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

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Issue 14 – 24 May 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.

Market Commentary

European RDF enquiries are slowing down, going into the summer period, as demand is limited to Poland and some southern countries. Markets outside of Europe are also being pursued to take SRF material, but so far no long-term contracts have been finalised. RDF prices for shipments in the next 60 days are being directed by GBP vs Euro currency movements. The uncertainty surrounding the Brexit vote has helped the value of the Euro against the GBP, but it has not triggered any fresh spot deals. Markets in Germany and Holland remain quiet, but stocks are understood to be low and post-Brexit vote should see more interest emerge. RDF prices/fees come are under more pressure than SRF prices/fees.

In Indonesia, thermal coal prices are increasing and this has the potential to open opportunities for SRF shipments from Europe. Other industries in Europe, such as steel, are struggling to increase output in a competitive market and the potential for SRF pellets looks limited here right now. There is nearly 1mt of coking coal lying on the ground in the ARA region. (Cntd).

Market Commentary

In other alternative material markets, rising solid fuels prices in Turkey for cement producers are opening opportunities for TDF Shred (shredded used tyres). Cement producers are indicating that they are being offered at around $17/t DAP Marmara, for a very high c.v. >7,500kc NAR material.

Shareholders at Glencore’s recent annual meeting in May held in Zug, Switzerland,

voted 98% in favour of requiring more information on public-policy positions and actions Glencore takes on greenhouse gas pollution. Yet another step-change by a major mining and trading house as they follow initiatives taken by other major industrial companies integrating renewable and alternative fuels into their trading strategies and fuel portfolios recognising the benefits attached of producing lower GHG emissions and carbon credits. Alternative Fuel and SRF/RDF production is a Sunrise Industry in both mature and developing economies.

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 5.50 81.00 85.00

Amsterdam 5.40 80.75 86.00

Antwerp 5.90 80.00 83.50

Terneuzen 5.20 79.90 84.50

Dunkirk 4.80 78.80 83.00

Hamburg 4.70 84.00 87.00

Esbjerg 5.70 86.00 91.00

Inkoo 7.00 86.00 91.00

Gothenburg 7.50 87.00 89.00

Malmo NA NA NA

Riga 8.50 88.00 92.00

Sines 7.90 80.00 86.00

Gijon 7.70 82.00 87.50

Tarragona 9.00 NA NA

Mundra 30.00 NA +25.00

Casablanca 25.00 NA +28.00

News

Japan

Alternative fuel use by domestic paper/pulp and paperboard industries increased in March to 234kt, up from 212kt in February. Used tyre consumption by the same industry fell to 35,000t from 39,000t in February. The ceramic/clay and stone industries consumed 23,000t of waste plastic, up from 22,470t in February, according to the latest government statistics.

International Projects & Supply Deals

China

Hong Kong environmental services firm China Everbright will develop a 750 tonne per day waste to energy project in Shandgon. The Shandong Jinan No.2 Household Waste Integrated Treatment Plant waste to energy expansion project will to be constructed on a BOT (Build-Operate-Transfer) basis for 25 years. The project could generate up to 80,000 MWh of electricity each year.

International Projects & Supply Deals

United Kingdom

A 9.6 MW waste to energy gasification plant in Nottinghamshire has been approved by the Secretary of State for Communities and Local Government, Greg Clark MP.The facility will divert up to 117,000 tonnes of waste from landfill and recover up to 22,000 tonnes of recyclable materials each year. A planning application for the £70m facility was initially approved by Nottinghamshire County Council in 2014, but was then called-in for consideration by the government.

International Projects & Supply Deals

United Kingdom

Peel Environmental has submitted revised plans for a controversial energy-from-waste plant near Chester. The new plans will see the plant reduced in size. The plant would receive 350,000 tonnes a year of household, commercial and non-hazardous industrial waste and generate 35 MW of electricity. Construction is expected to start in 2017.

Country Profile

Iraq W2E Bulletin continues its theme of providing country profiles for emerging SRF

and RDF markets. We recently covered Iran, in this issue we take a look at neighbouring Iraq:

Iraq is an unlikely developer of waste-to-energy, given its recent history of political

and civil unrest, and its vast oil reserves. But the country is expected to produce 31,000 t of solid waste every day. The capital Baghdad produces about 1.50 mt of solid waste/yr, according to local sources. Existing infrastructure is struggling to cope with the growing increase in waste generation. Years of military conflict has damaged the waste infrastructure and waste is being dumped in unregulated landfill sites. Groundwater contamination, surface water pollution and fires are a becoming an endemic problem.

Country Profile

Iraq

The National Solid Waste Management Plan was developed by international waste management specialists in 2007, outlining a broad programme of action to develop Iraq’s infrastructure. There is a plan to build 33 engineered landfills with the capacity of 600 million m3 in all of the 18 governorates by 2027, with a supporting logistical network. Iraq currently has two regulated landfill sites; a 48 acre landfill site in Kirkuk city and one in Basra, meeting both USA Environmental Protection Agency and EU Landfill directive standards. There are other landfill sites under-development for Erbil, Dohuk, Anbar, Sulaimaniya and Thi Qar governorates, which are part of UNICEF and EU efforts to attaining Iraq’s Millennium Development Goal targets of ensuring environmental sustainability by 2015.

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 AF’s.

• 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 AF’s (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 €101.48

W2E-RDF2 16 – 18 MJ/Kg DAP ARA €80.58

W2E-SRF1 14 – 18 Mj/Kg DAP ARA €84.83

W2E-SRF2 18 - 22 Mj/Kg DAP ARA €67.87

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 2016

Thermal Coal 6000 net kcal/kg

1% S CIF ARA

Ex Russia

Pet Coke 7000 net kcal/kg

5.0 - 7.0 % S FOB US Gulf

January 45.00 23.50

February 44.00 22.00

March 44.90 21.95

April 45.75 28.00

May (MTD) 44.80 29.90

June (Forward) 49.00 34.00

Monthly Averages

Solid Fuels – Thermal Coal

CIF ARA thermal coal prices are increasing during a quarter that is seasonally the flattest period for power production and demand. There is little in the way of fresh tender demand from and industrial and power producers, over the next 45 days. Multi-year low thermal coal stocks at Amsterdam-Rotterdam-Antwerp appear to be the new norm and is creating a stir amongst buyers, although it could create more price spikes. In the meantime, prompt supplies from Colombia, Russia, Poland and the USA are well-offered. Deals for very high c.v. (6900kc NAR) US coal have been concluded in the high $50s/t DAP ARA. European power prices have increased since the last issue and oil markets are well-supported. Prices for Russian material for delivery in the next 45 days are assessed at $49.00/t DAP Rotterdam, for a 5,700 kcal/kg NAR material, with 1% max sulphur. This is up from $44.80/t DAP Rotterdam on W2E Bulletin Issue 14. Polish 6,200kc NAR coal is also trading in the high $40s/t DAP ARA for handysize shipments.

Solid Fuel - Pet Coke

Indian demand for fuel-grade petroleum coke from the United States is propping the market up, amid slow demand in Europe and South America. Prompt deals for high sulphur petroleum (>5-7%) coke in the next 45 days are in a range of $33-35/t FOB United States Gulf for a 7,500 kcal/kg NAR Supramax. This is up from $28.00-29.25/t FOB on the previous issue.

Prices for mid-sulphur (4-5%) petroleum coke is also increasing as exports from Venezuela are close to zero, which is helping to lift prices. New tenders for mid-sulphur cargoes are emerging in Turkey and Egypt. Demand in Northwest Europe is weak, with cement producers being offered high c.v. US coal as an alternative to petroleum coke. Petroleum coke stocks in the Netherlands are high at about 200kt.

European Logistics

Freight / North Sea Coasters / Logistics Average container costs on trucks from the UK to Rotterdam are about €38-40/t,

according to trading sources. These rates are up just over 10% since the W2E April 25 2016 update and reflects the recent rally in Brent oil markets. Otherwise, for seaborne markets, freight rates remain at very low levels (see W2E Bulletin price and freight table). The North Sea fleet is over-supplied and new orders continue to arrive on the market.

Trade

England A big fall in exports of Refuse Derived Fuel (RDF) to largest customers Netherlands

and Germany in April meant overall exports fell by 50,000 tonnes compared with March. Total exports were 276,759 tonnes in April compared with a record-breaking 327,200 tonnes in March. Netherlands remained the top destination at 115,411 tonnes, falling from 133,055 tonnes in March. Some 57,507 tonnes was shipped to Germany, compared with 75,341 tonnes in the previous month. Shipments to Sweden and Norway were steady, at 46,792 and 20,702 tonnes respectively. Latvia took 12,288 tonnes, Belgium 8,061 tonnes, Denmark 7,516 tonnes, France 4,227 tonnes, Cyprus 2,131 tonnes, and Portugal 2,123 tonnes. (Cntd).

Trade

England

The five largest suppliers in April were SITA UK Limited (36,985 tonnes); Biffa

Waste Services Limited (31,251 tonnes); N&P Alternative Fuels Limited (30,043 tonnes); Andusia Recovered Fuels Limited (28,245 tonnes); and Geminor UK Limited/GemiUK Limited (14,917 tonnes).

Trade

England

0

100,000

200,000

300,000

400,000

500,000

600,000

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

United Kingdom RDF exports (tonnes)

2014

2015

2016

Source: Environment Agency

Trade

England

0

100,000

200,000

300,000

400,000

500,000

600,000

Me

tric

to

nn

es

Exports of SRF/RDF from England Jan-Apr 2016

Events

Netherlands The Confederation of European Waste to Energy plants (CEWEP) holds its 8th

annual waste-to-energy congress in Rotterdam on 16-17 June. A number of eminent speakers from the Dutch Presidency, the European Commission, the European Parliament, local decision makers, the waste industry and academia will be participating. CEWEP said: "There is an obvious link between the important EU initiatives on the Circular Economy and Energy Union. This link is Waste-to-Energy. Therefore, in 2016 the European Commission will deliver a communication paper that exploits the potential of Waste-to-Energy by establishing synergies between resource efficiency, energy efficiency, circular economy and climate change."

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