Communists bully coal markets
will their bluff succeed?
Yesterday the communists in China attempted to talk down the coal market. Just recently they had communicated to their energy providers to “secure supplies at any cost”. Now that those energy power plants are buying coal hand-over-fist to try to stock up, China is concerned that the price is getting out of hand.
China “will study-specific measures to intervene in coal prices and promote the return of coal prices to a reasonable range”. Having said this, they have already told state-owned mines to reduce coal prices by 100 yuan per ton less than spot.
This is a standard operating procedure for a communist country. In an effort to force the price down, they take a top down approach by limiting those that supply the goods. Unfortunately for them, it is unlikely to work. Since they are constraining supply it will lead to shortages and further price increases.
I don’t blame them for their economic ignorance. They most likely don’t know any better. They’ve already attempted to adjust demand down by limiting large power consumers and administering rolling blackouts. China has also taken steps to alleviate the energy crunch by allowing coal-fired power prices to fluctuate by up to 20%, enabling power plants to pass on more of the high costs of generation to commercial and industrial end-users. Previously they would only allow a 10% fluctuation in price. Allowing these prices to freely float is what will ultimately lead to the end of the blackouts. It would also encourage development of new forms of energy production. However, this is the least likely path for the communists as it would mean giving up control.
China is also “increasing coal output” and “giving coal transportation through ports and railroads the highest priority”. While this makes good print and had an initial effect on the market, overall there is nothing of substance here to indicate that China has any sort of control over the price of coal. China just gave us an opportunity to buy more as Ramaco was down big on the news.
Cornelius is testing the market to see if the time is right to jump in. We’ve had back-to-back positive days for silver and gold. I don’t want to get too far ahead of myself but this is very encouraging.
For GLD:
It looks like we’ve had a double bottom at $161. I’m going to become very excited about getting in the market when the price starts to push up against the previous resistance at $170-$171.
Silver is a different story altogether.
It has rebounded strongly off the low on September 29th. It is already working on the resistance at $23. It looks like an encouraging opportunity to start buying. I intend to beginning accumulating. I always start small and as it continues to push through past resistances, I add.
