Quick, ramp up production

So coal prices have gone bananas but there is a lot of conjecture about whether this run will last or fizzle out.  The choice is to react and increase production or sit tight?

Let’s say that you gear up and push out some additional tonnes, what is the worst thing that could happen? Assuming that in the worst case scenario the coal price comes down to where it was one year ago, you might end up with a stockpile of additional coal that  breaks even on cost and takes a while to sell. In the mean time the base load production has made a lot of money during the short term price spike.

But let’s say the price stays elevated, maybe not as high as it is now, but above the cost of production. The decision to ramp up will look like a master stroke.

One thing for sure is that producers are now rolling in cash and have nothing to lose in increasing production.