Coal price down 45% from Sep high, page-6

The supply response to demand and market dislocation is always more complex than we realise. When NEWC was hitting US$400 the first time around, out came the dreaded “this time it’s different” lines (the most dangerous four words an investor can say). Yet perhaps now the market is normalising (China opening up to Australian coal again, albeit mostly met right now) and whilst many saw this as bullish for demand, I thought it was a sign of a normalising market which, long term, means a more efficient market, and therefore lower prices than when the market was in turmoil and Australia kept going underwater.

Also, while I’m not a natural gas expert, there is clearly some swapover effect when NG is high, for certain countries / utilities swapping over to ‘cheaper’ coal. But with the NG price in freefall (in part thanks to warmer weather and full storage capacity) that won’t be happening to the same extent. That’s how I’ve heard others explain it anyway, and it’s hard to ignore how NEWC has weakened as NG has fallen.

Just some thoughts, but like you I’m also unsure of where NEWC goes from here in the short term. But worth remembering that the professional money has been modelling far lower LT prices for exactly this sort of reason. When spot is high and we’re all bullish to the max, it’s fun for the punters to pile on them and go on about how out of touch the ‘analysts’ are, but truth is, the good ones have been in this game a long time, and they’ll always err on the side of caution with commodities.

That’s my take, FWIW. Cheers