Coal...shouldn't it go up?

[Rick]

I bought and dumped CNX then bought, again. NSP, too. Shouldn't coal benefit in fighting our so-called addiction to oil or am I dreaming?

[Rick]

No ideas?

[GDFLS]

Sorry I haven't done much research on coal, but from i get from nres reports, it seems like some states want to look more into clean coal energies.

Sorry I am not much help in this area.

[Rick]

The market answered my question today. Took a beating, but Jubak swears it's headed up. This will be a long term investment.

[Luc1Grunt]

Take a look at sectors and look for the correlation over history. Oil vs. Coal.........vs. oil svc.....vs. nat gas....etc., etc., etc. Common sense applies "outside" the markets.

[optimus25]

Energy sector down today. Hold.

[madcowdisease]

Wait 'til the summer. Once we all crank up our A/C coal will get noticed. BRIC will also contribute to this. They've got an emerging middle-class in these nations and not only does that mean they want cars, of course higher oil, but also all the creature comfors we have here in The West like air conditioners.

[aj14]

Oil, gas, and all natural resource stocks are WAY overowned. As mutual funds face redemptions they have to liquidate shares to pay out the cash to investors. The greatest overweight is in oil and resources, so they are being dumped to raise cash. It has nothing to do with the fundamentals.

The news that America is "adicted" to oil is only news to the President. The rest of us were aware of it a long time ago. Give the sector a little time to settle down, and your investments in oil and coal should be fine. The addiction is not going away anytime soon...especially as the Chinese industrialize.

[Rick]

Hey, my CNX came through.

[madcowdisease]

Hey, my CNX came through.

Sure did. My coal watchlist has been on fire this past week.

[Hanger]

Regarding clean coal....

Read about the Flue Gas Desulphurization(FGD) industry...

Tennessee Valley Authority along with Southern Company are expected to have about 6-10 by 2010. And there are already a few in operation, 2 in Indiana for Northern Indiana Public Service Company Parent Company NiSource(NI:NYSE) and I believe there are a few more already in operation. With the clean air laws passed by the Bush Administration, it will not be long before this industry takes off and coal should rebound once these plants are built...

Basically these plants are removing better than 95% of the sulfur emissions but off by coal being burnt. Which allows these companies to use cheaper coal(high sulfur).....

Just a little insight...

[sportsmadness80]

Check this out an Alaskan company is experimenting with coal to create clean burning diesel fuel. Once this technology gets out .... look out. More to follow on this. This is a native company here in Alaska, but I need to investigate more.

[MoMoney4Me]

Shouldn't coal benefit in fighting our so-called addiction to oil or am I dreaming?
Coal was a worthy investment when the question was posed, and is as good now as then. Value Line Investment Survey rates the industry 3rd of 97, only behind Retail Building Supply and Securities Brokerages.

Industry Commentary

The Coal Industry is poised to generate big profits in 2006. The assumption is based largely on the significant appreciation of coal prices across the major coal basins in the United States, which includes Central Appalachia and the Powder River Basin. The factors supporting the rally in the coal markets are discussed in detail below.


Industry Background


Coal that is produced in the U.S. is mainly used to generate electricity. By last count, electricity generation accounted for nearly 90% of domestic coal consumption. Further, coal is the most widely used resource by utility plants, providing base load electric power. Nuclear plants and natural gas are the major competing fuel sources. These facts underscore the importance of coal to meet the nation's incremental electricity needs, driven by economic growth.


Supply And Demand


Extreme volatility in natural gas prices over the past year has subsequently prompted greater consumption of coal to meet additional power requirements. Although it is true that natural gas prices have eased from their highs, it's clear that coal continues to be the more cost-efficient fuel source at this time. Another important factor that may help to support coal prices in the near term is the relatively low level of inventory held by utility plants. Arch Coal, one the largest coal mining firms in the U.S., estimates that utility stockpiles were 37% below the 15-year average at the end of 2005 (33 days of supply). Cash-strapped utility plants, bound by industry regulations, have deferred coal shipments in order to address other operational issues. It is difficult to predict when utility plants will replenish their supplies to normal levels, but the eventual pickup in demand augurs well for the mining firms.


The Powder River Basin


All of the major coal basins in the U.S. have enjoyed a strong price rally, though one region has stood out of late. Specifically, the spot price for coal from the Powder River Basin (PRB), spanning the Montana-Wyoming border, has risen sharply over the past few months. According to the latest data, the average spot price was $17.25 per short ton, up considerably from the $13.85 per short ton in late November. There are several reasons for the improvement. Supply constraints in the eastern U.S., namely Central Appalachia, appear to have caused utility plants to shift their attention to the PRB (production rates in Central Appalachia have been steadily declining because of geological and regulatory factors). In contrast, PRB coal is plentiful in reserves and more easily accessible for mining. Too, PRB coal contains a relatively low amount of sulfur dioxide, a chemical pollutant emitted by coal-burning plants. This is worth noting because federal regulators have placed restrictions on the level of sulfur dioxide emissions. By incorporating PRB coal into the fuel mix, power plants can be in a better position to stay within government emission guidelines. Given the promising prospects in the PRB, investors may want to consider Peabody Energy or Arch Coal, both of which control large reserves in the area.


Metallurgical Coal


Thus far, we have discussed the market trends for thermal coal, used to generate electricity. However, metallurgical coal, a key ingredient in the steel-making process, has also benefited from stronger demand. Heady economic growth in China contributed to the sharp rally in the metallurgical coal market last year. There have been indications recently that contract prices will not be as favorable in 2006, but the fundamentals remain positive. For those seeking a high level of current income, Fording Canadian Coal Trust is worthy of consideration.


Investment Advice

Bullish on the Coal Industry's near-term earnings prospects. Higher coal prices are enabling the mining firms to negotiate more lucrative supply contracts. This should become more visible on the bottom line, as legacy contracts expire over time. On a related note, the coal industry is capital-intensive with high fixed operating expenses, providing good operating leverage in periods of rising coal prices. Note: None of these companies have been materially affected by recent safety issues with West Virginia mines.

[metalheadrr3]

I picked up Alliance Resources about a week ago [ARLP] and it's up about 13%. Pays a 4% dividend as well. Might be worth checking out.