Coal Trader, just wondering if you had any thoughts on the recent "rally" in Newcastle from 114 to 132, especially re: what might be driving that and if it might change your outlook from back when you issued the warning on Thermal coal?
The bounce is rather surprising since not a lot has changed. The optimism out of China since CNY has been bullish, and Japanese imports have been strong, but that's all a seasonality issue. The entire market is underpinned by the NEWC 5500 spec, if low-CV faulters NEWC 6000 could fall precipitously. I'm not yet changing my view, I think the seaborne indexes are just snapping back from relentless selling. Nothing really bullish, fundamentally, to point to.
I saw the news about Stanmore after earnings. The price came down, so I'm interested in your view of the company. Is it worth a small investment at 3.3AUD?
I think it's worth a small % of a coal basket for sure. The Aussie royalties and spread b/w high quality vs low quality met specs is really taking a bit out of SMR.
Has there ever been a restriction on coal exports for environmental reasons- trying to stop export to foreign countries that still use coal? Anything similar to the recent regulations stopping LNG terminal construction?
The West Coast of the USA has put up a limited blockade of coal exports by stopping all development opportunities & projects. Canada has also suggested it will try to ban thermal coal exports from 2030.
Just hold it and forget it. I wouldnt sell a share. If you want to allocate NEW money to met coal, perhaps think of other names (HCC is my pick), but if you're already in AMR, just sit tight and be right.
And might I add, don’t write calls on your long position. Premium is great but it a micro manage pain with AMR. I had some after it hit 300 and changing it each time to a higher exercise price but in the end when it dipped back bought them back and now just let it ride. Much easier
The Teck deal closes in the back half of this year, until then I'm not sure it matters unless met markets take another leg up in terms of price. So probably too soon to consider the met assets. And right now their thermal assets are underperforming YoY due to much lower thermal prices.
If HCC is ready for a rerate because of BC in 2026 (even if it doesn't happen until then) and WHC was a buy some month ago because of D&B which closes soon I think, why not also be early with Glencore?
I'm trying to think in terms of risk vs reward and I could definitely be wrong. But for HCC, it is SO cheap today and moreso in the future, that I see very little risk. On Glencore the risk is thermal, plus the metals business (basically everything was down 50% YoY). With WHC, there's a catalyst with the sell down that should re-rate D&B higher... but there's also thermal risk w/ WHC. HCC clearly the safest and also has the most upside.
Yes, you laid in your other publishings out all good forecasts , thank you, but I like you to play a little devils advocate.
How well are the met coal producers able to keep afloat if demand for whatever unknown would plummet. Or inability to ship.
Most miners learned the lesson and all are now out of debt. Great. But what about operational cost from overhead that will stay during a down turn
Steel producers cannot turn off their furnaces . Many companies cannot lay off their workers without consequence later when things get better. Likely for miners too.
So how big are their reserves to winter through and for how long?
As investor, I am fine with some bad quarters with little or no profit due to market downturn. Opportunity to buy more. But capital destruction , fire sales and lay offs (unless it is former useless twitter employees) is seldom good.
Arch mentioned they will increase their rainy day chest. very good. But what about the other miners?
Alpha basically announced the same thing Arch did.. they're going to raise a little capital by pausing the buyback. I think that's smart for the very reasons you spoke of. In a downturn it's all about costs and natural hedges. So typically, Alpha and Ramaco, those with higher costs, generally tend to do more domestic business which is locked in price & volumes (natural hedge for a calendar year). Arch and Warrior have lower costs and tend to do less domestic business, but they have more leeway due to their lower cost profile.
It's also noteworthy that these 4 (in the US) are the highest quality... there's many many smaller and less well capitalized producers they compete with in each of these basins. Those competitors are non-public so we don't talk about them much, but they would take the brunt of a downturn whereas these 4 companies would survive and take market share.
Coal Trader, just wondering if you had any thoughts on the recent "rally" in Newcastle from 114 to 132, especially re: what might be driving that and if it might change your outlook from back when you issued the warning on Thermal coal?
The bounce is rather surprising since not a lot has changed. The optimism out of China since CNY has been bullish, and Japanese imports have been strong, but that's all a seasonality issue. The entire market is underpinned by the NEWC 5500 spec, if low-CV faulters NEWC 6000 could fall precipitously. I'm not yet changing my view, I think the seaborne indexes are just snapping back from relentless selling. Nothing really bullish, fundamentally, to point to.
Coal Trader, any thoughts on AMR earnings? Or is that coming soon?
Working on the earnings transcript notes now.. then the thoughts article soon thereafter.
And what is the story today with AMR
Just only profit taking , volume now double avg, 4% of float, some annoying 3rd party doing their thing or something else?
I saw the news about Stanmore after earnings. The price came down, so I'm interested in your view of the company. Is it worth a small investment at 3.3AUD?
I think it's worth a small % of a coal basket for sure. The Aussie royalties and spread b/w high quality vs low quality met specs is really taking a bit out of SMR.
Thanks. It's strange that YAL is not moving down with the price of thermal.
Has there ever been a restriction on coal exports for environmental reasons- trying to stop export to foreign countries that still use coal? Anything similar to the recent regulations stopping LNG terminal construction?
The West Coast of the USA has put up a limited blockade of coal exports by stopping all development opportunities & projects. Canada has also suggested it will try to ban thermal coal exports from 2030.
CT - would you recommend holding AMR long term or book some profits now?
Just hold it and forget it. I wouldnt sell a share. If you want to allocate NEW money to met coal, perhaps think of other names (HCC is my pick), but if you're already in AMR, just sit tight and be right.
What about ARCH, just keep or switch to HCC?
Please keep in mind that switching can be expensive tax wise due to cap gains if held in ordinary account.
And might I add, don’t write calls on your long position. Premium is great but it a micro manage pain with AMR. I had some after it hit 300 and changing it each time to a higher exercise price but in the end when it dipped back bought them back and now just let it ride. Much easier
dosent get Glencore with the new coal assets interesting here? (though don't know what's going on with copper...)
The Teck deal closes in the back half of this year, until then I'm not sure it matters unless met markets take another leg up in terms of price. So probably too soon to consider the met assets. And right now their thermal assets are underperforming YoY due to much lower thermal prices.
If HCC is ready for a rerate because of BC in 2026 (even if it doesn't happen until then) and WHC was a buy some month ago because of D&B which closes soon I think, why not also be early with Glencore?
I'm trying to think in terms of risk vs reward and I could definitely be wrong. But for HCC, it is SO cheap today and moreso in the future, that I see very little risk. On Glencore the risk is thermal, plus the metals business (basically everything was down 50% YoY). With WHC, there's a catalyst with the sell down that should re-rate D&B higher... but there's also thermal risk w/ WHC. HCC clearly the safest and also has the most upside.
‘..see very little risk..’
CT,
What about risk in steel demand plummeting?
Yes, you laid in your other publishings out all good forecasts , thank you, but I like you to play a little devils advocate.
How well are the met coal producers able to keep afloat if demand for whatever unknown would plummet. Or inability to ship.
Most miners learned the lesson and all are now out of debt. Great. But what about operational cost from overhead that will stay during a down turn
Steel producers cannot turn off their furnaces . Many companies cannot lay off their workers without consequence later when things get better. Likely for miners too.
So how big are their reserves to winter through and for how long?
As investor, I am fine with some bad quarters with little or no profit due to market downturn. Opportunity to buy more. But capital destruction , fire sales and lay offs (unless it is former useless twitter employees) is seldom good.
Arch mentioned they will increase their rainy day chest. very good. But what about the other miners?
Alpha basically announced the same thing Arch did.. they're going to raise a little capital by pausing the buyback. I think that's smart for the very reasons you spoke of. In a downturn it's all about costs and natural hedges. So typically, Alpha and Ramaco, those with higher costs, generally tend to do more domestic business which is locked in price & volumes (natural hedge for a calendar year). Arch and Warrior have lower costs and tend to do less domestic business, but they have more leeway due to their lower cost profile.
It's also noteworthy that these 4 (in the US) are the highest quality... there's many many smaller and less well capitalized producers they compete with in each of these basins. Those competitors are non-public so we don't talk about them much, but they would take the brunt of a downturn whereas these 4 companies would survive and take market share.