Natural gas is cheap right now in the US but it's not the "be...

Natural gas is cheap right now in the US but it's not the "be all, end all" that the media is spinning. In Japan natural gas prices are $14 btu and in Europe it's around $16. The US population is around 300m compared to the world of 3 billion. There is anecdotal evidence that coal demand will increase over the next 5-10 years commencing this year.

The over supply of nat gas in the US in reality has no bearing on the rest of the world because the infrastructure and the difficulty to export nat gas is a major problem. Specialized ships and new ports need to be built for the US to export nat gas. The only way to do that is to freeze the nat gas into LNG. This a major challenge that probably won't be solved for at least a decade.

Currently nat gas in the US is trading just under $3. My target is $4 by the end of the year.

If you believe that economic growth will improve over the next few years then it stands to reason that demand for coal will improve and hence prices. We are currently in the bottom of the cycle.

The early signs of increasing thermal coal demand will be when iron ore demand improves which requires coking coal to produce. The production of iron ore requires thermal coal and/or nat gas. Given the high prices of nat gas around the world and currently excluding the US the world will be using thermal coal for energy for decades.

As a matter of interest, the US is finding it very difficult to even export their coal to world markets. This is the US's problem, not the world's but if you follow the herd you wouldn't know it.

This is my take on the current slump in the coal market - coking and thermal.