You will notice that their realised thermal coal sale price is dismal and nowhere near the ASX listed average. You're in effect betting on the strength of the Amercian steel industry by going into those two. Australian coal is far superior and attracts an international market whereas US based is largely US consumed. Although there have been recent increased exports to Asia from US, it is still negligible.
No need to go abroad when there are world class assets at our doorstep, it is simply a matter of patience and timing. You have listed obvious pitfalls to your decision, among them should be ones given ignorance of a foreign nation's particulars. Coal is not the only game in town, it has had its spotlight, and in hindsight one should have sold when the spotlight was on it!
With the majority of producers still making money and coal prices at moderately profitable levels, we can still expect new coal mine projects, old mines to be reopened, existing mines to ramp up production. Interesting to see Huawei coal mining automation coming online in Chian (with profitability questionable at this stage). Rising stockpile volumes to come after demand dwindles but supply fails to notice.
Simple supply demand dynamics take over. At what point the market is oversupplied is anyone's guess, however I would say (given current relatively strong supplier profitability locally and internationally) that there is some way to go before a bottom is reached, but it should be reached within 3 years. Producers will chase one another to the bottom to see who can take the hardest beating. One by one, higher cost producers will fall on their sword and the supply shortage will reappear as a cleansed slate ready for the next bull run.
Now, before this can happen, we would need to see even low-cost, high-quality producers precipitously teeter on the edge of ruin. This was the case with WHC in both 2016 and 2020 where the SP fell to a low of some 25% of book value. Some will remember the jitters of an overbearing $1Billion debt while the coal price was $50 to $80 US. The weeding out process could take years. Following the peak cycle of 2012/2013, the coal price experienced 4 years of low prices with WHC barely profitable in those years before the next run up in late 2016 and all of 2017 and 2018.
Now that the unit cost has almost doubled in the last few years it could mean one of two things. Either the coal price will not reach historic lows since everyone is in the same inflated boat or that potential lack of demand could see any bottom price readjusted at yearly compounding inflation percentages. In the latter one would expect a whole lot of pain for the pleasure that was had. The higher the highs the lower the lows as they say.
I am certainly not expecting a magical bull run for coal prices from here, although I was a devout bull for 2020, 2021 and 2022. Supply response has proven too strong and economic growth too weak, a magical combination and easily foreseeable in hindsight when one is devoid of emotional attachment. The coal panning process has begun, let's see what's left in the pan come mid 2025.
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