There's a lot of money to be made spotting market bottoms in commodities. Buying producers and projects at ultra-low valuations, before the inevitable uptick in a sector.
Market commentaries are a key indicator in this regard. With bottoms usually being marked by "irrational apathy"--illogical reasoning from market bears who've simply been spooked by falling valuations in unloved sectors.
There's been a lot of such sentiment lately in coal.
I was particularly struck by one comment the last few weeks. From a high-profile market analyst, who noted that Asian coal demand can be written off as a market driver. Because no one in this part of the world wants to build new coal-fired power plants.
It's striking how such analysis flies in the face of actual events on the ground. In fact, just this week we got news of one high-profile energy consumer that's actively looking to add more coal power to its supply mix.
That's Tokyo Gas, Japan's largest municipal natural gas utility. Whose managers told a major power conference that the firm has "strong interest" in building new coal-fired power plants in order to diversify energy supply.
The comments came from Tokyo Gas executive officer and senior general manager Kunio Nohata. Who told the Gastech conference in Goyang, South Korea that his company "may have a coal-fired power plant in the future or at least, we may buy electricity from coal-fired power plants."
The move comes as Japanese utilities come under increasing pressure to cut fuel costs. With prices for alternative fuels like LNG still running at very high levels here compared to other parts of the world.
At the very least, this shows that big players are still receptive to coal. At the most, it could signal a wave of increasing coal demand as power producers increasingly come to rely on this cheap and reliable baseload fuel.
We're seeing the same story in India, East Africa and Southeast Asia. If analysts are saying otherwise, it might be time to be looking for a bottom in this sector.
Here's to putting your money where the market is,
By Dave Forest