Digging into Coal

As we at ISA continue to consider the coal industry, questions are popping up faster than answers.  The appearance is a rebound in natural gas prices would see coal stocks be the big winners.  But will such ever occur?  What’s that scale of the whole thing?  Suppose a reasonable assumption of 6 bcf/d of natty fuel switching is based on depressed $2-handle pricing and turns back to coal, that is the Btu equivalence of 1 million oil barrels!  Seems this would totally turn the industry around.  Stay tuned as we keep digging…

The boom in natural gas electricity generation consumption is based on price and not permanent with the industry literally burning off excess natty because of the ginormous oversupply.  Current rates are not sustainable but the trend is in this direction, yet coal fired electricy generation capacity is in trouble long term as “17% of existing capacity is vulnerable to retirement by 2020, 90% of this by 2015.”.  Doyle Trading Consultants

The exporting story is good as KMP Pumps Up To $87 Exporting Coal Through The Gulf Of Mexico (Forbes).  Also, China to shut 3,000 small coal mines by end 2015 at Platts.

In the short term, however, Coking Coal Exports From U.S. May Slow on BHP Labor Accord at Bloomberg.  And Indonesian thermal coal prices down on high stocks, low prices in China at Platts.

“Enthusiasm for coal stocks has thoroughly been extinguished. However, patient investors will likely see the group light up” from Barron’s.

ANR has a MACD divergence on one ugly chart:  Stockcharts.