Lithium and rare earths sh!tcos get the love, but coal investors get the returns

IEA predicts appetite for oil, coal and gas investments has peaked, but IEA forecasts are historically bad
Coal equities have been top performers in every commodity bull market since 1900
The pattern continues to repeat itself: Goehring & Rozencwajg
Since June 2020, coal equities have advanced almost 2,000%

The appetite for oil, gas, and coal investments has supposedly peaked, according to the gloomy World Energy Outlook 2023 released by the IEA (International Energy Agency).

The new kings – renewables – are expected to be crowned before this decade ends.

So why invest in fossil fuels, a sector with such a dismal outlook?

Because demand continues to confound the experts.

Oil, for example. Veteran resources investors Leigh Goehring and Adam Rozencwajg say the IEA has chronically underestimated global oil demand in 12 of the 14 years (including COVID-impacted 2020) since 2010.

“Excluding 2020, the IEA increased demand by an incredible 800,000 b/d on average from its initial expectation,” Goehring & Rozencwajg say in their third quarter market commentary.

“If the IEA’s error were a country, it would be the world’s 21st largest oil consumer.”

Here’s another remarkable fact.

From trough to peak, coal equities have been the best-performing sector in every commodity bull market since 1900, Goehring & Rozencwajg say.

This pattern still seems to be repeating itself, despite the sector-specific headwinds coal companies and their investors contend with.

No industry has been more capital-starved and socially hated than global coal over the past decade, both thermal and metallurgical.

This underinvestment has impacted supply, especially in the thermal space.

Met coal time will come, as “rising steel requirements in Asia … drive investment in more risky deposits, adding to potential volatility and market uncertainty,” the latest Resources & Energy Quarterly says.

It’s no wonder there’s a dearth of coal equities on the ASX, despite Australia’s reputation as the biggest met coal (52%) and second biggest thermal coal (17%) exporter in the world.

Goehring & Rozencwajg say demand continues to confound sceptics by displaying unexpected strength.

“Coal-related equities literally [not literally] ‘caught fire’ in the third quarter,” they say.

“The S&P 1500 Coal & Consumable Fuel Index surged 55%, the best-performing commodity-related equity group.

“For those unencumbered by ESG pressures, we continue to recommend coal equity exposure.”

Since June 2020, coal equities have advanced almost 2,000%, Goehring & Rozencwajg say.

That trounces the 110% return of the S&P North American Natural Resource stock index, the 70% return of the S&P Global Natural Resources stock index, and the 46% return of the S&P 500.

While Aussie miners have struggled to post 2022-type gains in 2023, they are cashed up and pay dividends.

Stanmore Coal will pay out upwards of US$50 million to shareholders after the cashed-up #coal miner missed out in a major BHP mine sale. #ASX $SMR https://t.co/IWrgIXIJwI

— Stockhead (@StockheadAU) November 29, 2023

Lithium and rare earths shitcos may get the love, but coal investors get the returns.

ASX coal stocks

Scroll or swipe to reveal table. Click headings to sort.

CODE COMPANY WEEK MONTH SIX MONTH 12 MONTH PRICE MARKET CAP YAL Yancoal 1% 4% 4% -15% 4.9 $6,470,153,241 WHC Whitehaven Coal 4% 7% 15% -23% 7.35 $6,040,257,660 NHC New Hope Corporation 1% -3% -6% -11% 5.08 $4,285,850,802 SMR Stanmore Resources 0% 4% 42% 52% 3.82 $3,398,246,460 CRN Coronado Global Resources -2% 10% 23% -11% 1.705 $2,891,882,684 DBI Dalrymple Bay 0% -3% 2% 14% 2.68 $1,328,641,268 TER Terracom 1% 13% -24% -57% 0.355 $296,357,507 BCB Bowen Coal -4% -2% -42% -66% 0.093 $273,012,173 BRL Bathurst Resources -1% -3% 8% 9% 0.95 $181,791,791 CKA Cokal 0% 20% 4% -38% 0.12 $129,473,878 TIG Tigers Realm Coal 0% 0% -29% -67% 0.005 $65,333,512 MCM Mc Mining 0% -15% 4% -42% 0.14 $57,104,704 AQC Australian Pacific Coal -4% -15% -9% -44% 0.115 $52,442,662 AKM Aspire Mining 5% 63% 57% 22% 0.096 $48,733,151 JAL Jameson Resources 0% 13% -36% -63% 0.045 $17,618,000 ATU Atrum Coal 0% 0% 0% -17% 0.005 $6,958,496

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