Coal: It's the World's Most Hated Natural Resource ... and It's a Buy
by StreetAuthority Nov 12th 2013 6:00AM
Updated Nov 12th 2013 8:24AM
AP
By Dave Forest
If I had to point to a segment of the natural resources sector with the lowest investor sentiment right now, it might well be coal.
Coal is thought of as antiquated and brutish, a relic that will soon be excised from the ranks of global energy markets.
It's easy to see why. On the surface, there's a lot to dislike about coal. The biggest strike against the industry is environmental. This month, the news has been rife with stories about record air pollution nearly shutting down a number of cities in northern China.
Whether it's for these environmental reasons -- or simply a matter of economics -- there's a sense that the world is turning away from coal.?Since 2009, China has been the driving force in global coal markets. Coal imports in that country exploded during the past five years, jumping to a peak of 35 million metric tons per month in December 2012. That's a 1,500 percent increase from 2008 levels. But growth in China's coal imports has stalled. Although imports are holding at a relatively high level, the days of explosive increases in import demand appear to have passed. The sense then is that we may be settling into a new normal for the coal market. Thermal prices peaked at $140 per metric ton back in 2008 when Chinese import demand began to surge. But today thermal coal has fallen back to half that level -- currently trading around $60 per metric ton on average globally.
There's a feeling among investors that thermal coal's best days are behind it. Big consumers such as China and Japan are making an effort to move away from the fuel, leaving little to drive the market.
But reports I'm reading from several parts of the world back up my suspicion that positive things are afoot in the coal sector. Changes in technology and some ground-moving shifts in global consumption patterns could spell better days ahead for these businesses.
I recently explained these shifts in the November issue of my Scarcity & Real Wealth newsletter, but suffice it to say, there's one major reason I think coal stocks could break out of their decade-low trading ranges -- one that could lead to a repeat of the kind of price spikes we saw in 2008.
Simply put, it's because India's coal industry is imploding.
Years of corruption and a bureaucracy as thick as pea soup have hobbled production of the country's mineral riches -- natural gas, iron ore and especially thermal coal.
by StreetAuthority Nov 12th 2013 6:00AM
Updated Nov 12th 2013 8:24AM
AP
By Dave Forest
If I had to point to a segment of the natural resources sector with the lowest investor sentiment right now, it might well be coal.
Coal is thought of as antiquated and brutish, a relic that will soon be excised from the ranks of global energy markets.
It's easy to see why. On the surface, there's a lot to dislike about coal. The biggest strike against the industry is environmental. This month, the news has been rife with stories about record air pollution nearly shutting down a number of cities in northern China.
Whether it's for these environmental reasons -- or simply a matter of economics -- there's a sense that the world is turning away from coal.?Since 2009, China has been the driving force in global coal markets. Coal imports in that country exploded during the past five years, jumping to a peak of 35 million metric tons per month in December 2012. That's a 1,500 percent increase from 2008 levels. But growth in China's coal imports has stalled. Although imports are holding at a relatively high level, the days of explosive increases in import demand appear to have passed. The sense then is that we may be settling into a new normal for the coal market. Thermal prices peaked at $140 per metric ton back in 2008 when Chinese import demand began to surge. But today thermal coal has fallen back to half that level -- currently trading around $60 per metric ton on average globally.
There's a feeling among investors that thermal coal's best days are behind it. Big consumers such as China and Japan are making an effort to move away from the fuel, leaving little to drive the market.
But reports I'm reading from several parts of the world back up my suspicion that positive things are afoot in the coal sector. Changes in technology and some ground-moving shifts in global consumption patterns could spell better days ahead for these businesses.
I recently explained these shifts in the November issue of my Scarcity & Real Wealth newsletter, but suffice it to say, there's one major reason I think coal stocks could break out of their decade-low trading ranges -- one that could lead to a repeat of the kind of price spikes we saw in 2008.
Simply put, it's because India's coal industry is imploding.
Years of corruption and a bureaucracy as thick as pea soup have hobbled production of the country's mineral riches -- natural gas, iron ore and especially thermal coal.
