a call from
Platts seeking comment by the time of going to press.
Teck is planning to produce about 20 million mt of coal
in 2009 and 20% of this year’s output at current spot
prices for hard coking coal would total around half a
billion US dollars and the valuation would depend on the
timeframe of the cashflows involved. Caisee de depot et
placement du Quebec and Alberta Investment
Management are among fund managers that have been
“pitched a deal,” the report said, while state Chinese
mining groups may also be interested in investment.
In addition to the coal-linked securities, the pension
funds are also said to be considering buying the miner’s
debt, the report said.
Teck bought full control of Elk Valley coal assets at the
peak of the market taking out a $5.81 billion 364-day
bridge facility due October 29, 2009, and a $4 billion
three-year amortizing term loan facility repayable in 11
equal quarterly installments starting April 2009.
Plunging commodity prices led to a downgrade in
Teck’s credit ratings on a poorer earnings outlook making
it more difficult and expensive for the diversified miner to
access the capital markets. An equity capital raising, which
the funds may also consider, could be hampered by Teck’s
dual-share structure that gives controlling shareholders
holding A-class shares more power than their stakes overall
warrant, the report said.
(continued on page 4)
ISSN 1746-8914
Volume 9 / Number 47 / Monday, March 9, 2009
 COAL TRADER INTERNATIONAL MONDAY, MARCH 9, 2009

one company linked to Felix.

Felix Resources shelves takeover
talks, looks to India, Indonesia
Australian coal producer Felix Resources appears to have
abandoned its talks with potential takeover suitors to concentrate
on a new strategy of buying assets in India and Indonesia.
In an interview with the Bloomberg news agency, Felix
Resources managing director Brian Flannery was quoted as
saying the company was looking at acquisition opportunities
in India and Indonesia. Flannery reportedly said Felix was in
talks with parties building power stations in India. He added
that the company had decided to take a step back from its
talks with potential buyers. Flannery was not available for
comment on March 6 and Felix’s spokesman had not
responded to Platts’ queries by day’s end, March 6.
Only one week earlier Felix had said in its February 27
statement accompanying its 2008 half year results that it
was still engaged in talks about a possible change of
control transaction. Chinese coal miner Yanzhou Coal was
Felix said in its statement that the global financial crisis
meant it was “unlikely these discussions would be concluded
in the near term.” Felix also said in the statement its focus
would be on developing its business as well as “investigating
other strategic opportunities to add value for shareholders.”
India has outlined plans to build 9 ultra mega coal-fired
power plants each with a generating capacity of 4,000 MW of
which five are proposed for coastal locations and four are
mouth-of-mine projects, according to Shri Bhatia, deputy
secretary at India’s coal ministry. Speaking at a coal conference
in Singapore on February 26, Bhatia said: “Although there is a
global economic slowdown, demand for coal in India will
continue to grow and measures will need to be taken to meet
this demand.” Coal-fired power stations presently accounted for
83.3% [77,458 MW] of India’s 93,393 MW of power generating
capacity. India is forecast to import 70 million mt of coal by
2012 compared with 50 million mt in 2007-08, Bhatia said.
Felix Resources’ share price closed 2.6% lower at A$7.05
on the Australian Stock Exchange, March 6.

Platts Forward Curve – Coal

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4 Copyright © 2009, The McGraw Hill Companies

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