NHC - General Discussion, page-139

Interesting thread with politics frequently referenced - understandably, because where the global coal industry finds itself today is an outworking of around a decade of ideologically-based government policies.

Which segues into the points made in your post, @Jrowl1 :

Starting with, "what if the war in Ukraine de-escalates?", well that can happen in two ways: 1. Russia ends up controlling Ukraine on Russia's terms, or
2. Russia is vanquished militarily.

1.) is certainly possible but without direct involvement from western military forces - which isn't going to happen - 2.) is wishful thinking, I'm afraid.

Besides, it's a moot point, because even if some kind of "resolution" was to occur in relation to Ukraine, there is no way the EU could say, "Well, all is forgiven, Vlad; so let's just reset things back to where they were and happily normalise trade relations once again".

Next, to your question of, "What about the FED raising rates to specifically to cool energy markets...?", the current energy crisis is not a demand-side issue; demand for energy is very price-inelastic... people need heat and warmth and economies need power, so the amount of demand destruction that would be needed to contain coal prices will blow up bond markets WAY before the price of coal crashes due to contraction in demand.

Instead, the current super-normal coal prices are a consequence of a massive supply-side shock, which has been in the making over the past decade or so.

Which, in turn, provides the rebuttal to your "most other commodities have fallen a lot about 25% and there isn't anything special about coal, ..."

The fact is that there is actually something special and unique about the coal market that differentiates it from other commodities.

That differentiating feature is that there has been an active policy strategy to limit global investment in coal capacity (along with other fossil fuels) at a time when demand for coal continues to rise due to accelerating energy demand in the developing world.

In economics parlance:

At a time that the Demand Curve keeps moving to the right, the Supply Curve has been forced to the left, with the result being an increase in the market-clearing price.

No legislated supply restrictions which have applied to coal capacity, have occurred in the global iron ore, copper, nickel or other metals.

So when you compare coal with other commodities, the structural supply-side differences means you're looking one set of industry circumstances that are totally unlike the others.

So does than mean that the coal price is going to remain above $400/tonne indefinitely?

Certainly not; it's unreasonable to assume that.

But the important thing for shareholders in stocks like NHC, is that they are currently trading on Free Cash Flow multiples of something like <2 times, at current spot coal prices and exchange rates.

Which means that every week and every month that the coal price remains at the current levels is mere cash flow serendipity for coal companies and their shareholders.

But one thing is for certain:

Market valuations for coal equities are certainly not factoring in anything near current spot coal prices.

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