Coal Cycle: The guest frames 2026 as a prime accumulation window after coal prices tested cost floors with limited bankruptcies and idlings, signaling improved industry footing.
Thermal Coal: Indonesia’s quota headlines likely overstate actual cuts, but still tighten seaborne markets and support Newcastle pricing, improving sentiment after a long bottoming range.
Met Coal: India’s rising steel cycle is now the key price driver as China turns inward, with tight PLV/PMV supply likely compressing relativities and boosting PCI usage over time.
AI Infrastructure: Hyperscalers’ near-insatiable compute needs collide with grid constraints, implying “all-of-the-above” power sourcing (coal, gas, behind-the-meter solar) until SMRs scale next decade.
Government Support: Western governments are backing strategic industrial assets, from the U.S. Steel (X)-Nippon deal scrutiny to U.S. rare earth stockpile plans and golden-share approaches.
Equity Ideas: The guest highlights Whitehaven (WHC) for a rerating toward U.S. multiples and new highs, Stanmore (SMR) as undervalued versus peers, and Peabody (BTU) with rising low-vol output, ILB/PRB tailwinds, and buyback potential.
Miners & M&A: BHP (BHP) can weather volatility and may evaluate BMA divestments under current royalty regimes, while MP Materials (MP) anchors a broader rare-earths buildout focused on processing and metallization capacity.
Transcript
It's interesting. Well, somebody's going to have to come in and take the Anglo assets. I'm not sure who is going to be the best candidate for that. Uh, you know, I would have said BHP a while ago. You know, now that Anglo is sort of, you know, engaged. I'm not sure what that's going to look like on down the road. >> For all the money miners who are are not acquainted with you yet, um, Matt Water, you are you're our go-to coal man. You're the world's go-to coal man. Everything coal, met thermal. We um we just ask Matt and I've noticed you throwing around this um this this theme you're toying with that 2026 is the the year of the great accumulation. Uh what do you mean by that? >> Well, uh you know, I had thought that 2026 initially was going to be the year where everything really pulled back. Um, hearkening back to my days at Woodmak, we saw kind of peak Chinese steel production in 2024, which uh is pretty close to what happened in reality for a 10-year forecast. That's not bad. Uh, and usually what happens is, you know, cycle lasts about 5 years. This one started for real in 2021. So, you know, if past prologue, uh, as Rick Rule would say, uh, that would mean that, you know, 2026 would have been the year for, uh, to kind of withstand all that. But instead, the the the China property debacle uh and just a real downfall in demand there pulled all of that forward into 2025. And so instead of getting a summer recovery, we got a big fat nothing. Uh and uh prices bottomed out. Uh but since then, we've had uh lower production than expected. Uh we just had a cyclone on the MET side. Uh we've had a cold winter. Things have improved on the thermal side. And we've tested what I think is really uh you know the cost floor for for each of those individual sectors. Uh and I might add we've tested it successfully. There have been a kind of a bare minimum of of you know bankruptcies you know companies going into receiverhip. Uh there surprisingly there's been a bare minimum of of uh mine idlings too. So I I think you know we can we can look back through the last year and say pretty firmly that you know the coal industry really is on on pretty good footing compared to the before times. >> Well as as 10year forecasts go that's that's quite the pick Matt but one thing I'm curious to hear whether you kind of had in in your bingo cards is some of the takeover battles and kind of tussles we've had for some of the major steel producers. So, US Steel played out last year and we're in the midst of one here in Australia with with Blue Scope Steel and that adds such a fascinating geopolitical kind of lens to this whole flushed steel market globally, doesn't it? >> Yeah. And, you know, my track record of predicting geopolitical outcomes like that, you know, is is far from successful. So, um, you know, I don't always know how those things are going to work out, but it made sense, at least from the from the US standpoint, that, uh, we had a company with a much better balance sheet come in to shepherd these assets going forward. Um, I haven't followed Blue Scope particularly closely, just because, you know, for me down under, I tend to be a consumer of data rather than a generator of it. Uh, but I'm interested to see uh, what happens there. for for the US that made a lot of sense and I was glad to see the deal go through with NPON uh despite both uh President Biden and President Trump having their misgivings about it. Um you know my my sense of it was that any concern about the union side of it was really overblown. Uh you know the the plans were were in place for a long time uh to build uh you know Big River Steel 2. Um and now we have a better balance sheet to do that with. I think that's good for for the workforce. Not bad. Um, but as for uh as for Blue Scope, uh, I don't really know. Honestly, I was going to ask you guys about that uh while we were having this discussion because you guys can probably provide the type of context that we'd need to sort of think about in order to uh figure out long-term positioning there. I think it's I think it's like yeah these these really ordinary businesses uh for for many reasons uh but because because assets in in you know strategic western countries with enormous replacement value that can can can provide enormous strategic value we're in the era of strategic value is real value and um and hence the evolving evolving kind of you know corporate corporate outcomes for these businesses >> and we've seen the signs that the governments are going to support these you know we've seen about every smell melt backed up by the government here as well. So, you know, you've got the government in your in your corner in the west as well. >> A huge ad to that >> if if we >> Yeah, I've been writing about that more on the on the rare earth side than than on steel in particular. But, uh just looking at the Trump administration's willingness to take a a golden share in, you know, those US steel operations. Uh governments are opening up pocketbooks to our corner of the market and that hasn't really happened in uh ever to my knowledge. Yeah. >> Well, if we if we flip the conversation to energy generation, that's a huge part of of what you've kind of been speaking about with thermal coal dynamics, AI, and and all of these kind of things. And the um the rhetoric has kind of changed there a bit as well. We saw just in the past week a a very important power plant in New South Wales extended again, another another two years of life added to it. And this is something you've been speaking about in in the States as well. you know, no longer switching the the coal power stations off, but maintaining them. You know, I don't think we're at the point where we're talking about building new coal power plants, but how is that narrative playing out right now, Matt? >> It's playing out exactly like that. Uh, now there there will be uh there was one closure here that has resulted in um uh Alliance Resource Limited Partners taking off their Matiki mine, which had a 1 million toner customer. Uh that plant's going to have, you know, continued shutdowns and operations. So, uh, there there are still retirements happening, but, uh, most are trying to be prolonged, uh, for as long as they can. Um, I I don't know if I've said that on here before, but, I I bet we get maybe one new coal plant built in the US, uh, over the next 10 years. I would venture to guess it's probably in Wyoming, uh, where that would make better sense to pair with hyperscalers, uh, and and a government willing to sort of, uh, you know, go go along with that. Um but uh but yeah, to your point, I think everywhere else it's just keep them on for as long as you can until uh small modular reactors get here sometime in the next decade. Uh other than that, you're just building gas plants as best as you can. Um and I think you'll see a lot of behind the meter uh you know, solar and some other um uh installations as well. I mean, for for hyperscalers, it's all of the above and then some. Uh so they'll they'll take whatever power they can get um almost at whatever price they can get it uh until we wind up at the point where they're building just faster than uh power capacity demand can uh can keep up with it. >> I mean these these hyperscalers they they need almost infinite compute and you know you've got this collision of of exponential compute growth with with what is clearly the ability to provide a linear energy capacity at best and and an old system. Um it's a it's a strange confluence of circumstances that we're contending with at a time when you know energy constraints have never been more stark and yet and yet like you talk about thermal coal coal markets energy markets broadly have been like in a bottoming range. Strange. >> Yeah. So it's you know shudder to think what energy costs will be like at the at the peak of this next cycle. Um, but with regard to with regard to compute, I mean, there there's nothing that's going to stop a hyperscaler from building out compute capacity, right? But, uh, if the energy grid can't keep up with it, then all you get basically are increasing prices and that without additional capacity, whatever additional compute you build just lays dormant and it doesn't get used. So, you know, the the energy constraint is the functional capacity for, you know, the for AI rate of change development just in general. And that's going to be true whether we're talking uh you know, the United States or Europe or China uh or, you know, the Southeast Asia and other places. Uh that's that's a limiting factor everywhere and it's it's contingent upon, you know, a country being able to supply and feed that beast um as much as it can. China's obviously better positioned than most to be able to uh to to weather that storm, but even they have fuel constraints as well. >> Can can you wrap some numbers around it for us, Matt, just to hammer home the the point? Like what what has the the growth rate of of electricity demand been to date? Fairly flat as I understand it. And and what are we kind of looking at this this step change being? >> Uh it's it's relatively flat. I mean, I think if you go back and look at we're we're moving from a completely flat environment as far as power demand growth in the United States to, you know, maybe 1 2% per year, which is still pretty flat, mind you. Um, but when you when you take a look at the for me, the the where the place where you could actually see it play out is in power prices. Um, and power prices are incredibly volatile. But if you take, you know, a a moving average, uh, and you look at it over time, well, since 2021, since this buildout really began, power prices had just moved steadily up and to the right at like a 10 or a 15 degree angle. Um, and I I don't think there's, you know, there there's capacity to absorb a hockey stick in the short term, like we just had, uh, you know, a massive winter storm uh, plow through the US and then a follow-up one on the back of it. uh we had some freeze offs and natural gas but for the most part um it seemed like uh the utilities were were prepared for it to some degree. Um you know the but the the ability to absorb a sustained uh spike over time I think is eventually would impact the hyperscalers as well. So um you know in that in that sense you know can I quantify it uh in terms of demand? I I think we'll just have a you know one 2% power demand growth until uh price begins to get in the way. When that is I I don't know that's a function of capital access rather than uh you know the energy grid here at this point in time. Uh right now the grid is you get what you get and you don't get upset uh more so than anything else. >> One one of the one of these um one of the realities of the buildout that that the data centers required is they're also very like aluminium intensive. They need a bunch a bunch of extra aluminium and then building out the aluminium smelter capacity. Well, aluminium smelters are incredibly energy intensive themselves. So, there's like, you know, an an extra layer of energy intensity required to service the data centers from from new aluminium demand growth that that comes out. And and aluminium is an interesting one because where where there is a lot of like capacity build out in the aluminium sector it is in Indonesia right now and in Indonesia incredibly topical for the seaborn thermal market this week as like there's there's news out that they're reducing supply quotas by like 40 to 70% on 2025 levels. Is that like a is that right? And b like surely this has an enormous impact on on thermal seaborn markets. >> Yeah. We uh so my partner Joe Alena and I actually just did a podcast talking about this exact thing. And uh one of the things we highlighted was and I asked about I was at Woodmac at the last time this happened which was back in 2021 uh on a on a temporary uh visit to my old stomping grounds. And the the net result is these are headline numbers, the 40 to 70%. We're not going to decrease production by 40 to 70%. It's uh you know it's a stick uh that's meant to get people to reduce production. So you'll start to see some mines come off. You'll start to see some supply rationale, but it's not going to get to 40%. It'll get to you know uh you know few million tons, 100 million tons or something like that. Uh and then it'll start to to taper off. And that's that's okay. I mean you can pull that much out of the market. That helps uh that helps the you know the other suppliers into the basin. will help uh you know Newcastle 5500 uh kind of get off the schneide as well. It's been you know languishing down here uh much to Yan Cole Shagran. Think about how how uh how big a price Yanle share would be uh share price Yanco would have if uh if we could actually get 5500 moving. So yeah, you know, I I don't really look at the at the headline numbers so much as I look at it as uh just a geopolitical way to get supply ration to some degree to support uh you know, kind of broader markets. And uh and I think we need that. I mean, we got a nice little jump in um uh Newcastle prices here this week, like about a $5 jump or so up at 116. Uh but that's been the first kind of like uh bullish feeling. uh have had in the thermal coal world for a while, you know, >> at the margin. This is yeah, incredibly constructive though, like >> Yeah. Um c >> can you speak to the the demand side? We we touched on it in in the States and North America there, but how is Asian demand kind of looking? There's been so much made of of China's buildout of of EVs and and we kind of know where a lot of the power of that needs to to kind of come from. So, what's the narrative there looking like at the moment? >> Um asking the wrong guy here at this point in time. That's more of a question for my partner. We've kind of bifrocated into thermal and met coal markets. I'll be sure and have him on the next time. Uh >> yeah, >> as far as as far as I know, um you know, I think that the price has kind of spoken for itself with regard to uh demand. We we have we have plenty of supply to support uh any demand increases that's out there here at the moment. Um but uh you know even just the JKM price going up uh from uh you know I want to say what is this 1562 to 1798. I mean we had a you know 10 year a 20% move uh up and that's really supported uh you know Newcastle prices here. when when those sorts of things happen and you see Newcastle that responsive that quickly that that means that behind the the scenes there is uh tighter availability for those types of coals than you think there are. So I don't think it'll take much in terms of either incremental supply rationalization or incremental demand increases to uh to get thermal coal moving again. I'm not sure we're going to see the blowoff tops like we've seen in the past, but um you know the uh in the before times what was the typically the highs of a cycle are now the lows. Uh and then you know we could probably see $200 Newcastle again you know within three to four years assuming that uh you know demand continues continues on at the pace that it's it's currently on. on the um yeah the the China side of things maybe even from from like a a MET perspective like the thing that I guess like really took the wind out of um out of out of coal in 23 24 was the the the ability for China to to source a lot of its you know co coal demand from from increased production from from Mongolia which was um yeah cut off and then and subsequently kind of you ramped pretty hard. What are those dynamics like for for Mongolian coal into China now? Is it still still ramping strong? Uh any any changes there? >> Uh as far as volumes go, I think we've kind of hit the the wall of where volumes are going to be. I mean, you can uh to have any additional uh imports, you'll actually need to build out uh uh transport capacity. So as soon as you see those capital uh allocations get uh get completed then then there will be an incremental uptick. But what China's done on the metco side uh is they've they've done uh they've increased domestic production, >> right? >> Uh they were they were down in last year uh I want to say maybe 15% on the med side for for key components uh which uh kept their reliance on the seaborn market but as soon as that began to go in the other direction uh that's what really coincided with the bottom falling out of net prices and those sorts of things. And now um like this quarter, China hasn't been setting the price at all. There's not really much urgency for them to go into the market to pick up premium lowval tons. Um kind of what they've been doing is they're relying on domestic production. Uh they're supplementing that with, you know, the maximum amount of tons they can import from Mongolia and Russia. And then they're going out to the market for uh you know, a few million tons a month of coals with strength contributing property. Uh so going to Canada for uh for good premium midvolatile coal. They're going to Australia for mostly for premium midvol something they can get kind of offsp spec second tier hard coing coal. Um like that's kind of what China's been in the market for. So the driver of this metco run up to 250 250 bucks plus in the physical market has been India. So India's really showed up in a big way. Uh and if you look at their steel prices their steel prices have come up commensurately with coke and coal prices. So, the more uh room that their domestic market gives them, uh the more resilient that that PLV prices are going to be. Uh it's been good to see. We've been talking about it for a couple of years, but it's nice to see it play out that way. For once, >> those those global steel cycles really um yeah, like really really map out a lot of this demand, right? and and and India is at a much earlier like yeah like he's is at an early stage in that steel cycle that China would have experienced many many you know many years ago now. >> Yeah. I mean they're they're kind of taking the reigns from where China left off. So we're going to see China contract relatively slowly uh you know turn inward for their supply much like they've been but India can really ramp up uh through the end of the decade. I forget how much um uh incremental steel capacity they have coming online. Uh but it's uh you know if you if you pare it down to just uh premium lowvall and premium midvall and you look at what the forward demand looks like um there's not enough uh that's in the pipeline in the development pipeline to supply it. So more than likely what's going to happen is that that demand will trickle down into second tier hard coing coal and you'll see a kind of a shrinking of the relativities between the premium stuff and the next tier down. Um and I think you'll see India use more PCI. So the relativities of PLV to PCI are probably going to shrink as well. Um I think Japan will probably increase their PCI rates like that's that's where I see the pressure valve to the extent that there is one uh being released in the market now. uh semisoft h highvall completely different supply story um that's going to be kind of a rough go of it I think for uh for a year or two but once that gets resolved then then everything you know is going to begin to move up commenurately with the with the rest of the cycle >> so that there's a lot of hope on this this India narrative playing out and a lot of people have a bit of kind of stock in it what do what do you keep your eyes on to just check in that it's continuing to play out as you've kind of forecast over the past few years and as we look forward >> um I put out a chart I try to do it every couple of weeks or whatever that just looks at Indian steel margins. Uh so I I you know take uh you know PLV medal and whatever the current shipping rates are to India and we just deliver it to a fictitious plan and then run a cost stack off of that and see what their margin is. uh when the margins have been deeply negative or or you know are inflecting to the downside that has for the last year or so indicated that we're going to have a rough go of the next sort of few months. Uh and vice versa when steel prices allow um you know uh Indians to go into the market and uh and pick up uh and actually pick up tons at reasonable prices then the cycle goes the other way. So really that's what I'm kind of using as an onoff lever. uh and you know we're writing about it on on the coltrader.com the coltrader.substack.com substack.com as often as we can but that's like for me that's the bell weather now is what what is the health of India's steel industry um right now it's okay you know last year it was pretty bad we we've we've graduated from bad to okay uh but as we see it in the you know the Coke stock prices when you go from terrible to less bad that's usually where you get the highest beta right >> that that's really interesting because if we if we look back the last 10 or 20 years and And I'm pretty green here, so I'm really curious to hear what you have to say. The the Chinese steel sector has not always been the most profitable. It's it's waxed and waned, but there's been some atrocious years of of profitability for the for the steel makers out of out of China. But on the whole, if we look back over the last 20 20 odd years, it has grown quite phenomenally to to the point you made before where it's kind of plateaued recently. So is that different in India for for the dynamics of how the the industry's come come about? >> That's a good question. Uh I'm not quite sure how to answer that uh to be fair. Um but what I would say is that you know when I look back on China uh we used to yeah I think when I when I started forecasting on my own uh you know not not a part of Wood McKenzie or um or working on the equity side um you know one of the things that I sort of looked at was I want to say the average margin at a Chinese mill over like 10 years when I started doing this in 2020 21 was like $4 dollar of IBIDA. That's before everything else. So it was clear that China was, you know, basically running their steel mills at a cost center to fuel domestic growth. Um when I look at India, uh India kind of likes to make money. So I don't think they're going to look the same as a command economy uh going forward. they have a much freer market obviously uh you know uh much more kind of geopolitically aligned with the west and so I think what you'll see in India is more typical cycle fits and starts it's not going to be an engine that goes you know 100 miles an hour at a constant speed when uh when the steel mmakers start to hurt from a profitability perspective uh you know you they'll slow down uh they're more incentivized to uh to take those market cues than than the Chinese are which honestly from an investment standpoint I think a good thing that benefits us because then cycles do become a little bit more predictable as opposed to operating on the whim of the next five-year plan. Um so I I think that's going to be you by and large more profitable for uh for the investing side of things as we go forward. at your core. Matt, you're a cost curve guy and um I I'm just I'm keen to understand and appreciate how cost curves have have evolved or what are the dynamics amongst those kind of cost curves like say see the changes in the last like four years. >> Well, most of the changes have occurred on the on twofold. Well, one is on the mining side. We've had a lot of uh labor cost inflation around the globe. I think that's, you know, it's maybe not exactly uniform from country to country, but that has been a theme. In order to incentivize, uh, you know, men and women to go work in these industries, you have to pay them a wage that encourages it. And that's, um, that's that's been the reality. Uh, certainly in where I come from in West Virginia, um, you know, there's there's no love lost between uh, you know, the people in the industry over the years. Um, so if you want to, you know, bring a third generation, fourth generation coal miner to work after he's seen, you know, his father and his grandfather, uh, you know, and they and they saw that his great-grandfather go through these these employment cycles. Um, it's a it's a much tougher cell than it used to be. Um, you know, I think that probably changes to some degree going forward as we increase automation within the industry. Um I'm not uh uh you know on the on the bleeding edge of uh equipment development and those things but I would I would expect to see a pretty hefty amount of automation uh if we have this conversation in say 10 years. I went to a a conference in Pittsburgh uh in early June uh and uh there was a remote uh Joy was running a remote continuous minor operator uh and it's like playing a video game. It's amazing. But uh they're they're what they want to do is they want to have people be able to sit at the surface and run these machines underground and then you just send in uh you know essential maintenance when when we get to that point. Um I'm not sure what the cost curve is going to look like that if we have that kind of labor cost deflation. Is that offset by maintenance capex? Is that offset by equipment purchases? Um >> ratios geological. Yeah. >> Yeah. I think that's to be determined >> um over time. But um the the other the other cost increase in general has been the the royalty side from the government side and that's been entirely in Australia. So if we see a reversal of that uh you know sometime in the next uh before the end of the decade I mean that will that would really shift the top end of the cost curve. >> Yeah. So, you know, we wouldn't be able to uh, you know, have these blowoff numbers. Uh, I don't think at all. I think you'd probably put a cap at like 350 400 bucks and that would be the end of it. >> So, Matt's not at the forefront of mining equipment advancements. Maybe we should introduce him to Derek Herd because Derek Herd is at the forefront of mining equipment advancements. >> Sanvic ground support, CSI, >> mate. It's it's literally in their DNA to bring R&D of ground support to the industry via new products every it feels like every week. >> 150 years they've been doing this for. It's their bread and butter innovation. They're at the bleeding edge of keeping mine workers safe. Like >> 150 years. >> It's crazy. >> I don't even know mines have been been here for that long. >> Even even longer, mate. But as long as we got mines, you got to have them safe. And that's what Sanvic do. And like Matt said, they're at the bleeding edge of ground support. So if you've got an underground mine in any continent on the planet, they can look after you, mate. >> Get in touch with Sanvic ground support. Derek Herd will fix you up. >> Go Sanvic. >> So help me help me just to appreciate how you've witnessed this like the the hu enormous kind of royalty regime that was introduced in in in Queensland to a lesser part in in in New South Wales that it's it's like morphed the cost curve. Were those were many of those assets like lower half or upper half and now I'm guessing it's just it's lifted the kind of the floor to the benefit of of you know ex Australia seabour producers who have been able to capture greater margin at a at a higher floor price. So, if we think about what the marginal ton is, what the cost of that mine is, um, in the before times when we were building out the the cost curve at Woodmac, uh, for Matt, I would have said that probably was somewhere in the 120s. >> Yeah. >> Which meant that you would have had, you know, for any sort of two or three-month period, you can, you know, spot price can go down 25% below that. uh people shut down operations and it and it comes back up and uh I want to say that you know in the last really terrible bare cycle medal bottomed out in the low 90s um so so that kind of tracks uh that number now I'm pretty sure is about605 um which used to be the long-term price assumption for for PLV so and you know It it also makes the cost curve more volatile from year to year. So when you have these these blowoff uh tops um Australia moves to the to the top of the curve. Um and the US stays steady. So you have this like change uh that that never used to have never used to be in existence at all. Um and if the if the US is setting the cost floor uh for the rest of the world, oh I can guarantee that's going to be pretty high. Um so there's there's a lot of uh tolerance for volatility when we get up into those uh into the upper stratosphere. Um so you know all in all we were asked the question on the podcast today like where do you think uh you know will we get five years down the road what's what will have been the average price? Um and uh I remember uh I was I was having dinner with Andy Edson about two or three years ago and he asked me that question. And I said probably about 265. You know, if you think of the bottom as uh 160 165 bucks and you think of the you know the the peak of the market uh probably without you know a Russia Ukraine layered over top of it is probably you know 350 400. If you kind of just go to the mean, you're going to wind up at about 250 260 265 and that's plenty for, you know, a higher cost miner to u make money uh make a a 20% profit on top of maintenance capex and whatever logistics they have. Um that to me is kind of where prices have to be for PLOV uh to just maintain uh the status quo. Um if you can't do that and more supply comes out then that number winds up being higher until uh you know till robots take over the world. Well if robots take over the world I um actually well there's this AI paradox now I think and it and it's and it's the the the reality is that technological advancements now require more fossil fuel as opposed to becoming energy independent or relying on on new energy. We actually need more fossil fuels as a result of the the latest technological advancement. So if robots take over the world, I think we're still going to need a ton more coal. >> Oh yeah, if there if they even plan to take over the world, we're going to need a ton more steel, too. >> I'm not sure. I mean, if we're going to build those robots out of aluminum, that that's another quandry we get into. So, uh, yeah, there's there's no, you know, it's hard for me to not to look at the next decade and not think that, you know, all the companies that that we love and have been close to for the last, uh, uh, you know, decade or so are going to fare really well. Um, this is going to be a pretty pretty important transition, not just for the industry, but I think for, you know, for humankind as well. Well, the last time we had you on the show, we were we were speaking about M&A and consolidation in this in the space with um the the Peabody deal that ultimately fell through. So, if you do think ahead 10 years, is there is there more? Is there less companies? What does it kind of look like? And and in the near term, are there deals playing in the back of your mind? >> It's interesting. Well, somebody's going to have to come in and take the Anglo assets. I'm not sure who uh is going to be the best candidate for that. uh you know I would have said BHP uh a while ago uh but uh you know now that Anglo is um uh sort of uh you know engaged uh I'm I'm not sure what that's going to look like on down the road. Um you know uh I think in the US we'll have some consolidation over time. I think uh you know uh companies uh I think core probably wants to acquire uh I would venture to guess over time. I I would I wouldn't be surprised if AMR or Warrior uh both uh were interested in acquiring, but I I think at the at the crux of the question is everybody needs more Lovall. Um, and that's what we're going to need to uh, you know, see people invest in. You know, whether that's lowvol PCI, uh, second tier hard coing, coal, premium, midvall, um, you know, PCI, like all we need, all of the above, and there's not enough of it in the market to sustain it. Um, so, you know, I I think M&A makes sense. I think we we will see somebody come in and eventually restart a lot of these mines that have that have been shut down here recently. Um but uh you know who's going to lead that capital cycle? Um I wouldn't be surprised if it's someone like Matt Latimore. Um I think I think he's positioned pretty well to you know to make a move here in the next uh uh during the next cycle at some point. >> The cold tycoon of this cycle undoubtedly. Yeah, for sure. Um the um India India is going to be very involved. >> Yeah. >> Um >> I imagine a bunch will pop out of Glen Tinto if if that deal eventually. There'll be plenty plenty of divestments subsequent to that deal. >> Yeah. Uh and we're talking about maybe a coal spin out of the Glen Tinto deal as well. U I'm here for that. Give that to me all day. >> Yeah. Yeah. Um yeah, let's let's talk about Latimore briefly because A recent a recent deal that um that they did do was acquire Ilawa out of South 32. Do you think that will come back to market in some way, shape, or form? Do you think they'll um that'll that'll find like a a public vehicle? >> Uh public vehicle, that's a good question. I don't necessarily know the answer to that. Um but uh I think it would it would make sense especially if he were able to you know tack on a few other um acquisitions as well. Um so I saw they had the they had an incident uh up there at some point in time here recently. I'm not sure what the what the current status is of those operations, but the uh the the message I think is pretty clear uh is that if you're operating in Australia uh an economy of scale will do you really well. Uh I mean BHP's been able to weather those those production storms because they have a pretty big portfolio of assets. Um and I think that's uh you know that's that's the case as well. It's like if you're a uh single asset producers have been you know very exposed to these price cycles in the past. Uh so you need to get at that critical you know three four five uh you know operations and preferably as many as you can in the premium segment as well uh in order to be I think guaranteed a uh you know a throne in the next uh in the next cycle. That's actually I'm glad you mentioned BHP because that's that's we heard a rumor like I want to say October last year that um yeah BHP would was likely to to evaluate a a devestment of BMA by the calendar end of calendar year 26. Do you think there's that's nonsense or do you think uh do you think that might hold up if if the royalty regime in Queensland stays where it is? >> Uh I don't think that's uh out of the question at all. I mean it would uh they've kind of signaled that they want to wind that down to some degree in the past and um you know at the right price especially uh with those remaining reserves like do you want to carry that operating risk uh on through another capital cycle for them when they have uh uh you know bigger fish to fry elsewhere. Um it's a good question. I wouldn't be surprised to see it change hands at some point in time or maybe not all of it but uh uh one or two targeted mines uh over over a period of time or alternately they acquire something and then spin it out. Um I think that would be pretty reasonable as well. Excuse our Australian bias, but you know, we're just going to keep talking about Australian coal companies, Matt, but um uh >> well, like on on that point, Trav, in the context of Bomb Basin and and the fact that there's next to no new mines coming online, given the the high quality nature and the the strategic placement of of the assets and the, you know, the shackles they have with the royalty regime, you'd have to think it'd be it'd be kind of um appealing with, you know, the, you know, as an option type play with the idea that maybe the royalties roll off in in a few years time, that could be something that's that's pretty interesting depending on on prices, you put it there. >> Yeah. If the royalty regime went back to uh the before times, >> let's say in five years, >> that won't happen. >> Not while state like Queensland state debt just explodes exponentially faster than the royalty >> revenue fund. Easy. Oh, >> that's that's true. That's true. Yeah. Um but let's let's say they they ease off some >> degree. Yeah. >> Uh then yeah, I mean that's a call option on whatever purchase it is that you make, right? You can't necessarily work that into the uh you know, you can write it in as a scenario in terms of a potential valuation, but without uh you know, without any you know, guarantee of of whether or not that's going to happen. I don't think you could pay for it. Um, it's, you know, you could maybe use it to justify, you know, an additional five 10% upside or something like that. But >> the structure of those royalties was was mental as well because it was designed to kind of capture this super profit period, but but at these fixed price levels and so like you know um it became increasingly ownorous at these above certain fixed kind of like prices, right? and and now with just the the event of inflation, it it it completely just erodess any any ability for these businesses to have any margin over time, right? >> Uh you would think so, but at the same time, uh you know, the US is doing a really outstanding job of torching the dollar here at the moment. And >> yeah, right. I mean, I the the the Australian US dollar crossed 70 uh for the first time in God knows how long. It's been a while. Um, and at least when I run my models, that's uh the difference in price there is about plus $5 on, you know, on long-term forecast for uh for metal. Um, but the other thing it does is it uh I mean it'll say if the if the Aussie dollar uh went back to par like where it was, you know, during the last u uh you know, during the first coal boom that I went through, um well, that that takes away a lot of the uh the upside for royalties. You know, if we get back up to $300, $400 and we're saying that's the max that um you know, these other countries steel steel industries can handle. Well, if that's only 300 or 400 Aussie dollars at the same time, that's not quite as big of a hit uh that the government will get. So, you know, the the US hasn't has a you know, sort of a what is that a tertiary role to play in uh in in how that pans out over time. Um so, and I and you know, speaking you know, solely from from perspective over here, uh it ain't stopping uh during this presidency. uh there is a 0% chance that we will stop uh hammering money I think uh over the next uh three years and uh and I'm not sure that you know even in the event of uh you know Democrats taking over the Senate and us returning to gridlock uh or god forbid you know whoever the the next uh the next Democratic president is we're we're going to have different um different versions of the same problem until something breaks here in the US. So, um I I think I think we're kind of at the beginning of a of a currency cycle that is way above my pay grade, but something that I think all of us will have to pay very close attention to uh over the coming five years because what I if if I can change the value of the currency by 10% and that changes the medal price by $5, what happens if we change it by 30%. Um that's uh that's kind of where you know I have to take off my analyst hat and just go I don't know what's going to happen here at this point in time. So most of what we can do is just take the the the the variables that we have plug them into the model and solve for X. And when we start mcking around with the variables um you know that's a pretty wide range of outcomes for for everything. So it's a it's why I hate politics man. So fun. >> When you plug those variables into your models, Matt, I'm just I'm I'm keen to depict how you know your relative preference of of the um of the coal stocks we're familiar with by by you know relative to their current price. Um you think just just if you could like order names like Stanmore, Yankl, White Haven um that that would be wonderful. >> Um I mean I think I think Stanmore is criminally undervalued down here. >> Yeah. Uh, I'm just looking at trailing EV to Ebida. Uh, which isn't the best metric, but it's what I have in front of me. And, you know, White Haven's up at, you know, five and a 5.3. Uh, and then Stanmore is a 3.8. That's just wrong. And then, you know, in the US, you know, on the Met side, you know, Alpha's at 5.5. I mean, shouldn't White Haven get a US multiple? like it should absolutely uh you know get get something comparable I think in those Warriors at 7.9 I mean come on guys White Haven's as big a global player uh and just as important to uh to the global industry and more diverse um yeah like let's let's get those numbers up. Those are rookie numbers. >> Well, you can you can thank Aussie Super. I think they're they're helping the cause and um buying White Haven stock again. So, >> I mean, it's been on a heater like it's nearly doubled in the in the last >> I don't know 12 months or something like that. So, >> quietly quietly finding popularity >> and that's like that you I mentioned Aussie super buying White Haven again, but there's there's absolutely this kind of evolution in global capital allocation. You know, Black Rockck's had many iterations of its ESG influence on the world and and we're now in ESG 4.0 0 era which um is is the the the realization that that these businesses are incredibly important to our prosperity and that they shouldn't have been so punitive in um in their their ways of restricting capital flows into these businesses previously. >> It matters tremendously for the cost of capital. Hey Matt, like the the change in debt that these guys are playing like you've probably got more more boots on the ground so to speak. >> It's cheap again. You can get you can get really cheap debt as a call company. I mean, it was crazy high. It was out of this world high. But I'm not sure what the latest numbers on on debt packages for the for the states companies that you're seeing are, but it's really pulled in over here. >> I mean, uh, you know, I don't think it's out of the question to be able to go get an 8 and a half% coupon, 10% coupon somewhere around in there. And that was unheard of just a few Well, getting anything was unheard of a few years ago. >> Yeah. >> Um, >> and and and the Fed's rate, the Fed's fund rate was was next to zero a few years ago as well. And now we're we're at whatever it is 4% or something. >> Yeah. >> Yeah. Exactly. I mean, you know, all these coal companies which were, you know, left for dead in the first part of my career, all have better balance sheets than the United States. So, God bless. >> That is great. >> Wait, just wait for the United States to nationalize them. Then they'll have bad balance sheets again. >> Never say never. Yeah, I yeah, I can see a scenario where that that could play out. Um, >> and >> but yeah, just uh looking down the list, I mean, uh, I think I think New Hope is probably pretty fairly valued here. They've had a nice little >> Yep. >> uh, you know, uh, 13% up to to kind of catch up with everybody else here the last little bit. Um, Yan Cole had a nice 20% run. >> Yeah. um less uh and then yeah, White Havens, I mean, White Haven's going to take out all-time highs this cycle and just keep going. >> Yeah. >> Uh so I I pretty firmly believe in that that we should see it rerate higher up to sort of the US guys at least. Um and I want to see Stanmore get up into the fives. Um like that should be a $4 stock, an Aussie $4 stock at least. >> Yep. Yep. And uh XASX names where, you know, where what are your most favored stocks at the moment? I mean, I'm still pretty firmly on the Met side. Uh, you know, we're at the beginning of this cycle here. I want to be um you know I'm not fully sized in anything coal right now but I think maybe by the time we get to the end of shoulder season end of June uh I want you know at least you know a 15 20% basket you know allocated across the met sector which would include really in no particular order AMR uh Warrior um HCC uh Ramico MEC uh White Haven and Stanmore I think would be and and core natural resources and Peabody. I don't have any Peabody right now either. So, there's seven and they're all fine. >> Yeah. >> Like, you know, it's it's sort of like pick your uh pick your horse. Uh Peabody's interesting because we're we're increasing lowvall production. We're going to have a pretty good thermal coal year in the Illinois basin and the Powder River basin. Um you know, it's uh it's already completely come back to the highs from uh from the Anglo days of Yore. Um but uh yeah, it's if they start buying back back stock especially um there's there's room for that to sort of go higher as well. So anyway, I'm I've got um you know I've got my calendar circled for end of June and I want to have you know a basket of all these and which one's going to be the highest uh allocated at that time will kind of depend on where we wind up in the cycle. But, you know, right now, I think you could make a case for, you know, putting almost any of those at the top at any one point uh at any one point in time. I mean, you know, Ramico isn't the isn't the biggest producer, but they've got all the uh you know, the rare earth uh uh marketing hype. >> Is that what is that what lured you in to start talking about rare earth as well, Matt? Was it was it Ramaco? It was it was pretty clear that if we want to have any sort of basis in reality for uh understanding what valuations look like for um now keep in mind Peabody and and core natural resources also have mines in the PRB that will have you know comparable uh you know concentrations of of you know gallium and uh and you know light rarers mostly I would figure scandi and those sorts of things. Um, and the US government is currently writing checks at a pretty alarming clip. So, yeah, that's that's why I had to start kind of digging in and at least becoming familiar enough with the sector that I could function a little bit. And, you know, along the way uh it sort of became really clear that the uh I mean the the oxide really isn't the constraint there. It's metalization. um you know it's uh you know SX processing uh metalization so those are the companies that that I probably want to focus on more over the longer term uh because like we don't have anybody in the US who knows how to run any of these operations anymore so we're going to have to rebuild all the expertise we're going to have to you know import the technology we're going to have to you know nearshore or friendly shore uh raw material supply because like other than MP um you know we have you know ground top is, you know, without uh a processing facility located nearby, like would not be a mine in and of itself, you know. Um, so it it's the way that I look at this is there's it's the West versus China and the West is in the process of aligning. Uh, and that means, you know, partnerships between the US and Australia, partnerships between US and Brazil. uh it's just uh you know rally the troops and let's uh let's see if we can you know create a uh you know downstream uh magnet manufacturing uh industry that that lies outside of China for the first time in you know 30 years it's uh it's going to be group effort boys >> and do do you have a first pass view on the uh the stockpile announcement that that came out I think over overnight for us here in in Australia but in a nutshell Trump wanting to to put together a12 billion US group of any which metals. It wasn't exactly clear. Pretty pretty light on details. >> Yeah, I mean I think Samarium, Europium, I think those were kind of two at the at the top end of the want spectrum at least from what I understand. But uh yeah, like that also that comes on the heel of that Reuters article uh last week which absolutely rugpulled the whole sector. Wow. Yet was edited >> yet was edited like four times to the point where it was like why why did you even write the >> such good entertainment. What like the MP materials Twitter handle. >> Oh yeah. Shout out to MP Material social media. That was the most fun thing I've read in a long time. the uh but it's you know it just absolutely punished most of those companies for no real reason. Uh and then uh the announcement that we're going to build these stock piles just basically proves it. Like there's there's more than one way that that Trump can implement tariffs. You know, there's more than one way that we can set floor prices. Like there's, you know, I I understand that it's news and like if you go out and you have somebody give that quote to you in your journals, you got to print it. Uh absolutely. But you should at least do the podicum of work to understand that even if this happens, are there other avenues to get there? And that's kind of what I thought that they failed to do. Like markets are complex and if there's demand for something, it will find a way uh and it will show up, you know, in price whether you want it to or not. They're very funny like that. >> Yeah. >> So, uh anyway, that's that's my take as to as to how that progresses. I don't know. But, uh it was it was a nice bookend to the shenanigans from last week. >> Totally. Totally. I mean for all the complexity that the fact that one Reuters article can can shake the the market like that is yeah entertaining if anything all the paper hands over here in the US >> and that's not us at all. Those are rookie numbers. >> That's an absolute delight to speak with you about all things Cole as always. Look forward to um yeah you being accompanied by your partner Joe next time that you're um you grace us with your presence on our on our channel. But thank you so much. >> Uh thanks for having me guys. It's so wonderful to get to talk to you every time and absolutely we'll bring a guest here next time uh so that I can wax so we can wax more poetic about the thermal coal side. >> Look forward to it. Have a good one Matt. Thank you. There we go mate. What a pleasure as always speaking with Matt Water. You can check out his fantastic work on Substack at the coal trader and he's also got the uh the rare earth trader. He puts out a bunch of work there. Super insightful. So go check that out. And all made possible thanks to our fantastic partners Sambitic ground support focus the platform by market you would have seen some of the charts in the show there intrlinks and exceed capitaloo now remember I'm an idiot JD is an idiot if you thought any of this was anything other than entertainment you're an idiot and you need to read our disclaimer
Coal's Inflection Point: AI Collides With Energy
Summary
Transcript
It's interesting. Well, somebody's going to have to come in and take the Anglo assets. I'm not sure who is going to be the best candidate for that. Uh, you know, I would have said BHP a while ago. You know, now that Anglo is sort of, you know, engaged. I'm not sure what that's going to look like on down the road. >> For all the money miners who are are not acquainted with you yet, um, Matt Water, you are you're our go-to coal man. You're the world's go-to coal man. Everything coal, met thermal. We um we just ask Matt and I've noticed you throwing around this um this this theme you're toying with that 2026 is the the year of the great accumulation. Uh what do you mean by that? >> Well, uh you know, I had thought that 2026 initially was going to be the year where everything really pulled back. Um, hearkening back to my days at Woodmak, we saw kind of peak Chinese steel production in 2024, which uh is pretty close to what happened in reality for a 10-year forecast. That's not bad. Uh, and usually what happens is, you know, cycle lasts about 5 years. This one started for real in 2021. So, you know, if past prologue, uh, as Rick Rule would say, uh, that would mean that, you know, 2026 would have been the year for, uh, to kind of withstand all that. But instead, the the the China property debacle uh and just a real downfall in demand there pulled all of that forward into 2025. And so instead of getting a summer recovery, we got a big fat nothing. Uh and uh prices bottomed out. Uh but since then, we've had uh lower production than expected. Uh we just had a cyclone on the MET side. Uh we've had a cold winter. Things have improved on the thermal side. And we've tested what I think is really uh you know the cost floor for for each of those individual sectors. Uh and I might add we've tested it successfully. There have been a kind of a bare minimum of of you know bankruptcies you know companies going into receiverhip. Uh there surprisingly there's been a bare minimum of of uh mine idlings too. So I I think you know we can we can look back through the last year and say pretty firmly that you know the coal industry really is on on pretty good footing compared to the before times. >> Well as as 10year forecasts go that's that's quite the pick Matt but one thing I'm curious to hear whether you kind of had in in your bingo cards is some of the takeover battles and kind of tussles we've had for some of the major steel producers. So, US Steel played out last year and we're in the midst of one here in Australia with with Blue Scope Steel and that adds such a fascinating geopolitical kind of lens to this whole flushed steel market globally, doesn't it? >> Yeah. And, you know, my track record of predicting geopolitical outcomes like that, you know, is is far from successful. So, um, you know, I don't always know how those things are going to work out, but it made sense, at least from the from the US standpoint, that, uh, we had a company with a much better balance sheet come in to shepherd these assets going forward. Um, I haven't followed Blue Scope particularly closely, just because, you know, for me down under, I tend to be a consumer of data rather than a generator of it. Uh, but I'm interested to see uh, what happens there. for for the US that made a lot of sense and I was glad to see the deal go through with NPON uh despite both uh President Biden and President Trump having their misgivings about it. Um you know my my sense of it was that any concern about the union side of it was really overblown. Uh you know the the plans were were in place for a long time uh to build uh you know Big River Steel 2. Um and now we have a better balance sheet to do that with. I think that's good for for the workforce. Not bad. Um, but as for uh as for Blue Scope, uh, I don't really know. Honestly, I was going to ask you guys about that uh while we were having this discussion because you guys can probably provide the type of context that we'd need to sort of think about in order to uh figure out long-term positioning there. I think it's I think it's like yeah these these really ordinary businesses uh for for many reasons uh but because because assets in in you know strategic western countries with enormous replacement value that can can can provide enormous strategic value we're in the era of strategic value is real value and um and hence the evolving evolving kind of you know corporate corporate outcomes for these businesses >> and we've seen the signs that the governments are going to support these you know we've seen about every smell melt backed up by the government here as well. So, you know, you've got the government in your in your corner in the west as well. >> A huge ad to that >> if if we >> Yeah, I've been writing about that more on the on the rare earth side than than on steel in particular. But, uh just looking at the Trump administration's willingness to take a a golden share in, you know, those US steel operations. Uh governments are opening up pocketbooks to our corner of the market and that hasn't really happened in uh ever to my knowledge. Yeah. >> Well, if we if we flip the conversation to energy generation, that's a huge part of of what you've kind of been speaking about with thermal coal dynamics, AI, and and all of these kind of things. And the um the rhetoric has kind of changed there a bit as well. We saw just in the past week a a very important power plant in New South Wales extended again, another another two years of life added to it. And this is something you've been speaking about in in the States as well. you know, no longer switching the the coal power stations off, but maintaining them. You know, I don't think we're at the point where we're talking about building new coal power plants, but how is that narrative playing out right now, Matt? >> It's playing out exactly like that. Uh, now there there will be uh there was one closure here that has resulted in um uh Alliance Resource Limited Partners taking off their Matiki mine, which had a 1 million toner customer. Uh that plant's going to have, you know, continued shutdowns and operations. So, uh, there there are still retirements happening, but, uh, most are trying to be prolonged, uh, for as long as they can. Um, I I don't know if I've said that on here before, but, I I bet we get maybe one new coal plant built in the US, uh, over the next 10 years. I would venture to guess it's probably in Wyoming, uh, where that would make better sense to pair with hyperscalers, uh, and and a government willing to sort of, uh, you know, go go along with that. Um but uh but yeah, to your point, I think everywhere else it's just keep them on for as long as you can until uh small modular reactors get here sometime in the next decade. Uh other than that, you're just building gas plants as best as you can. Um and I think you'll see a lot of behind the meter uh you know, solar and some other um uh installations as well. I mean, for for hyperscalers, it's all of the above and then some. Uh so they'll they'll take whatever power they can get um almost at whatever price they can get it uh until we wind up at the point where they're building just faster than uh power capacity demand can uh can keep up with it. >> I mean these these hyperscalers they they need almost infinite compute and you know you've got this collision of of exponential compute growth with with what is clearly the ability to provide a linear energy capacity at best and and an old system. Um it's a it's a strange confluence of circumstances that we're contending with at a time when you know energy constraints have never been more stark and yet and yet like you talk about thermal coal coal markets energy markets broadly have been like in a bottoming range. Strange. >> Yeah. So it's you know shudder to think what energy costs will be like at the at the peak of this next cycle. Um, but with regard to with regard to compute, I mean, there there's nothing that's going to stop a hyperscaler from building out compute capacity, right? But, uh, if the energy grid can't keep up with it, then all you get basically are increasing prices and that without additional capacity, whatever additional compute you build just lays dormant and it doesn't get used. So, you know, the the energy constraint is the functional capacity for, you know, the for AI rate of change development just in general. And that's going to be true whether we're talking uh you know, the United States or Europe or China uh or, you know, the Southeast Asia and other places. Uh that's that's a limiting factor everywhere and it's it's contingent upon, you know, a country being able to supply and feed that beast um as much as it can. China's obviously better positioned than most to be able to uh to to weather that storm, but even they have fuel constraints as well. >> Can can you wrap some numbers around it for us, Matt, just to hammer home the the point? Like what what has the the growth rate of of electricity demand been to date? Fairly flat as I understand it. And and what are we kind of looking at this this step change being? >> Uh it's it's relatively flat. I mean, I think if you go back and look at we're we're moving from a completely flat environment as far as power demand growth in the United States to, you know, maybe 1 2% per year, which is still pretty flat, mind you. Um, but when you when you take a look at the for me, the the where the place where you could actually see it play out is in power prices. Um, and power prices are incredibly volatile. But if you take, you know, a a moving average, uh, and you look at it over time, well, since 2021, since this buildout really began, power prices had just moved steadily up and to the right at like a 10 or a 15 degree angle. Um, and I I don't think there's, you know, there there's capacity to absorb a hockey stick in the short term, like we just had, uh, you know, a massive winter storm uh, plow through the US and then a follow-up one on the back of it. uh we had some freeze offs and natural gas but for the most part um it seemed like uh the utilities were were prepared for it to some degree. Um you know the but the the ability to absorb a sustained uh spike over time I think is eventually would impact the hyperscalers as well. So um you know in that in that sense you know can I quantify it uh in terms of demand? I I think we'll just have a you know one 2% power demand growth until uh price begins to get in the way. When that is I I don't know that's a function of capital access rather than uh you know the energy grid here at this point in time. Uh right now the grid is you get what you get and you don't get upset uh more so than anything else. >> One one of the one of these um one of the realities of the buildout that that the data centers required is they're also very like aluminium intensive. They need a bunch a bunch of extra aluminium and then building out the aluminium smelter capacity. Well, aluminium smelters are incredibly energy intensive themselves. So, there's like, you know, an an extra layer of energy intensity required to service the data centers from from new aluminium demand growth that that comes out. And and aluminium is an interesting one because where where there is a lot of like capacity build out in the aluminium sector it is in Indonesia right now and in Indonesia incredibly topical for the seaborn thermal market this week as like there's there's news out that they're reducing supply quotas by like 40 to 70% on 2025 levels. Is that like a is that right? And b like surely this has an enormous impact on on thermal seaborn markets. >> Yeah. We uh so my partner Joe Alena and I actually just did a podcast talking about this exact thing. And uh one of the things we highlighted was and I asked about I was at Woodmac at the last time this happened which was back in 2021 uh on a on a temporary uh visit to my old stomping grounds. And the the net result is these are headline numbers, the 40 to 70%. We're not going to decrease production by 40 to 70%. It's uh you know it's a stick uh that's meant to get people to reduce production. So you'll start to see some mines come off. You'll start to see some supply rationale, but it's not going to get to 40%. It'll get to you know uh you know few million tons, 100 million tons or something like that. Uh and then it'll start to to taper off. And that's that's okay. I mean you can pull that much out of the market. That helps uh that helps the you know the other suppliers into the basin. will help uh you know Newcastle 5500 uh kind of get off the schneide as well. It's been you know languishing down here uh much to Yan Cole Shagran. Think about how how uh how big a price Yanle share would be uh share price Yanco would have if uh if we could actually get 5500 moving. So yeah, you know, I I don't really look at the at the headline numbers so much as I look at it as uh just a geopolitical way to get supply ration to some degree to support uh you know, kind of broader markets. And uh and I think we need that. I mean, we got a nice little jump in um uh Newcastle prices here this week, like about a $5 jump or so up at 116. Uh but that's been the first kind of like uh bullish feeling. uh have had in the thermal coal world for a while, you know, >> at the margin. This is yeah, incredibly constructive though, like >> Yeah. Um c >> can you speak to the the demand side? We we touched on it in in the States and North America there, but how is Asian demand kind of looking? There's been so much made of of China's buildout of of EVs and and we kind of know where a lot of the power of that needs to to kind of come from. So, what's the narrative there looking like at the moment? >> Um asking the wrong guy here at this point in time. That's more of a question for my partner. We've kind of bifrocated into thermal and met coal markets. I'll be sure and have him on the next time. Uh >> yeah, >> as far as as far as I know, um you know, I think that the price has kind of spoken for itself with regard to uh demand. We we have we have plenty of supply to support uh any demand increases that's out there here at the moment. Um but uh you know even just the JKM price going up uh from uh you know I want to say what is this 1562 to 1798. I mean we had a you know 10 year a 20% move uh up and that's really supported uh you know Newcastle prices here. when when those sorts of things happen and you see Newcastle that responsive that quickly that that means that behind the the scenes there is uh tighter availability for those types of coals than you think there are. So I don't think it'll take much in terms of either incremental supply rationalization or incremental demand increases to uh to get thermal coal moving again. I'm not sure we're going to see the blowoff tops like we've seen in the past, but um you know the uh in the before times what was the typically the highs of a cycle are now the lows. Uh and then you know we could probably see $200 Newcastle again you know within three to four years assuming that uh you know demand continues continues on at the pace that it's it's currently on. on the um yeah the the China side of things maybe even from from like a a MET perspective like the thing that I guess like really took the wind out of um out of out of coal in 23 24 was the the the ability for China to to source a lot of its you know co coal demand from from increased production from from Mongolia which was um yeah cut off and then and subsequently kind of you ramped pretty hard. What are those dynamics like for for Mongolian coal into China now? Is it still still ramping strong? Uh any any changes there? >> Uh as far as volumes go, I think we've kind of hit the the wall of where volumes are going to be. I mean, you can uh to have any additional uh imports, you'll actually need to build out uh uh transport capacity. So as soon as you see those capital uh allocations get uh get completed then then there will be an incremental uptick. But what China's done on the metco side uh is they've they've done uh they've increased domestic production, >> right? >> Uh they were they were down in last year uh I want to say maybe 15% on the med side for for key components uh which uh kept their reliance on the seaborn market but as soon as that began to go in the other direction uh that's what really coincided with the bottom falling out of net prices and those sorts of things. And now um like this quarter, China hasn't been setting the price at all. There's not really much urgency for them to go into the market to pick up premium lowval tons. Um kind of what they've been doing is they're relying on domestic production. Uh they're supplementing that with, you know, the maximum amount of tons they can import from Mongolia and Russia. And then they're going out to the market for uh you know, a few million tons a month of coals with strength contributing property. Uh so going to Canada for uh for good premium midvolatile coal. They're going to Australia for mostly for premium midvol something they can get kind of offsp spec second tier hard coing coal. Um like that's kind of what China's been in the market for. So the driver of this metco run up to 250 250 bucks plus in the physical market has been India. So India's really showed up in a big way. Uh and if you look at their steel prices their steel prices have come up commensurately with coke and coal prices. So, the more uh room that their domestic market gives them, uh the more resilient that that PLV prices are going to be. Uh it's been good to see. We've been talking about it for a couple of years, but it's nice to see it play out that way. For once, >> those those global steel cycles really um yeah, like really really map out a lot of this demand, right? and and and India is at a much earlier like yeah like he's is at an early stage in that steel cycle that China would have experienced many many you know many years ago now. >> Yeah. I mean they're they're kind of taking the reigns from where China left off. So we're going to see China contract relatively slowly uh you know turn inward for their supply much like they've been but India can really ramp up uh through the end of the decade. I forget how much um uh incremental steel capacity they have coming online. Uh but it's uh you know if you if you pare it down to just uh premium lowvall and premium midvall and you look at what the forward demand looks like um there's not enough uh that's in the pipeline in the development pipeline to supply it. So more than likely what's going to happen is that that demand will trickle down into second tier hard coing coal and you'll see a kind of a shrinking of the relativities between the premium stuff and the next tier down. Um and I think you'll see India use more PCI. So the relativities of PLV to PCI are probably going to shrink as well. Um I think Japan will probably increase their PCI rates like that's that's where I see the pressure valve to the extent that there is one uh being released in the market now. uh semisoft h highvall completely different supply story um that's going to be kind of a rough go of it I think for uh for a year or two but once that gets resolved then then everything you know is going to begin to move up commenurately with the with the rest of the cycle >> so that there's a lot of hope on this this India narrative playing out and a lot of people have a bit of kind of stock in it what do what do you keep your eyes on to just check in that it's continuing to play out as you've kind of forecast over the past few years and as we look forward >> um I put out a chart I try to do it every couple of weeks or whatever that just looks at Indian steel margins. Uh so I I you know take uh you know PLV medal and whatever the current shipping rates are to India and we just deliver it to a fictitious plan and then run a cost stack off of that and see what their margin is. uh when the margins have been deeply negative or or you know are inflecting to the downside that has for the last year or so indicated that we're going to have a rough go of the next sort of few months. Uh and vice versa when steel prices allow um you know uh Indians to go into the market and uh and pick up uh and actually pick up tons at reasonable prices then the cycle goes the other way. So really that's what I'm kind of using as an onoff lever. uh and you know we're writing about it on on the coltrader.com the coltrader.substack.com substack.com as often as we can but that's like for me that's the bell weather now is what what is the health of India's steel industry um right now it's okay you know last year it was pretty bad we we've we've graduated from bad to okay uh but as we see it in the you know the Coke stock prices when you go from terrible to less bad that's usually where you get the highest beta right >> that that's really interesting because if we if we look back the last 10 or 20 years and And I'm pretty green here, so I'm really curious to hear what you have to say. The the Chinese steel sector has not always been the most profitable. It's it's waxed and waned, but there's been some atrocious years of of profitability for the for the steel makers out of out of China. But on the whole, if we look back over the last 20 20 odd years, it has grown quite phenomenally to to the point you made before where it's kind of plateaued recently. So is that different in India for for the dynamics of how the the industry's come come about? >> That's a good question. Uh I'm not quite sure how to answer that uh to be fair. Um but what I would say is that you know when I look back on China uh we used to yeah I think when I when I started forecasting on my own uh you know not not a part of Wood McKenzie or um or working on the equity side um you know one of the things that I sort of looked at was I want to say the average margin at a Chinese mill over like 10 years when I started doing this in 2020 21 was like $4 dollar of IBIDA. That's before everything else. So it was clear that China was, you know, basically running their steel mills at a cost center to fuel domestic growth. Um when I look at India, uh India kind of likes to make money. So I don't think they're going to look the same as a command economy uh going forward. they have a much freer market obviously uh you know uh much more kind of geopolitically aligned with the west and so I think what you'll see in India is more typical cycle fits and starts it's not going to be an engine that goes you know 100 miles an hour at a constant speed when uh when the steel mmakers start to hurt from a profitability perspective uh you know you they'll slow down uh they're more incentivized to uh to take those market cues than than the Chinese are which honestly from an investment standpoint I think a good thing that benefits us because then cycles do become a little bit more predictable as opposed to operating on the whim of the next five-year plan. Um so I I think that's going to be you by and large more profitable for uh for the investing side of things as we go forward. at your core. Matt, you're a cost curve guy and um I I'm just I'm keen to understand and appreciate how cost curves have have evolved or what are the dynamics amongst those kind of cost curves like say see the changes in the last like four years. >> Well, most of the changes have occurred on the on twofold. Well, one is on the mining side. We've had a lot of uh labor cost inflation around the globe. I think that's, you know, it's maybe not exactly uniform from country to country, but that has been a theme. In order to incentivize, uh, you know, men and women to go work in these industries, you have to pay them a wage that encourages it. And that's, um, that's that's been the reality. Uh, certainly in where I come from in West Virginia, um, you know, there's there's no love lost between uh, you know, the people in the industry over the years. Um, so if you want to, you know, bring a third generation, fourth generation coal miner to work after he's seen, you know, his father and his grandfather, uh, you know, and they and they saw that his great-grandfather go through these these employment cycles. Um, it's a it's a much tougher cell than it used to be. Um, you know, I think that probably changes to some degree going forward as we increase automation within the industry. Um I'm not uh uh you know on the on the bleeding edge of uh equipment development and those things but I would I would expect to see a pretty hefty amount of automation uh if we have this conversation in say 10 years. I went to a a conference in Pittsburgh uh in early June uh and uh there was a remote uh Joy was running a remote continuous minor operator uh and it's like playing a video game. It's amazing. But uh they're they're what they want to do is they want to have people be able to sit at the surface and run these machines underground and then you just send in uh you know essential maintenance when when we get to that point. Um I'm not sure what the cost curve is going to look like that if we have that kind of labor cost deflation. Is that offset by maintenance capex? Is that offset by equipment purchases? Um >> ratios geological. Yeah. >> Yeah. I think that's to be determined >> um over time. But um the the other the other cost increase in general has been the the royalty side from the government side and that's been entirely in Australia. So if we see a reversal of that uh you know sometime in the next uh before the end of the decade I mean that will that would really shift the top end of the cost curve. >> Yeah. So, you know, we wouldn't be able to uh, you know, have these blowoff numbers. Uh, I don't think at all. I think you'd probably put a cap at like 350 400 bucks and that would be the end of it. >> So, Matt's not at the forefront of mining equipment advancements. Maybe we should introduce him to Derek Herd because Derek Herd is at the forefront of mining equipment advancements. >> Sanvic ground support, CSI, >> mate. It's it's literally in their DNA to bring R&D of ground support to the industry via new products every it feels like every week. >> 150 years they've been doing this for. It's their bread and butter innovation. They're at the bleeding edge of keeping mine workers safe. Like >> 150 years. >> It's crazy. >> I don't even know mines have been been here for that long. >> Even even longer, mate. But as long as we got mines, you got to have them safe. And that's what Sanvic do. And like Matt said, they're at the bleeding edge of ground support. So if you've got an underground mine in any continent on the planet, they can look after you, mate. >> Get in touch with Sanvic ground support. Derek Herd will fix you up. >> Go Sanvic. >> So help me help me just to appreciate how you've witnessed this like the the hu enormous kind of royalty regime that was introduced in in in Queensland to a lesser part in in in New South Wales that it's it's like morphed the cost curve. Were those were many of those assets like lower half or upper half and now I'm guessing it's just it's lifted the kind of the floor to the benefit of of you know ex Australia seabour producers who have been able to capture greater margin at a at a higher floor price. So, if we think about what the marginal ton is, what the cost of that mine is, um, in the before times when we were building out the the cost curve at Woodmac, uh, for Matt, I would have said that probably was somewhere in the 120s. >> Yeah. >> Which meant that you would have had, you know, for any sort of two or three-month period, you can, you know, spot price can go down 25% below that. uh people shut down operations and it and it comes back up and uh I want to say that you know in the last really terrible bare cycle medal bottomed out in the low 90s um so so that kind of tracks uh that number now I'm pretty sure is about605 um which used to be the long-term price assumption for for PLV so and you know It it also makes the cost curve more volatile from year to year. So when you have these these blowoff uh tops um Australia moves to the to the top of the curve. Um and the US stays steady. So you have this like change uh that that never used to have never used to be in existence at all. Um and if the if the US is setting the cost floor uh for the rest of the world, oh I can guarantee that's going to be pretty high. Um so there's there's a lot of uh tolerance for volatility when we get up into those uh into the upper stratosphere. Um so you know all in all we were asked the question on the podcast today like where do you think uh you know will we get five years down the road what's what will have been the average price? Um and uh I remember uh I was I was having dinner with Andy Edson about two or three years ago and he asked me that question. And I said probably about 265. You know, if you think of the bottom as uh 160 165 bucks and you think of the you know the the peak of the market uh probably without you know a Russia Ukraine layered over top of it is probably you know 350 400. If you kind of just go to the mean, you're going to wind up at about 250 260 265 and that's plenty for, you know, a higher cost miner to u make money uh make a a 20% profit on top of maintenance capex and whatever logistics they have. Um that to me is kind of where prices have to be for PLOV uh to just maintain uh the status quo. Um if you can't do that and more supply comes out then that number winds up being higher until uh you know till robots take over the world. Well if robots take over the world I um actually well there's this AI paradox now I think and it and it's and it's the the the reality is that technological advancements now require more fossil fuel as opposed to becoming energy independent or relying on on new energy. We actually need more fossil fuels as a result of the the latest technological advancement. So if robots take over the world, I think we're still going to need a ton more coal. >> Oh yeah, if there if they even plan to take over the world, we're going to need a ton more steel, too. >> I'm not sure. I mean, if we're going to build those robots out of aluminum, that that's another quandry we get into. So, uh, yeah, there's there's no, you know, it's hard for me to not to look at the next decade and not think that, you know, all the companies that that we love and have been close to for the last, uh, uh, you know, decade or so are going to fare really well. Um, this is going to be a pretty pretty important transition, not just for the industry, but I think for, you know, for humankind as well. Well, the last time we had you on the show, we were we were speaking about M&A and consolidation in this in the space with um the the Peabody deal that ultimately fell through. So, if you do think ahead 10 years, is there is there more? Is there less companies? What does it kind of look like? And and in the near term, are there deals playing in the back of your mind? >> It's interesting. Well, somebody's going to have to come in and take the Anglo assets. I'm not sure who uh is going to be the best candidate for that. uh you know I would have said BHP uh a while ago uh but uh you know now that Anglo is um uh sort of uh you know engaged uh I'm I'm not sure what that's going to look like on down the road. Um you know uh I think in the US we'll have some consolidation over time. I think uh you know uh companies uh I think core probably wants to acquire uh I would venture to guess over time. I I would I wouldn't be surprised if AMR or Warrior uh both uh were interested in acquiring, but I I think at the at the crux of the question is everybody needs more Lovall. Um, and that's what we're going to need to uh, you know, see people invest in. You know, whether that's lowvol PCI, uh, second tier hard coing, coal, premium, midvall, um, you know, PCI, like all we need, all of the above, and there's not enough of it in the market to sustain it. Um, so, you know, I I think M&A makes sense. I think we we will see somebody come in and eventually restart a lot of these mines that have that have been shut down here recently. Um but uh you know who's going to lead that capital cycle? Um I wouldn't be surprised if it's someone like Matt Latimore. Um I think I think he's positioned pretty well to you know to make a move here in the next uh uh during the next cycle at some point. >> The cold tycoon of this cycle undoubtedly. Yeah, for sure. Um the um India India is going to be very involved. >> Yeah. >> Um >> I imagine a bunch will pop out of Glen Tinto if if that deal eventually. There'll be plenty plenty of divestments subsequent to that deal. >> Yeah. Uh and we're talking about maybe a coal spin out of the Glen Tinto deal as well. U I'm here for that. Give that to me all day. >> Yeah. Yeah. Um yeah, let's let's talk about Latimore briefly because A recent a recent deal that um that they did do was acquire Ilawa out of South 32. Do you think that will come back to market in some way, shape, or form? Do you think they'll um that'll that'll find like a a public vehicle? >> Uh public vehicle, that's a good question. I don't necessarily know the answer to that. Um but uh I think it would it would make sense especially if he were able to you know tack on a few other um acquisitions as well. Um so I saw they had the they had an incident uh up there at some point in time here recently. I'm not sure what the what the current status is of those operations, but the uh the the message I think is pretty clear uh is that if you're operating in Australia uh an economy of scale will do you really well. Uh I mean BHP's been able to weather those those production storms because they have a pretty big portfolio of assets. Um and I think that's uh you know that's that's the case as well. It's like if you're a uh single asset producers have been you know very exposed to these price cycles in the past. Uh so you need to get at that critical you know three four five uh you know operations and preferably as many as you can in the premium segment as well uh in order to be I think guaranteed a uh you know a throne in the next uh in the next cycle. That's actually I'm glad you mentioned BHP because that's that's we heard a rumor like I want to say October last year that um yeah BHP would was likely to to evaluate a a devestment of BMA by the calendar end of calendar year 26. Do you think there's that's nonsense or do you think uh do you think that might hold up if if the royalty regime in Queensland stays where it is? >> Uh I don't think that's uh out of the question at all. I mean it would uh they've kind of signaled that they want to wind that down to some degree in the past and um you know at the right price especially uh with those remaining reserves like do you want to carry that operating risk uh on through another capital cycle for them when they have uh uh you know bigger fish to fry elsewhere. Um it's a good question. I wouldn't be surprised to see it change hands at some point in time or maybe not all of it but uh uh one or two targeted mines uh over over a period of time or alternately they acquire something and then spin it out. Um I think that would be pretty reasonable as well. Excuse our Australian bias, but you know, we're just going to keep talking about Australian coal companies, Matt, but um uh >> well, like on on that point, Trav, in the context of Bomb Basin and and the fact that there's next to no new mines coming online, given the the high quality nature and the the strategic placement of of the assets and the, you know, the shackles they have with the royalty regime, you'd have to think it'd be it'd be kind of um appealing with, you know, the, you know, as an option type play with the idea that maybe the royalties roll off in in a few years time, that could be something that's that's pretty interesting depending on on prices, you put it there. >> Yeah. If the royalty regime went back to uh the before times, >> let's say in five years, >> that won't happen. >> Not while state like Queensland state debt just explodes exponentially faster than the royalty >> revenue fund. Easy. Oh, >> that's that's true. That's true. Yeah. Um but let's let's say they they ease off some >> degree. Yeah. >> Uh then yeah, I mean that's a call option on whatever purchase it is that you make, right? You can't necessarily work that into the uh you know, you can write it in as a scenario in terms of a potential valuation, but without uh you know, without any you know, guarantee of of whether or not that's going to happen. I don't think you could pay for it. Um, it's, you know, you could maybe use it to justify, you know, an additional five 10% upside or something like that. But >> the structure of those royalties was was mental as well because it was designed to kind of capture this super profit period, but but at these fixed price levels and so like you know um it became increasingly ownorous at these above certain fixed kind of like prices, right? and and now with just the the event of inflation, it it it completely just erodess any any ability for these businesses to have any margin over time, right? >> Uh you would think so, but at the same time, uh you know, the US is doing a really outstanding job of torching the dollar here at the moment. And >> yeah, right. I mean, I the the the Australian US dollar crossed 70 uh for the first time in God knows how long. It's been a while. Um, and at least when I run my models, that's uh the difference in price there is about plus $5 on, you know, on long-term forecast for uh for metal. Um, but the other thing it does is it uh I mean it'll say if the if the Aussie dollar uh went back to par like where it was, you know, during the last u uh you know, during the first coal boom that I went through, um well, that that takes away a lot of the uh the upside for royalties. You know, if we get back up to $300, $400 and we're saying that's the max that um you know, these other countries steel steel industries can handle. Well, if that's only 300 or 400 Aussie dollars at the same time, that's not quite as big of a hit uh that the government will get. So, you know, the the US hasn't has a you know, sort of a what is that a tertiary role to play in uh in in how that pans out over time. Um so, and I and you know, speaking you know, solely from from perspective over here, uh it ain't stopping uh during this presidency. uh there is a 0% chance that we will stop uh hammering money I think uh over the next uh three years and uh and I'm not sure that you know even in the event of uh you know Democrats taking over the Senate and us returning to gridlock uh or god forbid you know whoever the the next uh the next Democratic president is we're we're going to have different um different versions of the same problem until something breaks here in the US. So, um I I think I think we're kind of at the beginning of a of a currency cycle that is way above my pay grade, but something that I think all of us will have to pay very close attention to uh over the coming five years because what I if if I can change the value of the currency by 10% and that changes the medal price by $5, what happens if we change it by 30%. Um that's uh that's kind of where you know I have to take off my analyst hat and just go I don't know what's going to happen here at this point in time. So most of what we can do is just take the the the the variables that we have plug them into the model and solve for X. And when we start mcking around with the variables um you know that's a pretty wide range of outcomes for for everything. So it's a it's why I hate politics man. So fun. >> When you plug those variables into your models, Matt, I'm just I'm I'm keen to depict how you know your relative preference of of the um of the coal stocks we're familiar with by by you know relative to their current price. Um you think just just if you could like order names like Stanmore, Yankl, White Haven um that that would be wonderful. >> Um I mean I think I think Stanmore is criminally undervalued down here. >> Yeah. Uh, I'm just looking at trailing EV to Ebida. Uh, which isn't the best metric, but it's what I have in front of me. And, you know, White Haven's up at, you know, five and a 5.3. Uh, and then Stanmore is a 3.8. That's just wrong. And then, you know, in the US, you know, on the Met side, you know, Alpha's at 5.5. I mean, shouldn't White Haven get a US multiple? like it should absolutely uh you know get get something comparable I think in those Warriors at 7.9 I mean come on guys White Haven's as big a global player uh and just as important to uh to the global industry and more diverse um yeah like let's let's get those numbers up. Those are rookie numbers. >> Well, you can you can thank Aussie Super. I think they're they're helping the cause and um buying White Haven stock again. So, >> I mean, it's been on a heater like it's nearly doubled in the in the last >> I don't know 12 months or something like that. So, >> quietly quietly finding popularity >> and that's like that you I mentioned Aussie super buying White Haven again, but there's there's absolutely this kind of evolution in global capital allocation. You know, Black Rockck's had many iterations of its ESG influence on the world and and we're now in ESG 4.0 0 era which um is is the the the realization that that these businesses are incredibly important to our prosperity and that they shouldn't have been so punitive in um in their their ways of restricting capital flows into these businesses previously. >> It matters tremendously for the cost of capital. Hey Matt, like the the change in debt that these guys are playing like you've probably got more more boots on the ground so to speak. >> It's cheap again. You can get you can get really cheap debt as a call company. I mean, it was crazy high. It was out of this world high. But I'm not sure what the latest numbers on on debt packages for the for the states companies that you're seeing are, but it's really pulled in over here. >> I mean, uh, you know, I don't think it's out of the question to be able to go get an 8 and a half% coupon, 10% coupon somewhere around in there. And that was unheard of just a few Well, getting anything was unheard of a few years ago. >> Yeah. >> Um, >> and and and the Fed's rate, the Fed's fund rate was was next to zero a few years ago as well. And now we're we're at whatever it is 4% or something. >> Yeah. >> Yeah. Exactly. I mean, you know, all these coal companies which were, you know, left for dead in the first part of my career, all have better balance sheets than the United States. So, God bless. >> That is great. >> Wait, just wait for the United States to nationalize them. Then they'll have bad balance sheets again. >> Never say never. Yeah, I yeah, I can see a scenario where that that could play out. Um, >> and >> but yeah, just uh looking down the list, I mean, uh, I think I think New Hope is probably pretty fairly valued here. They've had a nice little >> Yep. >> uh, you know, uh, 13% up to to kind of catch up with everybody else here the last little bit. Um, Yan Cole had a nice 20% run. >> Yeah. um less uh and then yeah, White Havens, I mean, White Haven's going to take out all-time highs this cycle and just keep going. >> Yeah. >> Uh so I I pretty firmly believe in that that we should see it rerate higher up to sort of the US guys at least. Um and I want to see Stanmore get up into the fives. Um like that should be a $4 stock, an Aussie $4 stock at least. >> Yep. Yep. And uh XASX names where, you know, where what are your most favored stocks at the moment? I mean, I'm still pretty firmly on the Met side. Uh, you know, we're at the beginning of this cycle here. I want to be um you know I'm not fully sized in anything coal right now but I think maybe by the time we get to the end of shoulder season end of June uh I want you know at least you know a 15 20% basket you know allocated across the met sector which would include really in no particular order AMR uh Warrior um HCC uh Ramico MEC uh White Haven and Stanmore I think would be and and core natural resources and Peabody. I don't have any Peabody right now either. So, there's seven and they're all fine. >> Yeah. >> Like, you know, it's it's sort of like pick your uh pick your horse. Uh Peabody's interesting because we're we're increasing lowvall production. We're going to have a pretty good thermal coal year in the Illinois basin and the Powder River basin. Um you know, it's uh it's already completely come back to the highs from uh from the Anglo days of Yore. Um but uh yeah, it's if they start buying back back stock especially um there's there's room for that to sort of go higher as well. So anyway, I'm I've got um you know I've got my calendar circled for end of June and I want to have you know a basket of all these and which one's going to be the highest uh allocated at that time will kind of depend on where we wind up in the cycle. But, you know, right now, I think you could make a case for, you know, putting almost any of those at the top at any one point uh at any one point in time. I mean, you know, Ramico isn't the isn't the biggest producer, but they've got all the uh you know, the rare earth uh uh marketing hype. >> Is that what is that what lured you in to start talking about rare earth as well, Matt? Was it was it Ramaco? It was it was pretty clear that if we want to have any sort of basis in reality for uh understanding what valuations look like for um now keep in mind Peabody and and core natural resources also have mines in the PRB that will have you know comparable uh you know concentrations of of you know gallium and uh and you know light rarers mostly I would figure scandi and those sorts of things. Um, and the US government is currently writing checks at a pretty alarming clip. So, yeah, that's that's why I had to start kind of digging in and at least becoming familiar enough with the sector that I could function a little bit. And, you know, along the way uh it sort of became really clear that the uh I mean the the oxide really isn't the constraint there. It's metalization. um you know it's uh you know SX processing uh metalization so those are the companies that that I probably want to focus on more over the longer term uh because like we don't have anybody in the US who knows how to run any of these operations anymore so we're going to have to rebuild all the expertise we're going to have to you know import the technology we're going to have to you know nearshore or friendly shore uh raw material supply because like other than MP um you know we have you know ground top is, you know, without uh a processing facility located nearby, like would not be a mine in and of itself, you know. Um, so it it's the way that I look at this is there's it's the West versus China and the West is in the process of aligning. Uh, and that means, you know, partnerships between the US and Australia, partnerships between US and Brazil. uh it's just uh you know rally the troops and let's uh let's see if we can you know create a uh you know downstream uh magnet manufacturing uh industry that that lies outside of China for the first time in you know 30 years it's uh it's going to be group effort boys >> and do do you have a first pass view on the uh the stockpile announcement that that came out I think over overnight for us here in in Australia but in a nutshell Trump wanting to to put together a12 billion US group of any which metals. It wasn't exactly clear. Pretty pretty light on details. >> Yeah, I mean I think Samarium, Europium, I think those were kind of two at the at the top end of the want spectrum at least from what I understand. But uh yeah, like that also that comes on the heel of that Reuters article uh last week which absolutely rugpulled the whole sector. Wow. Yet was edited >> yet was edited like four times to the point where it was like why why did you even write the >> such good entertainment. What like the MP materials Twitter handle. >> Oh yeah. Shout out to MP Material social media. That was the most fun thing I've read in a long time. the uh but it's you know it just absolutely punished most of those companies for no real reason. Uh and then uh the announcement that we're going to build these stock piles just basically proves it. Like there's there's more than one way that that Trump can implement tariffs. You know, there's more than one way that we can set floor prices. Like there's, you know, I I understand that it's news and like if you go out and you have somebody give that quote to you in your journals, you got to print it. Uh absolutely. But you should at least do the podicum of work to understand that even if this happens, are there other avenues to get there? And that's kind of what I thought that they failed to do. Like markets are complex and if there's demand for something, it will find a way uh and it will show up, you know, in price whether you want it to or not. They're very funny like that. >> Yeah. >> So, uh anyway, that's that's my take as to as to how that progresses. I don't know. But, uh it was it was a nice bookend to the shenanigans from last week. >> Totally. Totally. I mean for all the complexity that the fact that one Reuters article can can shake the the market like that is yeah entertaining if anything all the paper hands over here in the US >> and that's not us at all. Those are rookie numbers. >> That's an absolute delight to speak with you about all things Cole as always. Look forward to um yeah you being accompanied by your partner Joe next time that you're um you grace us with your presence on our on our channel. But thank you so much. >> Uh thanks for having me guys. It's so wonderful to get to talk to you every time and absolutely we'll bring a guest here next time uh so that I can wax so we can wax more poetic about the thermal coal side. >> Look forward to it. Have a good one Matt. Thank you. There we go mate. What a pleasure as always speaking with Matt Water. You can check out his fantastic work on Substack at the coal trader and he's also got the uh the rare earth trader. He puts out a bunch of work there. Super insightful. So go check that out. And all made possible thanks to our fantastic partners Sambitic ground support focus the platform by market you would have seen some of the charts in the show there intrlinks and exceed capitaloo now remember I'm an idiot JD is an idiot if you thought any of this was anything other than entertainment you're an idiot and you need to read our disclaimer