Monday, April 18, 2011

Arch Coal (ACI) (AHGP) (CLD) (NRP) Close Mixed On Coal Prices

Coal companies have been performing somewhat volatile of late, depending on specific results for each company, even though the overall sector has been doing well recently. Firms like Alliance Holdings GP, (NASDAQ:AHGP), Cloud Peak Energy Inc. (NYSE:CLD), Arch Coal, Inc. (NYSE:ACI) and Natural Resource Partners (NYSE:NRP) closed mixed on Friday.

Metallurgical coal prices were mixed last week on the U.S. spot market, with spot prices for low-volatility coking coal dropping $3.12, or 0.9 percent, to $326.88 a ton in the week ended Friday, according to Energy Publishing Inc.. High-volatility coal remained the same at $298.33.

Like any sector, coal companies, even within a high-demand industry, still won't be carried solely by the robust market demand.

Even so, approximately 40 percent of global electricity production comes from coal, and should rise in the years ahead, as coal consumption is expected to increase at a rate of 2.5 percent annually over the next 20 years, according to Research and Markets.

It could even be more than that, as evidenced by the 5 percent increase in 2010, according to the EIA. It adds that 2011 coal consumption should remain about level, and in 2012 should jump by between 2 to 3 percent.

JPMorgan (NYSE:JPM) also recently said coal prices are up over the last year, but are still below the highs attained before the financial crisis in the latter part of 2008, suggesting room to move higher, although the health of the global economy will play a role there.

Coal is still the major fuel for electricity production. Global coal consumption, approximately 6.7 billion tons in 2006, is set to reach close 10 billion tons in 2011.

China produces about 70 percent of its electricity from coal and demand there continues to grow. Demand for coal to fuel power plants will climb to 1.4 billion tons by 2015, according to China Huaneng Group Corp.’s Chief Economist Wu Dawei.

So when you hear the next report attempt to downplay the role of coal, don't believe it. It's as needed and in demand as ever, and similar to the oil peak predictions, is pretty much a joke, as coal has been attempted to be painted in the same way, not taking into account the huge amounts of coal being discovered in China, and other places, and extraction methods that have been improved.

Many coal companies will shine, but they still need to be judged by their individual merits and not expect the ongoing coal demand imply all of them will be winners pulled up by the broader sector.

Natural Resource Partners (NYSE:NRP) closed Friday at $34.10, gaining $0.14, or 0.41 percent. Arch Coal, Inc. closed at $33.74, rising $0.39, or 1.17 percent. Cloud Peak Energy Inc. ended the session at $19.88, falling $0.76, or 3.68 percent. Alliance Holdings GP closed at $50.33, up $0.72, or 1.45 percent.

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