Arch Coal and Alpha Natural Resources Rally Sharply in October as Coal Market Begins to Stabilize
NEW YORK, NY -- (Marketwire) -- 10/30/12 -- Coal stocks have struggled in 2012 as abundant supplies and historically low prices have made natural gas a cheaper alternative for utilities. Natural gas futures in April plummeted to a 10 year low of $1.91 per thousand cubic feet. The Market Vectors-Coal ETF (KOL) -- which seeks to replicate the price and yield return performance of the Stowe Coal Index -- has fallen over 22 percent year-to-date. The Paragon Report examines investing opportunities in the Coal Industry and provides equity research on Arch Coal Inc. (NYSE: ACI) and Alpha Natural Resources, Inc. (NYSE: ANR).
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Coal companies, despite some reporting steep drops in their third quarter profits, have surged recently as they believe the market for coal is beginning to turn around. Arch Coal, Alpha Natural Resources, and Peabody Energy have all seen gains of at least 20 percent over the last month. According to Peabody's CEO Gregory Boyce coal's market share of electricity generated in the U.S. has risen from a low of approximately 30 percent in the second quarter to roughly 39 percent in September.
"While the global coal environment remains challenged, there are indications that markets are stabilizing through U.S. gas-to-coal switching, higher European coal-fueled generation and increased China infrastructure spending," Boyce said.
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Arch Coal is a top five global coal producer and marketer, with 157 million tons of coal sold in 2011. For the third quarter of 2012 the company reported a net income of $46 million compared to a net income of $9 million in the year-ago quarter. "Looking ahead, we believe global coal markets are in the process of correcting -- with the domestic thermal market building some momentum while metallurgical markets are bottoming out," said John W. Eaves, Arch's President and CEO.
With $7.1 billion in total revenue in 2011, Alpha Natural Resources ranks as America's second-largest coal producer by revenue and third-largest by production. Alpha is the nation's largest supplier of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries. The company is scheduled to release third quarter financials on November 2, 2012.
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