Hot Coal

Consol Energy and Suncoke Energy are stronger coal players who reported second quarter results today and have higher stock prices.  Leveraged and high cost names like ANR, ACI and JRCC are acting poorly in a strong tape.  Ironically the US coal market is searching for a bottom while the international super-cycle story contains more weakness.

U.S. coal stockpile have started to draw down.  With natural gas production staying stubbornly high shoulder season should be hairy.  But look for a recovery going forward.  From the Norfolk Southern conference call (SA):

“…it’s going to be a challenging second half. Stockpiles are still above target, as I’ve mentioned…it’s really based on the weather for the rest of the summer, and the shoulder months that we’re going to see in September, October as to whether or not coal, utility coal, really starts to move late in the fourth quarter, mid fourth quarter or it gets geared up for early 2013.” and “… with the heat that we’ve had from — starting the second week of June up through the current period, we’re seeing all of our coal-fired utility plants run as base load.”

Year to date U.S. coal production is down 5.6% from 2011 as supply curtailments kick in.  EIA  High cost mine shutdowns make the bull case very interesting if natural gas ever recovers.

China’s coal barons struggle amid falling coal prices at Xinhuanet.  But the long term coal story is compelling enough to Cloud Peak for them to lease Wyoming land to increase Asian exports.  Boston

They are in recession, yet UK May coal imports hit 3-year high of 3.64 million mt at Platts.  “The European-delivered CIF ARA thermal coal market saw its third consecutive day of higher trades Thursday morning…”  Platts

Tomorrow ACI reports and we will take a look at coal’s nemesis natural gas.