It's no secret the coal market is depressed.
Prices for thermal coal have fallen 50% from their five-year highs. Stock valuations for producers have tumbled--some by as much as 90%.
The question for investors then is: when will it get better?
There have been some swirling undercurrents in that regard. Rumors of production cuts in major producer Indonesia, for example.
But this month we got some of the first substantial news on a potential turnaround. Showing how supply and demand has finally started shifting in the sector.
Particularly in Australia. Where major coal producer BHP Billiton suggested it will cut production from one of its biggest mines.
The firm said it has terminated development work at its Goonyella Riverside mine in Queensland. Canceling contracts for stripping work aimed at expanding output here.
The work stoppage here could have a meaningful effect on supply--given that Goonyella is one of BHP's biggest mines. Producing 12.4 million tonnes for the fiscal year ended June 30, 2013.
The company noted that any output cuts resulting from the move will "be reported in quarterly production reports."
At the same time, reports from the shipping industry show a similar story. With less coal now being sold on international markets.
Platts reports that Panamax-sized coal vessels are shutting down. With low coal prices simply making such shipments unprofitable.
As one trader put it, "Owners are starting to think it's below cost and are anchoring."
Another source observed the effect this might have on the market. Saying that the industry is "looking to find a floor as for some owners we are already at levels below their running costs."
It would thus appear we've reached a point where few players in this market are making profits. And supply is responding accordingly. Historically, that hasn't been a bad time to buy.
Here's to the bottom,
By Dave Forest