Ann: Quarterly Activities Report, page-16

Hi @cpetersen. I'm not qualified to confirm anything on coal prices, but here's some thoughts. Previously NEWC and TTF gas had what I think is fair to call a strongly correlated trading pattern:



In fact, I recall in 2022 that TTF rolled over slightly before NEWC so it gave a good marker to get out near the highs (as flagged by a few, including @puppyeh - that October tweet made me a lot of money).

However when you look at just the past few months, that correlation has broken down. NEWC has really collapsed even as TTF continued to climb higher:



Interestingly, in contrast to 2022 it's now NEWC that has led the way down and TTF has been slow(er) to respond. Given the lengthy correlation (15+ years) it seems to me that it's unlikely that in the past few months this correlation has suddenly broken never to return; it's more likely those jaws will close. But which way do those lines go from here?

In today's release NHC directors highlight the current high gas prices and say it provides possible "upside" for NEWC:



The big outstanding issue is what happens to EU gas prices if Trump does effect some sort of Russia/Ukraine peace deal and Russian gas flows can return to western Europe. This is a huge unknown and I'm not smart enough to have any more of a view than to pose the question. However Goldman's have said this:

As per analysts at Goldman Sachs (NYSE:GS), the most immediate and pronounced effects of a potential peace agreement would be seen in energy markets, particularly European natural gas prices and the oil sector.The key expectation from Trump's proposal, set to be unveiled at the Munich Security Conference, revolves around easing hostilities and potentially reopening Russian energy flows into Europe. Goldman Sachs analysts suggest that if Russian natural gas supply to Europe is restored, it could drive down European natural gas prices (TTF) by as much as 15% to 50%. Before the war, Russia accounted for approximately 30% of Europe’s gas supply, a figure that has since dwindled to nearly zero. Should Russian pipeline flows through Ukraine resume at even modest levels, European storage levels would improve, and gas prices would likely decline further relative to coal. If Russian supply returned to pre-war levels, the price of TTF could drop to the mid-20s EUR/MWh, a stark reduction from current levels.

Source: Trump's plan to end Russia-Ukraine war: Goldman says focus on these commodities By Investing.com

There are obviously heaps of moving parts here and as one of the lowest-cost NEWC producers this is not intended as a bearish post - NHC look best placed to navigate any cycle. However, it's definitely worth watching TTF from here to see how it trades, and to consider a) whether NEWC has pre-emptively traded down on this possible outcome (Russian flows returning to Europe), or b) if TTF falls then there's even more downside for NEWC. I do not know the answer but this is how I'm thinking about the energy coal sector at the moment.

Happy to hear others' views.