Coal. Will it ever recover?
Since prices peaked in 2011, thermal coal — used in electricity — has plunged. Back in the ‘good old days’, thermal coal sold for roughly US$180 per tonne. But due to slowing growth and uncertainty over China, it’s selling for around US$52 per tonne today.
UBS commodities analyst Daniel Morgan recently told the Sydney Morning Herald: ‘The outlook for thermal is pretty poor. It’s the same story we’ve had for a while, which is China withdrawing and surplus mining capacity in all the big supply regions.
‘Prices are probably continuing to track or chase what happens with global commodities. Its underperformance just now looks like its catching up a little bit on the weakening of the Australian dollar.’
Indeed, with the deteriorating Chinese growth story, thermal coal’s outlook doesn’t seem great on paper.
But, what if the majority’s wrong?
Let’s find out…
What went wrong?
Like the iron ore producers at the top of the market, coal producers believed that Chinese demand would grow forever. As history shows, they couldn’t be more wrong. Check out the chart below. It shows Chinese thermal coal import growth over the past two years.
Source: Institute for Energy Economics and Financial Analysis
With declining coal consumption, China has moved to protect domestic production and cut imports. Looking at the graph, thermal coal imports are down by 35% over the past two years.
This trend shouldn’t be ignored.
China consumes as much coal as the rest of the world combined. The Chinese economy is contracting as it transitions from an investment-driven economy to a consumption-driven economy. This has pushed investment and industrial activity sharply lower in recent years. And with growth falling sharply, coal need has been reduced.
To make matters worse for coal, the Chinese Premier, Li Keqiang, declared ‘war on air pollution‘ in 2014. He hasn’t looked back, implementing tough regulatory policies on air pollution. Thermal coal demand has been taken to the chopping board.
It’s not just the Chinese cutting back on thermal coal. Indian imports are down by 34% over the past two years.
Moreover, western world leaders are dead set on bankrupting the thermal coal industry. They’re fighting a different war on ‘man-made’ global warming. Politicians have planned to phase out coal to cut back CO2 emissions. Adding to a decline in business activity, this has seen lower demand for thermal coal across the world.
Yet, as demand continued to drop, companies kept expanding production in a battle for market share. Now the thermal coal market is terribly oversupplied. This means that most producers are digging up coal for a loss.
According to the Australian Financial Review, coal miners are possibly the worst investment. The paper said,
‘A report by Oxford University’s Smith School of Enterprise and the Environment says Australia’s traditional power utilities show strong signs of being in a “death spiral”. The so-called death spiral occurs as solar and wind energy take market share from the centralised electricity grid and fossil fuel coal generators, forcing them to raise distribution charges or close generating capacity.
‘The report was funded by Norges Bank Investment Management, which manages Norway’s $1.15 trillion sovereign wealth fund and is reducing its coal exposure.’
In my view, the Norway Sovereign Wealth fund is making a huge mistake. It’s likely selling at or near the bottom of the cycle.
Don’t let the mainstream fool you
Many wouldn’t know it. The mainstream media and political community have misled the majority.
I realise you might not agree with my arguments. But, someone has to say it…
‘Man-made’ global warming is a total hoax.
Most politicians know it. It’s why they changed the term to ‘climate change’.
Our former Prime Minister, Tony Abbott, was right. He wanted to audit the Australian Bureau of Meteorology. According to the ABC, Abbott said ‘it was exaggerating estimates of global warming, Freedom of Information documents have revealed.’
Unfortunately, no audit went ahead. I guess to the benefit of government.
If you weren’t aware, governments across the world are dead broke. They’re facing a major sovereign debt crisis in 2016/17. Instead of restructuring the economy, politicians are kicking the can down the road. It’s why taxes are in a bull market.
Politicians have been trying to tax ‘man-made’ global warming for years. And they’ll probably succeed. The propaganda team is, no doubt, out in full force.
The Climate Change Business Journal estimates the Climate Change Industry’s worth around US$1.5 trillion. In other words, on our quest to change the climate, over four billion dollars is spent per day.
In a world facing rising unemployment, what scientist wouldn’t want some of that money?
US presidential hopeful, Senator Ted Cruz knows it. According to the Daily Caller, Cruz said ‘that the term “climate change” is the perfect “pseudoscientific theory for a big-government politician who wants more power.’
‘In the interview, Cruz recalled the global cooling arguments from the 1970s, telling NPR’s Morning Edition host Steve Inskeep that some of the same researchers worrying about global cooling as a threat in the 70’s, are the same people now telling people global warming is a problem today.
‘“Whatever happens, suddenly these scientists, who are receiving government grants to keep researching this, and these politicians — and, interestingly enough, the solution they are proposing for climate change — massive government control of the economy in every aspect of our lives — is exactly the same solution they proposed for global warming, it’s exactly the same solution they proposed for global cooling.”
‘And now, Cruz added, those researchers — the ones saying global cooling was a blight in the 1970s — are making out with millions of federal dollars to shift focus from global cooling to global warming.’
Indeed, someone’s getting rich from ‘man-made’ global warming. Unfortunately, it’s not us.
Global cooling — the gift to coal punters
The short of it is that the real science shows we’re heading into a prolonged cooling period. There has been no global warming for 18 years and 8 months.
This is not without precedent.
Man doesn’t affect the climate. It’s a natural cycle.
From 1450–1800, the world went through a cooling period. The time period was dubbed ‘the little ice age’. It then went into a 200-year warming period, when society developed and expanded. Unfortunately, I don’t have time to explain it all today. But, like any cycle, the modern day warming period has come to an end.
David DuByne, founder of the YouTube channel Adapt2030, believes that we’re looking at a three to five degree Celsius drop into 2035. And while this may not sound like much, it will have a major effect on the ecosystem and world economy.
So the point is, it’s going to get a lot colder. And when it gets colder, the coal power plants will have to be turned on — no matter what C02 targets these leaders set. As such, I see thermal coal prices bottoming around 2017.
I’d love to talk more. But, I don’t have space to tell you everything today. If you want more information, check out Resource Speculator. I’ve shown significant scientific evidence on this topic.
If you believe global warming’s a hoax and want to profit from the REAL trend ahead, check out Resource Speculator. I’m just getting started on this topic. In the months ahead, I’ll tell readers how they can profit from the global cooling trend.
To find out more, click here.