Casper Burgering

Senior sector economist

prospects for the dry bulk sector

Commodity Trade PatternsSector & Commodity Research

31 October 2012

Speaker notes available on request

Changing Patterns in Seaborne Trade

Source: Clarkson Research Services, ABN AMRO Sector & Commodity Research

Global seaborne trade patterns changed significantly in 20 years

} Imports into Asia increased strongly by 274% in 20 yrs (cagr 14% pa)

} Iron ore and coal seaborne trade main drivers of growth

14%

13%

73%

Data in figure based on trade of iron ore, coal and wheat (= 60% of total dry bulk trade)

20

%5

2%

28

%

0%

10%

20%

30%40%

50%

60%70%

80%90%

100%

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Coal, iron ore, grains import into EUCoal, iron ore, grains import into AsiaCoal, iron ore, grains import into Others

Dry Bulk Trade 1992-2012 (seaborne)

0 200 400 600 800 1,000 1,200

Other

Coke

Pig iron

Phosphate rock

Sugar

Petroleum coke

Nickel ore

Anthracite

Soyabeans

Cement

Fertiliser

Bauxite

Scrap

Agribulks

Forest products

Coking coal

Wheat

Steel products

Steam coal

Iron ore

1992 (volume in mln tonnes) 2012 (volume in mln tonnes)

Iron ore

21%

Metals

related

27%

Steam

coal

13%

Agri

related

32%

Other

7%

Source: Clarkson Research Services, Metal Bulletin, ABN AMRO Sector & Commodity Research

Dry Bulk Trade 1992:

Dry Bulk Trade 2012:

Other

10%

Agri

related

21%

Steam

coal

20%

Metals

related

21%

Iron ore

28%

China

India

Russia

Indonesia

US

UK

Germany

France

Italy

Spain

TurkeySouth

Africa

Japan

Netherlands

Brazil

0

10,000

20,000

30,000

40,000

50,000

60,000

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Urbanisation ratio (%)

GD

P p

er

ca

pita

(U

SD

)

Size bubble = crude steel use per capita (kg)

(see value near or in bubble)

5

6

44545 97

323

335

239

459

539

248

292

500

163

298147

Economic Development of Countries

Source: IISI, Worldbank, OECD

40% of world population

highmedium

low

highmedium

low

China & India Urbanization Process (2011)

Source: McKinsey Global Institute, Thomson Reuters Datastream

Today, 50% of world population lives in urban areas

Srinagar

Jammu

Ludhiana

Amristar ChandigamSimla

Jodhpur

Jaipur

DehliNew Dehli Kathmandu

Itanagar

KandlaGandhinagar

IndoreBhopal

Gwalior

Agra LucknowKanpur

Patna

Ahmadabad

Siliguri

SillongLedo

Veraval

Vadodara

Jabalpur

Varanasi

Allahabad

DhambadAgartala

Kohima

SilvassaSurat

Durg-Bhilainagar

Howrah

Imphal

AizawlAshansol

UlhasnagarNasik

Nagpur

Raipur Jamshedpur KolkataCuttak

Sholapur

Mumbai Poona

Hyderabad Vishakhapatnam

Puri

Bhubaneshwar

Vijayavada

Panaji

Marmagao Guntakai

Mangalore

Bangalore Chennai

Pondicherry

Salem

Madurai

Mysore

TrivandrumCochin

TiruchirapalliCalicut (Khozikode)Cuddalore

Coimbatore

Ranchi

Sichuan

Heilongjiang

Jilin

Liaoning

Hebei

Shandong

Fujian

Jiangxi

Anhui

Hubei

Hunan

Guangdong

Guangxi

Shanghai

Henan

Shanxi

Hainan

InnerMongolia

Shaanxi

Ningxia

Gansu

Qinghai

Guizhou

Yunnan

Tibet

Xinjiang

Jiangsu

Zhejiang

Tianjin

Taiwan

Beijing

Hong Kong

Macau

Chongqing

China 2011:

Population: 1,339,724,852

Urban people: 679,000,000

Urbanisation rate: 51%

India 2011:

Population: 1,189,000,000

Urban people: 357,000,000

Urbanisation rate: 30%

China & India Urbanization Process (2025-30)

Source: McKinsey Global Institute, Thomson Reuters Datastream

By 2025, more than 60% of world population lives in urban areas

Srinagar

Jammu

Ludhiana

Amristar ChandigamSimla

Jodhpur

Jaipur

Dehli

New DehliKathmandu

Itanagar

KandlaGandhinagar

IndoreBhopal

Gwalior

Agra LucknowKanpur

Patna

Ahmadabad

Siliguri

SillongLedo

Veraval

Vadodara

Jabalpur

Varanasi

Allahabad

DhambadAgartala

Kohima

SilvassaSurat

Durg-Bhilainagar

Howrah

Imphal

AizawlAshansol

UlhasnagarNasik

Nagpur

Raipur Jamshedpur KolkataCuttak

SholapurMumbaiPoona

Hyderabad Vishakhapatnam

Puri

Bhubaneshwar

Vijayavada

Panaji

Marmagao Guntakai

Mangalore

Bangalore Chennai

Pondicherry

Salem

Madurai

Mysore

TrivandrumCochin

TiruchirapalliCalicut (Khozikode)Cuddalore

Coimbatore

Ranchi

Sichuan

Heilongjiang

Jilin

Liaoning

Hebei

Shandong

Fujian

Jiangxi

Anhui

Hubei

Hunan

Guangdong

Guangxi

Shanghai

Henan

Shanxi

Hainan

InnerMongolia

Shaanxi

Ningxia

Gansu

Qinghai

Guizhou

Yunnan

Tibet

Xinjiang

Jiangsu

Zhejiang

Tianjin

Taiwan

Beijing

Hong Kong

Macau

Chongqing

China 2025:

Population: 1,470,787,000

Population growth: 10%

Urban people: 926,000,000

Urbanisation rate: 63%

India 2025-30:

Population: 1,470,000,000

Population growth: 24%

Urban people: 588,000,000

Urbanisation rate: 40%

Wuhan

Shenzhen

Current Wheat Trade Flows

Volatile trade patterns in agribulks

Source: IGC

} Supply is highly dependent on (regional) weather conditions

} Major import demand: Africa & Far East Asia

} Share in global output of China and India high (resp. 17% and 13%)

15%

18%

28%

13%

% = share in global wheat trade (figures 2010/2011)

6%

3%*

* Russia share 2009/2010 = 15%; Russia share 2011/2012 (e) = 15%

Current Coking Coal trade flows

Trade is likely to become more concentrated

Source: USGS, ABARE, AME, IEA, Metal Bulletin

} Australia & N. America together have 84% share in coking coal trade

} Game changer: Mongolia export volume is joining the ranks!

} Shift from seaborne to landborne trade

to Asia

11%

51%

26%

6%

7%

23%

3%

6%

6%

10%2%

5%

% = share in global coking coal trade

7%

Mongolia!

Current Steam Coal Trade Flows

Increased concentration reduces risk associated with greenfields

Source: USGS, ABARE, AME, IEA

} Atlantic Basin: ‘paper trade’ grown rapidly in last 4 yrs

} Game changers: increasing demand from Japan after Fukushima?

} India increasing coal import; relations with Indonesia & S. Africa

17%

8%

6%

9%

13%

% = share in global steam coal trade

15%

36%

33%

8% 4%

2%

4%

2%

Production Growth in Coal Across the Globe

Despite rising costs, investments in mining increase

Source: IEA, Metal Bulletin

} Top 30 coal miners have high reserves-to-production ratio: 60 yrs

} Output of hard coal in US and Europe is in a downward trend

} Centre of gravity of supply (and demand) in Far East Asia

+80%

+69%

+57%

+25%

+12%

+13%

0

1,000

2,000

3,000

4,000

5,000

6,000

2009 2015 2020 2025 2030 2035

Mtc

e

US Europe Australia

Russia China India

Indonesia South Africa Colombia

Increase production hard coal 2009-2035

Current Iron Ore Trade Flows

China is main importer of iron ore with a share of 59% in 2011

Source: UNCTAD, Metal Bulletin

} 95% of global iron ore trade is seaborne

} Pacific trade 55% and Atlantic trade 45% (in 2001: 45%-55% resp.)

} Output Pilbara region (Aus) approx. 430 mln tonnes/yr and rising

38%

29%

9%

4%

3%

35%

6%

22%

2%

% = share in global iron ore trade

8%2%

New Iron Ore Project Developments until 2014

- Rio Tinto

- BHP Billiton

- Fortescue Metals Grp

- Xstrata

- Eight minor companies

- Atlas Mining

- Brockman Resources

- FerrAus Ltd

- CITIC Pacific Mining

- Kumba

- Xstrata

- IMX

- Vale

- in Minas Gerais

- ArcelorMittal / Baffinland(Mary River Project)

Approx. 200 Mt reserves

- Rio Tinto(Guinea Simandou)

- Rio Tinto(JV Orissa Mining)

> 400 Mt

75-100 Mt

50-75 Mt

~ 30 Mt

> 100 Mt

~ 20 Mt

* Minor selection of total green- and brownfield projects worldwide

New discovered iron ore deposits in Qinghai

50-75 Mt

Sources: USGS, UNCTAD, Mining Journal, various public sources

} May 2012: Total project pipeline is 796 Mt of new production capacity, to come on stream between 2012-2014

ð Of which: 34% is certain, 28% is probable, 38% is possible

Country Dependency on Iron ore & Coal

Source: ABN AMRO Sector & Commodity Research (based on data from BP, EIA, UNCTAD)

• Basis: share in world proven reserves 2011

• Domestic availability & self sufficiency rate

• External dependency

• Basis: share in world imports 2011• Necessity for future development and

stage in economic transition• Urbanisation rate and demographics

Low High

How high is need for the commodity to a country?

What is the reserve base of a country?

Low

High

China – iron ore

China – coal

India – iron ore

India – coal

Japan – coal

Japan – iron ore

EU – iron ore

Indonesia – coal

S.Korea – iron ore

Australia – iron ore

Brazil – iron ore

Brazil – coal

Mongolia – coal

Developed countriesNewly industrializedDeveloping countriesLeast developed countries

Russia – iron ore

Russia – coal

Americas – coal

Australia – coal

S.Korea –coal

S. Africa – coal

EU – coal

0

200

400

600

800

1,000

1,200

1990 2000 2009 2020 2035

Mtc

e

0%

20%

40%

60%

80%

100%

Atlantic Coal Trade

Pacific Coal TradePacific Coal Trade Share (r.axis)

To conclude on Dry Bulk Trade Patterns

0

200

400

600

800

1,000

1,200

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Mt

40%

45%

50%

55%

60%

Atlantic Iron Ore Trade

Pacific Iron Ore Trade Pacific Iron Ore Trade Share (r.axis)

China joined WTO &

IOC announced

Beijing 2008

Source: IEA, Clarkson Research Services, ABN AMRO Sector & Commodity Research

Constantly changing trade patterns, but Asia will remain key trading area

} Over the past 20 years seaborne trade patterns changed significantly

} Dry bulk seaborne traded volumes increased by 400%+ in 20 years

} Urbanisation & industrialisation (China, India) will provide solid base

} Agribulk trade patterns will remain volatile

} Centre of global coal trade will be in the pacific (share of 75% in 2020)

} Huge investments will keep Australia on No.1 in iron ore output

forecasts by IEA

Further Information & Disclaimer

Casper Burgering

Senior sector economist – Hard Commodities

ABN AMRO Group Economics | Sector & Commodity Research

tel: +31 20 383 26 93

e-mail: casper.burgering@nl.abnamro.com

Visit also ABN AMRO Group Economics on the internet

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