Week Ending

February 16, 2016 Coal Weekly

Analyst Contacts:
Holly B. Stewart (713) 393-4512 hollys@howardweil.com
Alonso Guerra-Garcia (713) 393-4511 alonsog@howardweil.com

For all relevant disclosures and certifications see Appendix A Important Disclosures of this report.
Scotia Howard Weil is a division of Scotia Capital (USA) Inc., a member of the Scotiabank group, and represents Scotiabank’s energy equities business in the United States. Page 1
Conclusions…
Weekly take-
take-aways
Production – Total U.S. coal production for the week ending February fell ~30% y/y to 12.9 mm tons. Year-to-date production is now 37.1 mm
tons, or 32%, below the same period in 2014.
Pricing –
Regional Pricing – CAPP, ILB, and PRB pricing declined ~3.5%, ~1.5%, and 0.5% to $40.25/st, $31.50/st, and $9.70/st, respectively, during the week.
Western Bit spot prices rose ~1.5% to $29.50/st. Pricing in the NAPP region remained unchanged for the latest week.
International Pricing – The Newcastle seaborne thermal price rose ~2.5% to $53.25/mt during the latest week. The Australian price has recovered
~9.5% from the record sub-$50/mt lows experienced a month ago.
Coal-
Coal-fired vs. Gas-
Gas-fired Economics – CAPP coal remains out of the money as the eastern natural gas price trades near $2.05/mcf. The coal-
fired fleet burning PRB coal is uneconomic at the current gas price.
Coal Carloads – Compared to the same week last year, average weekly Eastern carloads were down ~23% and Western carloads declined
~30%. Eastern carloads increased ~3% w/w, while Western volumes fell ~8% compared to the previous week.

Page 2
Weekly Updates…

Page 3
Domestic Coal Supply

W eek ly Production by Region (m m tons) Weekly production

W e ek 6 % change
Region 6 -F eb-1 6 7-F eb-15 5-yr avg Y /Y 5 -yr avg Total U.S. coal production for the week ending
Appalachian 3.1 4.8 5.6 -34.4% -44.5% February 6 fell ~30% y/y to 12.9 mm tons when
Interior 2.4 3.5 3.4 -30.2% -28.7% compared to the same week last year.
W estern 7.3 10.2 10.3 -28.0% -28.7%
Total 1 2 .9 1 8 .4 1 9 .3 -3 0 .1 % -33 .3 %

Y TD Production by Region (m m tons) Year-

Year-to-
to-date production
To-Date % change
Year-to-date production is now 37.1 mm tons
Region 2 01 5 2014 5-yr avg Y /Y 5 -yr avg
Appalachian 19.1 29.7 32.8 -35.9% -41.8%
below the same period in 2014.
Interior 14.7 21.7 20.1 -32.3% -26.9% 2015 ended the year with 890 mm tons produced,
W estern 44.2 63.6 61.5 -30.5% -28.1% 11%, or ~110 mm tons, below that of 2014.
Total 7 8 .0 1 1 5.1 1 1 4 .4 -3 2 .2 % -31 .8 %

Source: EIA

Page 4
Coal Pricing…futures picture

C APP F utures Pricing - W eek ly C hanges

C urrent W eek Previous W eek % C hange
2 Q1 6 $37.00 $36.75 0 .7 %
3 Q1 6 $37.40 $37.10 0 .8 %
4 Q1 6 $38.70 $38.40 0 .8 %
1 Q1 7 $40.50 $40.35 0 .4 %
Average $ 3 8 .4 0 $ 3 8 .1 5 0 .7 %
$37.70
PRB F utures Pricing - W eek ly C hanges
C urrent W eek Previous W eek % C hange
2 Q1 6 $9.60 $9.40 2 .1 %
3 Q1 6 $9.40 $9.40 0 .0 %
4 Q1 6 $9.40 $9.40 0 .0 %
1 Q1 7 $9.55 $9.45 1 .1 %
Average $ 9 .4 9 $ 9 .4 1 0 .8 %

Page 5
 Coal Pricing…domestic spot market
C APP N APP Illino is Basin PRB W estern Bit
W ee k ly C o m parisons
2/13/2016 $40.25 $39.00 $31.50 $9.70 $29.50 Weekly pricing
2/6/2016 $41.75 $39.00 $32.00 $9.75 $29.00
Weekly Change -3.6% 0.0% -1.6% -0.5% 1.7% CAPP, ILB, and PRB pricing declined ~3.5%,
2/14/2015 $50.00 $51.75 $37.50 $9.85 $31.65 ~1.5%, and 0.5% to $40.25/st, $31.50/st,
Annual Change -19.5% -24.6% -16.0% -1.5% -6.8% and $9.70/st, respectively, during the week.
12 Month High $51.00 $51.75 $37.75 $11.10 $31.65
Western Bit spot prices rose ~1.5% to
12 Month Low $40.25 $39.00 $29.50 $9.70 $28.75
$29.50/st.
Quarterly C om pariso ns (Avg.) Pricing in the NAPP region remained
1Q11 $77.55 $73.98 $45.00 $13.83 $41.00 unchanged during the week.
2Q11 $78.83 $77.70 $45.00 $12.73 $41.00
3Q11 $80.20 $77.05 $45.00 $14.42 $41.00
4Q11 $78.79 $58.28 $48.29 $13.53 $41.00
1Q12 $67.53 $67.13 $53.78 $9.58 $41.00
2Q12 $63.65 $60.33 $47.53 $8.30 $41.00
3Q12 $63.05 $60.28 $43.58 $8.99 $41.00
4Q12 $66.21 $60.58 $38.57 $10.09 $41.00
1Q13 $65.70 $60.96 $38.85 $10.37 $41.00
2Q13 $66.84 $62.30 $40.06 $10.67 $41.00
3Q13 $60.96 $63.37 $39.22 $10.87 $41.00 Quarterly pricing
4Q13 $61.56 $62.29 $39.20 $11.01 $40.92
1Q14 $63.10 $62.20 $40.98 $11.61 $40.00
Pricing activity continued its trend lower for
2Q14 $65.20 $61.49 $41.70 $13.22 $37.29 CAPP, Western Bit, NAPP, and PRB in 4Q
3Q14 $58.00 $60.21 $42.05 $11.68 $32.92 with prices declining ~8%, ~4%, ~3%, and
4Q14 $56.47 $60.31 $40.26 $12.30 $31.66 ~0.5%, respectively. In the ILB, prices
1Q15 $51.52 $52.83 $37.08 $10.98 $30.50 actually recovered ~1%.
2Q15 $48.73 $46.83 $36.42 $10.46 $30.81
3Q15 $47.57 $42.75 $35.02 $10.61 $31.23
4Q15 $44.08 $41.55 $35.25 $10.56 $29.95
1Q16 $41.83 $39.75 $31.25 $9.81 $28.92
Q/Q Change (1Q16 vs. 4Q15) -5.1% -4.3% -11.3% -7.1% -3.4%
Y/Y Change ('15 vs. '14) -21.0% -24.7% -12.9% -12.7% -13.7%

Source: Platts Coal Trader

Page 6
 Spot Pricing…international markets
Australia Coal Pricing*

$140

$120 Australian spot pricing

$ /m etric tonne

$100 For the week ending February 12,

$80 Newcastle pricing rose ~2.5% to
$60 $53.25/mt. Pricing has tracked lower in the
$40 past several weeks following the seaborne
thermal price spiked to ~$71/mt early in
the year.
Source: Bloomberg
* API #3 Newcastle 6,000 kc GAD fob steam coal spot price

2011 2012 2013 2014 2015 2016 % C hange W ee k End % C hange

Q1 $127.72 $112.29 $91.33 $77.43 $62.85 $51.00 -18.9% 2/13/2015 $69.30
Q2 $119.97 $94.49 $85.38 $72.73 $58.07 2/12/2016 $53.25 -2 3 .2 %
Q3 $120.50 $86.15 $77.06 $67.96 $58.10 2/5/2016 $51.85 2 .7 %
Q4 $113.93 $84.25 $82.02 $62.95 $52.83
Ye ar $ 1 2 0 .5 3 $ 9 4 .2 9 $ 8 3 .9 5 $ 7 0 .2 7 $ 5 7 .9 6

NW Europe Coal Pricing*

$150

$125
$ /m etric tonne

$100

$75 European spot pricing

$50 Spot pricing in NWE declined ~0.5% to
$25 $43.15/mt. The drop in the European
thermal market has been a persistent
theme since late 2012.
Source: Bloomberg
* API #2 coal delivered to the ARA region of Northwest Europe; prices are CIF (cost, insurance, freight) inclusive

2011 2012 2013 2014 2015 2016 % C hange W e ek End % C hange

Q1 $122.97 $100.57 $86.39 $79.00 $60.39 $44.82 -25.8% 2/13/2015 $65.10
Q2 $124.70 $89.47 $79.87 $74.51 $58.30 2/12/2016 $43.15 -3 3 .7 %
Q3 $123.90 $90.93 $76.27 $75.51 $55.85 2/5/2016 $43.45 -0 .7 %
Q4 $114.51 $88.77 $84.28 $72.96 $49.77
Ye ar $ 1 2 1 .5 2 $ 9 2 .4 3 $ 8 1 .7 0 $ 7 5 .5 0 $ 5 6 .0 8

Page 7
Coal vs. Gas Economics

Coal vs. Gas Economics

Dark Spread C alculatio n Spark Spread C alculation
Assum ptio ns PRB C entral App PRB C e ntral App
Power price ($/Mwh) $28.88 $25.75 $28.88 $25.75
Fuel costs ($/ton)
C oal price $ 9 .7 0 $ 4 0.2 5
Transportation cost $25.00 $12.00
Total fuel cost $34.70 $52.25
Emissions costs
SO2 cost $0.01 $0.01
NOx cost $0.00 $0.00
Total emissions costs $0.01 $0.01
Total coal cost (per ton) $34.71 $52.26
To tal fue l co st (pe r m m btu) $ 1 .9 7 $2 .1 8 $ 1 .9 0 $ 2 .0 4
Heat rate of plant (mmbtu/MWh) 10.0 10.0 7.5 7.5
Total coal cost ($/MWh) $19.72 $21.78 $14.25 $15.30

Gro ss m argin ($/M W h) $ 9 .1 6 $3 .9 7 $ 1 4 .63 $1 0 .4 5

Source: Platts Coal Trader, SNL Energy, Scotia Howard Weil, Inc.

CAPP coal remains out of the money as the eastern natural gas price trades near
$2.05/mcf. The coal-fired fleet burning PRB coal is uneconomic at the current gas
price.

Page 8
 Coal Carloads
Eastern W estern
(in carloads) C SX N SC BN I UN P
W ee k ly Co m pariso ns Eastern Rail Cars (CSX & NSC)
Week 5 - 2016 14,649 15,137 32,586 19,713
Week 4 - 2016 13,226 15,644 34,896 21,842 Avg. Eastern coal carloads were down
Weekly Change 10.8% -3.2% -6.6% -9.7% ~23% this week compared to the same
Week 5 - 2015 19,309 19,485 42,228 32,743
Annual Change -24.1% -22.3% -22.8% -39.8%
week last year.
12 Month High 23,389 23,470 48,650 32,743 Eastern coal carloads increased ~3% w/w.
12 Month Low 11,495 11,458 31,184 19,235

Quarterly C om parisons (Avg.) Western Rail Cars (BNI & UNP)

1Q11 28,315 30,565 45,645 41,245
2Q11 27,976 29,288 41,515 37,204 Compared to the year ago week, avg.
3Q11 27,754 29,343 42,273 43,064 Western coal carloads declined ~30%.
4Q11 26,772 29,580 48,140 41,723
1Q12 23,694 26,309 43,231 37,359 Western coal carloads fell ~8% from last
2Q12 23,321 25,961 37,676 31,084 week.
3Q12 22,990 25,598 43,922 37,576
4Q12 21,348 25,839 42,030 34,541
1Q13 21,127 25,857 42,276 30,752
2Q13 21,885 25,399 39,942 31,203
3Q13 21,014 24,982 46,093 35,063
4Q13 20,117 23,631 43,080 30,868
1Q14 20,999 22,266 43,706 33,016
2Q14 23,518 25,952 42,352 31,456
3Q14 22,192 24,093 43,121 34,606
4Q14 22,200 21,857 45,204 34,177
1Q15 20,223 20,343 46,379 30,529
2Q15 20,329 20,249 42,357 23,008
3Q15 17,973 20,038 44,767 29,467
4Q15 15,266 18,175 42,703 26,427
1Q16 13,479 14,287 32,812 21,401
Q/Q Change (1Q16 vs. 4Q15) -11.7% -21.4% -23.2% -19.0%
Y/Y Change (1Q16 vs. 1Q15) -33.4% -29.8% -29.3% -29.9%
2014 22,227 23,542 43,596 33,314
2015 18,448 19,701 44,052 27,358
Y/Y Change ('15 vs. '14) -17.0% -16.3% 1.0% -17.9%

Source: Companies & Scotia Howard Weil

Page 9
 Steel Plant Utilization

Steel Plant Capacity Utilization

Domestic Weekly
100%
For the week ending February 8,
steel plant utilization rose
75%
~1.5% to 71.9%.
Avg U.S. Utilization ~78%
Due to the Monday holiday, steel
50%
plant utilization for the latest
week was not updated in time
25%
for publishing

U.S. Utilization (weekly) Global Utilization (monthly)

Source: Bloomberg

Dom estic Utilization

2011 2012 2013 2014 2015 2016 % C hange W eek Begin % C hange
1Q 73.7% 77.6% 75.6% 76.5% 72.7% 68.1% -6.4% 2/9/2015 74.8%
2Q 74.7% 78.7% 77.9% 76.4% 71.7% 2/8/2016 71.9% -3 .9 %
3Q 76.2% 75.0% 77.9% 78.8% 72.5% 2/1/2016 70.7% 1 .7 %
4Q 74.3% 71.7% 76.1% 76.3% 66.8%
Y ear 7 4 .7 % 7 5 .7 % 7 6 .9 % 7 7 .0 % 7 0 .9 %
Global Monthly
Global Utilization
2011 2012 2013 2014 2015 % C hange M onth End % C hange For the month of December,
1Q 81.1% 78.5% 79.0% 77.2% 72.4% -6.1% 12/31/2014 72.7% global utilization decreased
2Q 82.5% 80.4% 79.6% 78.5% 72.3% -7.9% 12/31/2015 64.6% -1 1 .1 %
3Q 78.8% 77.5% 77.2% 75.3% 68.5% -9.0% 11/30/2015 66.9% -3 .4 %
~3.5% m/m to a rate of 64.6%.
4Q 74.0% 75.5% 75.7% 73.6% 66.6% -9.4%
Y ear 7 9 .1 % 7 8 .0 % 7 7 .9 % 7 6 .1 % 7 0 .0 %

Page 10
Monthly Updates…

Page 11
Coal Stockpiles

November stockpile build

Coal stocks for the month increased 12.7 mm
tons, above the 5-year average build of 5.8
mm tons. Inventories of 188.5 mm tons are
now 12.5% above an elevated 5-year average.

The latest coal consumption and inventory

estimates suggest a forward demand cover of 115
days. This is below April 2012’s peak estimate of
119 days of inventory.

Page 12
Coal Demand
Total U.S. consumption
Total coal demand for the month of September
decreased ~5.5% to 70.0 mm tons compared to
last year. September consumption was ~11%
lower compared to the 5-year average for the
month.
2014 consumption of 916.9 mm tons was 0.8%,
or 7.5 mm tons, lower than the same period in
2013.
2013 total coal consumption ended the year up
4% at 924.4 mm tons compared to the same
period in 2012.

Electric Sector demand

November coal demand at the electric sector
declined 24% y/y to 48.9 mm tons.
November consumption was ~28% below the 5-
year average and YTD consumption is now 94.2
mm tons, or ~12%, below the previous year.
2014 demand of 851 mm tons was ~0.5% higher
than the 857 mm tons in 2013.
Total 2013 demand at the electric sector rose
nearly 37 mm tons or 4.5% to 856.9 mm tons
from 2012 levels.
Page 13
 Coal Imports & Exports
U.S. Coal Exports U.S. coal imports and exports
14
September U.S. coal exports decreased ~32% y/y to
12
5.3 mst, and fell ~17% m/m.
(m m short tons)

10

8 Met coal volumes for September declined ~35% y/y

6
to 3.4 mst. Additionally, exports decreased ~13%
versus August levels.
4

2 Thermal volumes fell ~27% y/y to 1.8 mst, and were

0 ~24% lower m/m.
YTD exports of 58.1 mst are ~22%, or 16.5 mst,
lower than the same period last year.
Met Steam

Source: McCloskey
2014 exports of 96.8 mst were ~17% lower than
the 116.7 mst shipped in 2013.

Chinese imports
For the month of December, Chinese coal imports
declined 35% y/y to 14.1 mt, and rose ~13.5% from
November levels.
Coking coal imports decreased ~42% compared to
December 2014 to 4.4 mt, and increased ~9%
m/m.
Thermal coal imports moved ~31% lower y/y to 9.6
mt, while rising ~15% from November levels.
Total 2015 imports of 155.9 mt were ~32%, or
72.1 mt, lower than 2014.
2014 Chinese coal imports ended the year ~15%,
or 39.4 mt, lower than 2013.
Page 14
Exports Continued….Australia
Australian Coal Exports

40

35

30
million metric tonnes

25

20

15

10

Thermal exports Met exports

Source: Bloomberg

Australian Coal Exports – Total Australian export volumes for the month of December decreased ~9% vs. last year and
gained 2% m/m to 32.9 mt. Full year 2015 exports of 386.0 mt declined ~0.5% y/y, or 1.3 mt.
Met Coal Exports – Australian met coal exports for December fell ~10% y/y to 15.1 mt. Additionally, exports decreased ~4%
from November levels.
Thermal Coal Exports – December thermal exports declined ~8.5% y/y to 17.8 mt, and rose ~8% m/m.

Page 15
International Steel Production

Chinese steel production moderates

Chinese steel supply for the month of December fell 5.5% y/y at 64.4 mt, and rose ~1.5% m/m.
Excluding China, international steel production declined ~5.5% from last year to 62.4 mt, and was down
~2% from November.

Page 16
Appendix A: Important Disclosures
Important Disclosures
We, Alonso Guerra-Garcia and Holly Stewart, certify that the views expressed in this research report accurately reflect our personal views about the subject securities or issuers; and I, Alonso Guerra-Garcia and
Holly Stewart, certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report
Important Disclosures
This report was prepared by a Scotia Howard Weil Research analyst. Scotia Howard Weil is a Division of Scotia Capital (USA) Inc., a US Registered broker-dealer and a member of the New York Stock
Exchange and FINRA. Scotia Howard Weil Research analysts focus primarily on the US Energy Sector. Scotia Capital (USA) Inc. is a wholly owned subsidiary of Scotia Capital Inc., a Canadian registered
investment dealer, and indirectly owned by The Bank of Nova Scotia. Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital
markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including Scotia Capital Inc. and Scotia Capital (USA) Inc. In addition to Scotia Howard Weil
Research, Scotiabank publishes and distributes Scotiabank Global Banking and Markets Equity Research (“Scotiabank Research”), which is a separate research publication. Scotia Howard Weil Research
Analysts and Scotiabank Research Analysts are independent from one another and their respective coverage of issuers are different. In addition, because they are independent from one another, Scotia Howard
Weil Research Analysts and Scotiabank Research Analysts may have different opinions on the short-term and long-term outlooks of local and global markets and economies.

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Page 17