This page has been archived and commenting is disabled.
Is Coal the New Black Gold?
After the halting and starting four week rally we have seen in stocks, I would be negligent to recommend equity plays here. But there is one sector you should add to your “buy on meltdowns” list and that is King Coal.
Demand from emerging markets, especially metallurgical coal needed to make steel, is absolutely exploding. Industry experts say a major super cycle of buying from China, South Korea, Japan, and Taiwan that is creating a long term structural shortage for the black stuff. One of the reasons Warren Buffet’s Berkshire Hathaway acquired the Burlington Northern Railway (BNR), was that it obtains 75% of its earnings from transporting coal to west coast ports for shipment to Asia.
The US currently derives 50% of its power generation from burning coal, and that dependence isn’t changing any time soon. The only potential drag is the subterranean price of natural gas, to which many coal burning utilities may switch, if prices fall further. Not only do power companies have the environmental incentive to switch to relatively clean burning CH4, it is also cheaper on a dollar per BTU basis. However, this only affects the domestic demand for coal, not the foreign markets.
If the Republicans win the November elections, a regulatory back off will deliver a sudden boost to profitability, and you can count on perceptions to front run that. The new cost of recent regulations brought in by the Obama administration has already been priced in to these stocks. Some of the premier names to look at here include Peabody Energy (BTU), Massey Energy (MEE), and Joy Global (JOYG), and the coal ETF (KOL). If you feel guilty, you can always donate your profits to the Sieera Club.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
- advertisements -
The answer? No, it is not.
Thorium, bidges?
Massey is good. Don't forget Arch and Patriot.
Coal mining operations here in British Columbia re-opening or gearing up to increase production. Most of it ships to asia through Vancouver & Prince Rupert.
Copper & gold operations in BC are opening & re-opening too.
Even lumber exports to asia have been picking up.
Little (or none?) of this economic improvement seems to have much to do with North American consumption.
There might be a day in the not too distant future where a lump of coal in a Christmas stocking might be considered a good thing.
One ton of appalachain coal,
currently spot-priced at around $60, exclusive of delivery,
will produce around 24,000,000 btu, or as much energy
as 6 barrels = 240 gallons of gasoline.
A single gallon of gasoline will do the same amount of work
as 414 man-hours.
so for that one ton of coal
you get 100,000 man-hours of work
(and no unions, no strikes, no piss-breaks or anything)
all of that for $60.
So exactly how many third-world bosses do you think are concerned about how dirty it is?
Coal will be the strategic reserve energie when oil runs out. Untill then, it's to much of a mess to use.
But there will be a day when all that stuff will be liquified and put in out gastanks .
Demand from emerging markets, especially metallurgical coal needed to make steel, is absolutely exploding.
Baltic Dry Index suggest this MHFT thesis may be wrong.
http://stockcharts.com/charts/gallery.html?s=%24bdi
So does this:
http://stockcharts.com/charts/gallery.html?s=mee
only a person with no soul would recommend buying massey energy.
Hah - you are not from WV I take it. Saying a mine has safety violations is saying that a mine is open and operating. The Fed's job is not safety - it is to fine every major mine tens or hundreds of thousands of dollars on a annual basis and they always find something wrong. Find a mine without safety violations and I'll find you a bought-off inspector (think BP oil rig given top ratings from the Feds).
Don't suppose you hillbillies have considered actually fixing the glaring violations?
When the 'hundreds of thousands' in fines is set against the billions in revenue, it doesn't seem quite so punitive.
I don't think you follow: EVERY mine get banged for hundreds of thousands - its like pay to play. And there are not "billions in revenue" from any one mine or else West Virginia would not be among the poorest states.
+BillyJoeBob on Strong's comments. Born and raised in WV. ;)
+1
I actually owned that stock back then.
How horrible. Come to learn later on how many problems those shits had and were trying to hide.
There is no such thing as clean coal, and it has a horrible EROEI. Considering oil is on its bumpy plateau of production, maybe coal makes a play at the markets. Maybe.
No. Gold is the new gold.
"Gold is the new gold."
You win line of the week! Come get your "F*** Yo Couch, Bernanke" T-Shirt!