Coal Exports: New U.S. Record

It isn’t news that natural gas has dethroned coal as the key source of power in the U.S.  Many investors have become skittish about the future of the coal industry, especially with environmental regulation going forward. However, before you turn your back on the black rock it’s worth considering its future abroad.

Although natural gas has been cheap in the United States, it can be almost five times as expensive abroad. Last year the U.S. broke its coal export record reaching 120 millions tons, doubling its 2009 exports. However, the rapid increases in coal exports are being supported by Europe and other emerging energy hungry nations.

England’s coal demand was up 50% in Q3 and they are only a small contributor to the $13.8 billion worth of coal that was exported in the U.S. during the first 11 months of 2012. Coal should also see a boost in countries such as Germany as nuclear-power plants are starting to be shut down. Over the next 5 years, global coal demand is expected to increase by over one billion tons.

However, the future of coal still faces a difficult road. Tougher environmental rules in the U.S., U.K. and the rest of Europe could lessen these optimistic demand projections. As the global economy improves, China and India should help pick up the slack. To put things in perspective, China consumed 3.8 billion tons in 2011 while global consumption, excluding China, reached 4.3 billion tons.

Business Solutions: Investing Ideas

Keep an eye on improving economic conditions in China to help increase coal demand and also watch the proposal in India for increased domestic production by foreign electronic manufactures. Both of these will help boost global coal demand as increased manufacturing will drive up energy demands. Europe will be a key contributor to increased exports, but regulation will complicate the matter. Coal stocks haven’t performed at their best as of late, but a turn around could be around the corner. Below are some possible investment opportunities to help you capitalize on future coal growth:

1. Peabody Energy Corp. ( BTU): Engages in the exploration, mining, and production of coal. Market cap at $6.37B, most recent closing price at $23.73. Investors feel their Australian mining platform is " strategically positioned to benefit from this rise in Asian demand."

2. Arch Coal Inc. ( ACI ): Engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States As of December 31, 2010, it operated or contracted out the operation of 23 active mines; and owned or controlled approximately 4. Market cap at $1.22B, most recent closing price at $5.75.  Of Note: Net institutional sales in the current quarter at -14.3M shares, which represents about 6.78% of the company's float of 210.77M shares. 

3. Alpha Natural Resources, Inc. ( ANR ): Engages in the production, processing, and sale of coal in the United States. Market cap at $1.81B, most recent closing price at $8.23.  Of note: Net institutional purchases in the current quarter at 15.5M shares, which represents about 7.1% of the company's float of 218.16M shares. 

4. CONSOL Energy Inc. ( CNX ): Engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. Market cap at $7.24B, most recent closing price at $31.73. Last Thursday Consol announced it will pay an estimated $500 million over the next 20 years for the right to drill for shale gas on 9,263 acres surrounding the Findlay airport.

5. Market Vectors Global Coal Index ( KOL ): The ETF seeks to replicate as closely as possible the price and yield return performance of the Stowe Coal Index (COAL or the Index) by investing in a portfolio of securities that generally replicates COAL.

6. PowerShares Global Coal Portfolio ( PKOL ): The Fund is based on the NASDAQ OMX Global Coal IndexSM (Index). The Fund will normally invest at least 90% of its total assets in securities that comprise the Index and American depositary receipts and global despositary receipts based on the securities in the Index.

( List compiled by Kapitall contributor Nick Sousa )



If you liked this article you might like

Nasdaq Tumbles as Tech Takes a Turn Lower

Nasdaq Tumbles as Tech Takes a Turn Lower

Stock Futures Power Higher on Earnings Beat From Facebook
Week Ahead: Apple Earnings, Jobs Report on the Docket in Busy Start to May

Week Ahead: Apple Earnings, Jobs Report on the Docket in Busy Start to May

Stocks Fall as Crude Oil Prices Tank

Stocks Fall as Crude Oil Prices Tank