This is a reply to Mondyinvest's comment above (stupid 'reply'...

This is a reply to Mondyinvest's comment above (stupid 'reply' function not working).

Demand destruction is a tricky one. Normally at these price levels you would expect significant demand destruction. However, there are several reasons why it will be limited - and you touched on some of them in your comment.

Firstly, coal is still far cheaper than gas (at current prices) for power generation in Asia and Europe - it is the best option. So gas will be switched off first and coal will actually increase output in the short term to pick up the slack from gas.

Secondly, what we are seeing, particularly in Europe, is governments stepping in to ensure their utilities keep operating and provide enough power - see Uniper in Germany and EDF in France, but there are other examples too. Call me cynical, but this has now got to the stage where governments (finally) realise that if the lights go out, so do their election hopes, so they have belatedly moved to step in, and ironically fix up the mess they made.

Thirdly, given the overall tightness of supply (I wrote a note on this earlier in the thread), and the overall preference for coal for the reasons explained above, price will be set by the ability/willingness to pay, which in this instance is pretty high! Competition between consuming countries (and rising demand) will keep prices elevated for some time in my opinion.

As mentioned previously, this time things are different. This is not a normal cycle. We are sowing the results of undermining and demonising the fossil fuel sector for the last decade, with no easy supply fixes on the horizon. This is a structural change in the market.

All the above IMO only.