Cheap Natural Gas and Warm Temperatures Caused Coal Demand to Decline by 93 Million Tons in 2012
NEW YORK, NY -- (Marketwire) -- 12/07/12 -- The coal mining industry has experienced major struggles in 2012 as warm temperatures and the emergence of natural gas as a cheaper alternative have caused demand for the commodity to plummet. The Market Vectors-Coal ETF (KOL) has fallen 25 percent year-to-date. The Paragon Report examines investing opportunities in the Coal Industry and provides equity research on Peabody Energy Corporation (NYSE: BTU) and Walter Energy, Inc. (NYSE: WLT).
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Gordon Howald, senior vice president of Doyle Trading Consultants LLC, at a recent conference stated that coal companies lost a total of 93 million tons in demand this year as total demand for coal in the U.S. declined 9.9 percent in 2012. Data from the Energy Department has shown that electricity demand for coal fell from 42 percent in 2011 to 37 percent in 2012, while electricity demand for natural gas rose from 25 percent to 31 percent over the same period. From now to 2020 a total of 34,700 megawatts of coal-fired generators will be shut down by utilities according to Howald.
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Peabody has approximately 9 billion tons of proven and probable coal reserves and owns, through its subsidiaries, majority interests in 29 coal operations located throughout all major U.S. coal-producing regions and in Australia. The company recently shutdown their Willow Lake Mine in Southern Illinois. Willow Lake sold 2.2 million tons in 2011.
Walter Energy is the world's leading, publicly traded "pure-play" metallurgical coal producer for the global steel industry with strategic access to high-growth steel markets in Asia, South America and Europe. The British Daily Mail newspaper has recently reported that BHP Billiton and Glencore International are considering a cash bid for Walter Energy. Shares of the company have surged nearly 15 percent in the past week.
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