NEW YORK (AP) â¿¿ Shares of some coal companies fell Wednesday as a drop in the price of natural gas futures heightened the competition between the two energy sectors for customers.
Coal companies were encouraged last month when natural gas futures jumped 13 percent on stronger demand because of the record hot summer. Utilities burned more natural gas to generate electricity for cooling and refrigeration. But the price of gas has fallen more than 14 percent since July 30, to $2.75 per 1,000 cubic feet on Wednesday. That makes natural gas cheaper than most coal products.
Now the mining companies are hoping for an improving economy and a cold winter that could improve coal demand, said William Burns, a coal analyst for Johnson & Rice Co.
The coal industry has been battered this year because a mild winter and spring reduced demand for coal from utilities.
Ramped up production in the nation's shale deposits created a huge surplus of natural gas that sent futures prices to a 10-year low earlier this year. Natural gas inventories are about 13.5 percent higher than the five-year average, according to the Energy Department.
Coal companies have made adjustments by idling some mines to cut costs. Patriot Coal Corp. has filed for Chapter 11 bankruptcy protection as it works to cut costs.
Natural gas prices have to be no less than about $3 per 1,000 cubic feet for coal produced west of the Mississippi to be competitive, Burns said. The price has to be around $4.80 per 1,000 cubic feet to make East Coast coal competitive. Gas prices haven't been that high in a year.
In afternoon trading, shares of Alpha Natural Resources fell 19 cents, or 2.8 percent, to $6.65. Arch Coal Inc. dropped 12 cents to $6.96 per share. Peabody Energy Corp. fell 46 cents to $21.82. James River Coal Co. fell 8 cents, or 3.1 percent, to $2.47.