I’ve been think about Japan and other current world events and am wondering if coal is set to explode.
Without discussing whether nuclear is or isn’t a good alternative energy source, I think it is safe to assume that the nuclear renaissance is effectively halted and that the industry will again spend years to remove the tarnish from its image.
With a vast portion of the world’s crude oil supplies controlled by tyrants and dictators and third world countries, I’m wondering how long people can tolerate volatility before considering an alternative.
As the wind and solar industries are effectively unable to provide energy on a large scale, what is left besides coal?
Am I missing something here? Are we seeing a perfect storm which could see demand for coal explode?
***Update*** A commenter on Fly’s Blog has mentioned that perhaps there will be an increased demand for steel due to the destruction in Japan. Isn’t coal the primary energy source for steel mills?
As a bonus, here is a list coal stocks sorted by RSI2.
Take the poll and leave a comment with your thoughts.
[polldaddy poll=4713658]
Alt. energy is unable to provide enough energy because of storage issues, no other reason. There’s a couple of projects in the works right now that may solve that.
Just saying – don’t discount alt. sources.
As for short-term, I vote, yes.
I wish there was a revise comment option.
Thanks.
I do not want this to end up being a discussion about alt. energy as much as whether coal is uniquely position right now to explode.
Might want to consider Sasol (SSL) – “clean” coal might be best of both worlds.
Thanks, good idea. Also, do not forget KOL, the coal ETF.
Seems like the logical short term energy play – how about natural gas longer term? And I agree on the beat down coming in nuclear stocks – as well as uranium too perhaps?
Yeah, it seems like uranium should get trashed. I don’t follow the natty markets. Do you like it as a cleaner alternative to oil?
Natty is a far cleaner alternative to oil and much, much cleaner than coal. Also I am told it is about the cheapest way to put in a new power plant. So LNG transport and pipelines may be a good play.
Uranium and nuclear stocks will get trashed initially. I am not sure if the message that people will take away is “nuclear = bad” or building in “earthquake zones = stupid” I think it remains to be seen. The big nuclear market for new plants is China and I have trouble seeing them changing course given their needs.
Thanks Sik.
Low sulfur coal (used by electric utilities) may be the best bet (oversold) as compared to the metallurgical coals used in steel making which may be overbought already despite some new positive momentum from the steel/reconstruction trade. Should Japan move to coal fired utilities watch out but that won’t happen overnight.
ACI, BTU
CLD works too.
hi woodshedder, have had ico on my watch list for a couple weeks now.has been a lot of rumbling going on in coal,and coal itself has been inching up for a bit here now, so yes i think we could see a btfo. its just the most inexpensive and abundant source for electricity production. but i must disagree with the sediment on uranium though,this japan melt down, wont stop the other countries in west europe from using nuke power,actually uranium is in short supply,for the millions of pounds of uranium needed to run nukes around the world, are actually in short supply. something should be breaking in natty not to far from now either.
Long LLEN and PUDA. Go Coal!!!
Fuck, I hope not, as I’m hedging my portfolio with KOL. I didn’t think that one over…might be scrambling today.
Also, don’t forget NRP.
Coal and railroads will once again rule the planet.
sniper6 fearless prediction, coal has a lot of legs and is going higher. I own crappy LLEN just for laughs. ICO is one fucked up bitch who seems to go up when the sector goes down, and vice versa.
ANR, ACI, BTU, CNX for a measure of stability. My personal favorite, PCX, for schizo price action and intraday scalping both up and down.
I don’t see coal as a long term alternative to nuclear power, even if it is just for smog issues. Think back to how bad chinese cities were in the run up to the Olympics and how long coal can remain a viable or less harmful source in the face of this. However, I feel that a coal run up in the near term would be a very knee jerk reaction from a market that doesn’t know how to quite absorb the wheels slowly coming off the proverbial wagon, somewhat alike to oil trading down on the news of the Japanese quakes.
I closely follow the coal sector and have been invested in a variety of names since late 2009/early 2010, including ANR, BTU, CNX, and WLT. The fundamentals are strong on the demand/supply sides and continue gaining momentum. The global quarterly benchmark settlement prices for metallurgical coal have been as follows:
Fiscal 2009: $129/ton
Fiscal Q1 2010: $200/ton
Fiscal Q2 2010: $225/ton
Fiscal Q3 2010: $209/ton
Fiscal Q4 2010: $225/ton
Estimated Price for Fiscal Q1 2011: $320/ton – $330/ton
On the supply side of met coal significant flooding in Australia, a major met coal exporter have caused significant supply disruptions that will likely linger for at least 6 months. A variety of other met coal producers have announced significant downward production revisions due to mining issues.
In terms of demand, China and other Asian countries continue driving demand for met coal. China increased its met coal imports from approx. 4.5M tons in 2008 to approx. 41M tons in 2010. The Japan earthquake shouldn’t cause any significant ability for the country to handle coal imports, which is critical because its the world’s largest importer of met coal. Also, any excess supply caused by import disruptions should easily be absorbed into a tight global market.
In terms of steam/thermal coal used for power generation, the fundamentals are bullish as well. The spot prices for global coal benchmarks have already increased approximately 25% this year to approx. $125/ton and the upcoming global benchmark settlement could likely settle in the $140/ton range. Price curves for domestic coals is also strong and have increased anywhere from approx. 30% – 40% in the past year.
Bottom line, China and other emerging nations are increasing their power generation capacity predominantly with coal fired power generation. Also, although low natural gas prices have caused displacement of various coal fired generation the overall impact hasn’t had a material impact on coal prices.
Thank you for your analysis. Very helpful!