The Coal Trader's 2025 Metallurgical Coal Outlook - Part 2

A Challenging Year Lies Ahead, But There's Still Light at the End of the Tunnel

In the opening of Part 1 of this outlook, I wrote the following…

“At their very best, forecasts are an imperfect snapshot of a single moment in time, framed by unreliable economic and geopolitical assumptions, and captured by the faulty camera in our minds.”

In Part 2 today, we will start to delve into some of those “unreliable assumptions” and hopefully give you a feel for why this kind of analysis is so difficult.

Honestly, Monday’s trading around the Deepseek announcement was a pretty decent example of how a solid forward thesis can get absolutely wrecked – in this case, rapidly increasing power demand due to the projected AI data center buildout.

Hallador Resources HNRG 0.00%↑ which had previously benefitted from the thesis, fell a ridiculous 28% on the news. For better or for worse, we picked up some shares on the decline, because despite the run-up in IPP valuations, no new real demand has yet to actually physically manifest…

All that changed was one of the “unreliable assumptions” that, depending on whether you love/hate/couldn’t care less about the stock, underpinned the longer term investment thesis/fairy tale/story.

And we have got to all realize that even on the more stable (we think!) metallurgical coal side, there are A LOT of these narratives in play.

Green steel; hydrogen use; natgas-driven direct-reduced iron; flash ironmaking – all of these burgeoning technologies have been at one point or another purported to be the harbinger of Steelmageddon 2.0. And research houses around the world have been quick to jump on those bandwagon, largely driven by a desire for ideological alignment so they can sell more subscriptions to their clientele (read: large banks and funds) who bought in hook, line, and sinker to the broader ESG narrative, which is in turn being driven by THEIR major clients (read: wealthy ideologues).

Now, we fully empathize with the desire to be a responsible shepherd to our environment – we only get one, after all. But in practicality, transitions are messy to begin with. And by definition occur over a very long time, not all at once.

As we have said time and again on podcasts, any process has an order of operations, and step #1 must lead to step #2, not step #100. So by default, our expectations for the speedy success of that transition are much more tempered than the majority of our institutional peers.

Moreover, we do not purport to be experts on geopolitics/economic conditions/currencies/weather/etc. And because of that, we reserve the right to change our minds quickly when reality proves any of those “unreliable assumptions” to be wrong.

In our newfound era of randomly sized geopolitical tariffs sized and implemented as if by whim, I suspect our industry will fare much better by quickly analyzing the results of such potential scenarios rather than to try and nail the short term fluctuations ahead of time.

So with that YUGE caveat in mind…let’s take a look at coking coal demand…