Climate Change, page-560

Can you elaborate on that supply demand thingy. I mean, has supply increased a whole bunch in the last two years? What's the explanation for the drop from $400USD to now $127USD?

Sounds like a "Gotcha!" attempt.

But sure, I'll bite.

Do you think that the starting point i.e, $400/t - when the median point on the industry cost curve is well below one-quarter of that level - is even a remotely reference-able number?

As a WHC shareholder, I certainly didn't for one second think that the thermal coal price would ever get there, let alone spend the better part of a year there. Heck, I don't even think $250/t is a realistically sustainable price.

So that there has been a fall in the price from >$400/t to <$130/t might get people such as yourself a bit animated or compelled to comment, as a WHC shareholder I see it as rather irrelevant (apart from the fact that the surge in the price had the effect of increasing WHC's net cash position by more than $3.0bn; which is equivalent to ~$4.00/share).

But I don't believe any right-minded person values the company on the spot price at any given point in time; instead, as a long-term shareholder [*], I take my cues from the forward curve, which was in extreme contango (rightly so) when the spot price was $400/t, but which is now in backwardation all the way out to late calendar 2025.

But, hey, if you want to get all worked up by the current spot coal price, then let's contextualise it for a second:

Global industrial production growth (a proxy for energy demand) turned negative in SQ2023, where it has remained since. If that happened at any other previous time in the past, the spot price for thermal coal would have been crunched to $50/t or $60/t perhaps, a a level below the average point on the global industry cost curve.

Yet the spot price today is more than double the normal industrial production trough level.

(In fact, despite the current slump in global industrial output, the coal price it is today at the same level as it was during previous peaks.)

I trust this adds to your understanding of the supply-demand dynamics.


While the likes of you might get preoccupied by the condition in coal markets based on a daily, monthly or even six-monthly proposition, my gaze is firmly across the totality of the coal price cycle: my view is that the under-investment in supply has been a two-decade process; it isn't suddenly going to be fixed in the space of just a year or two; the global energy shortage is going to be a phenomenon for many more years to come.


[*] One who is close to recouping his initial investment through the receipt of fully-franked dividends over the past few years, plus the ~$4/share NTA boost, as discussed above.

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