1.What specifically do you mean that South African coal mines " wouldn't be relying on the national grid" for their electrical power, to operate their mines? Back-up diesel generators?
2. This AFR S. Oldfield 15.3.23 article simply ignores it would be very difficult for thermal coal prices to revert to the mean prices (after boom prices have occured)- because
new supply has been
greatly hamstrung by ESG priciples etc.- & thermal coal demand is still very strong for the forseeable future- it hit record usage in 2022 (& possibly again in 2023).
"Ray David, a portfolio manager for Australian equities at Schroders, notes that commodities are called commodities for a reason.
“During boom cycles, investor exuberance can propel commodity prices to eye-watering levels, which can then lead to a flood of new supply as investors chase top-of-the-cycle profits.
“Often it’s not the demand forecasts that can catch investors left-footed, it’s the impact of supply that causes the swings in commodity prices and investor anxiety. The reality is that high prices are a cure for high prices, and markets can often be self-destabilising before they go back to equilibrium.
Tim Johnston, deputy head of Australian equities at value investor Tyndall Asset Management, says it is important to look at the prospects of each commodity separately. He notes that on a forward P/E basis the resources sector remains more conservatively priced than in May 2008 (previous commodities' boom -my words).
“There is a pretty strong narrative that a number of metals are going to have a much better future than they’ve had in the past and the obvious ones that fall into that bucket are the likes of copper and lithium,” he says.
“The cash coming back to corporates that are already in production is enormous – certainly well north of whatever anyone would have thought two years ago.
“We see value in a number of names we hold in the oil sector as well as in the lithium and mineral sands industries. We see less value in the large iron ore producers”. ".
Why haven't the above recognised:-
. the incessant & understandable clarion call of "Energy Security" by the EU etc. following Russia's brutal invasion.
. Russia's "weaponising" (EU term) of its vast energy reseves eg unilaterally stopping gas to most of the EU last October (The EU announced in March 2022 it intended to wean itself off Russian gas totally by c.2026 or 2027).
. The IEA, & several other energy experts, has stated in the last few months that the energy crisis in the EU & UK will be FAR worse in the Decemebr 2023 winter, cf the December 2022 winter (due to NO big imports of Russian fossil fuels in 2023),
https://www.copyright link/wealth/personal-finance/where-the-great-mining-boom-will-end-20220912-p5bhgm?utm_medium=social&utm_campaign=nc&utm_source=Twitter#Echobox=1676412488
(Google "AFR Oldfield where the great mining boom etc.", to open link)
(20min delay)
