Zacks Industry Outlook Highlights: Peabody Energy, CONSOL Energy, James River Coal and Cloud Peak Energy
CHICAGO, Dec. 14, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Coal, including Peabody Energy Corporation (NYSE: BTU), CONSOL Energy Inc. (NYSE: CNX), James River Coal Co. (Nasdaq: JRCC) and Cloud Peak Energy (NYSE: CLD).
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A synopsis of today's Industry Outlook is presented below. The full article can be read at
http://www.zacks.com/stock/news/66230/Coal+Industry+Stock+Review+-+November+2011
According to EIA's "Short-term Energy Outlook," U.S. coal exports rose to 54 MMst during the first half of 2011, the highest since 1982, representing about 35% compared with the same period in 2010. U.S. coal exports likely remained elevated in the second half of 2011, reaching an annual total of 102 MMst. Exports are expected to decline to 91 MMst in 2012, as supply from other major coal-exporting countries recovers from disruptions.
Demand for U.S. coal was also strong in the third quarter. This was mainly driven by increased coal imports in China, South Korea, India and Europe. China net coal imports just hit an all-time high in September. South Korea's coal imports also have set records recently, and India's thermal coal imports are up more than 40% year-to-date.
Additionally, coal trade in the U.S. continues to benefit from favorable prices for the shipments made. Per the EIA's latest report, average delivered coal prices to the electric power sector have increased steadily over the last 10 years by an average of 6.7% each year. The EIA sees this trend continuing in 2011, largely because of a rise in transportation costs.
The projected average delivered coal price to the electric power sector, which was $2.26 per MMBtu in 2010, rises to $2.41 per MMBtu in 2011 and $2.44 per MMBtu in 2012.
Demand Upsurge in Asian Countries: The increases in coal demand in Asian economies like China and India have been a key price driver since the end of the recession in 2009. We expect this trend to continue in future mainly due to the growing energy needs in India, China, South Korea and Europe.
China, the world's fastest growing major economy, has massive coal reserves. However, its domestic coal production continues to fall short of meeting its rapidly growing demand for coal, resulting in the continuous rise in coal imports. China has since overtaken the U.S. as the world's largest consumer of coal.
Similarly, in India, the rising population and economic growth continue to call for increased coal consumption for electricity generation. Coal accounts for nearly 55% of the country's energy consumption needs. The last four decades have seen the country's commercial energy consumption rise by about 700%. Going forward, India plans to double electricity generation capacity by 2012, which could see the country importing in excess of 200 million tons of coal.
Given the growing demand from the fast-growing Asian economies, we find companies exporting coal to the emerging regions attractive for investment. Some of the names are Peabody Energy Corporation (NYSE: BTU) and CONSOL Energy Inc. (NYSE: CNX). Other key thermal coal players who stand to benefit from the increasing demand for coal include James River Coal Co. (Nasdaq: JRCC) and Cloud Peak Energy (NYSE: CLD).
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