Just revisiting this excellent analysis heading into '22, which is the best rundown of the supply / demand picture for the global met markets that I've seen.
A lot has happened in the intervening 8 months: indicators of an impending global industrial slowdown, European energy crisis, and trade dislocations due to the Ukraine war. As we approach Q2 2022 earnings season, I am wondering again about the foreseeable supply / demand dynamics over the next year. A couple qqs:
1. I have read that much high-vol coal could be crossed-over into thermal markets, and for some US producers (ie, AMR) that makes up ~60+% of their production. Do you have a sense for how that affects the supply picture for met? Will European sanctions on Russia (they were importing 50mt of coal from Russia) substantially tighten the met market?
2. How is met demand from India / China today given the global economic headwinds we are facing?
Really appreciate any insight on that if you have the time. Thanks for the great information and analysis.
Great analysis as well! Thank you! On the other hand, you can hardly find a better time for high prices than September - November. The contracts for 2022 are almost done. Therefore, a short-term rebound in prices until February will not influence bottom line much. With current prices, some producers, taking into account dividends and buybacks, will bring next year as much as you pay now. So there might be risk focusing on the short-term movement to miss long term grow. There is still a chance that market won't be well balanced even in 2023. India will definitely grow faster (fully agree with you), Chine-Australia political issues definitely for years.
It's tough to say, probably a personal decision based on time preferences. To be clear, from now to Feb, price realizations are going to be fabulous for these producers even though they are falling! So there's that cognitive dissonance we (the markets) have to deal with.
If you're following along w/ my own positioning, I cut AMR, ARCH, CEIX and ARLP positions in half earlier this week, and hedged the rest w/ BTU puts. Until today it looked like a good call!
Just revisiting this excellent analysis heading into '22, which is the best rundown of the supply / demand picture for the global met markets that I've seen.
A lot has happened in the intervening 8 months: indicators of an impending global industrial slowdown, European energy crisis, and trade dislocations due to the Ukraine war. As we approach Q2 2022 earnings season, I am wondering again about the foreseeable supply / demand dynamics over the next year. A couple qqs:
1. I have read that much high-vol coal could be crossed-over into thermal markets, and for some US producers (ie, AMR) that makes up ~60+% of their production. Do you have a sense for how that affects the supply picture for met? Will European sanctions on Russia (they were importing 50mt of coal from Russia) substantially tighten the met market?
2. How is met demand from India / China today given the global economic headwinds we are facing?
Really appreciate any insight on that if you have the time. Thanks for the great information and analysis.
Great analysis as well! Thank you! On the other hand, you can hardly find a better time for high prices than September - November. The contracts for 2022 are almost done. Therefore, a short-term rebound in prices until February will not influence bottom line much. With current prices, some producers, taking into account dividends and buybacks, will bring next year as much as you pay now. So there might be risk focusing on the short-term movement to miss long term grow. There is still a chance that market won't be well balanced even in 2023. India will definitely grow faster (fully agree with you), Chine-Australia political issues definitely for years.
would you recommend getting out of the pure play met coal like METC and AMR and re enter in Feb ?
It's tough to say, probably a personal decision based on time preferences. To be clear, from now to Feb, price realizations are going to be fabulous for these producers even though they are falling! So there's that cognitive dissonance we (the markets) have to deal with.
If you're following along w/ my own positioning, I cut AMR, ARCH, CEIX and ARLP positions in half earlier this week, and hedged the rest w/ BTU puts. Until today it looked like a good call!
I'd assume my own time preferences are shorter than most who read this.
much appreciated comments Sir !