The Bustling Market for Exported US Coal
From Daily Finance
By Christopher Barker
Against the backdrop of a crushing collapse in the shares of U.S. coal producers last year, one important segment of the market for U.S. coal celebrated some noteworthy success.
Peering through the wreckage of major producers Arch Coal and Alpha Natural Resources — both of which have shed roughly half of their market value over the trailing year — we witness the deep and lasting impacts of the ongoing natural gas revolution. But that’s not the whole story!
You see, as diminished domestic coal consumption feeds elevated stockpiles and weakens prices, that underutilized supply becomes increasingly attractive to buyers outside the country.
As we’ll explore in greater detail in a forthcoming discussion (bookmark this page to catch my next installment), major producer Peabody Energy — my long-standing top pick within the industry — took decisive steps during 2012 to enhance its access to this important seaborne trade. CONSOL Energy — one of the very few domestic producers to outperform the benchmark Market Vectors Coal Index ETF over the past year — has undertaken a timely expansion of its key port facility in Baltimore, Md. These efforts highlight the changing character of what it means to be a competitive coal producer within this transformed structure of the U.S. coal market.
We’ll survey the relevant transportation infrastructure, and consider which coal producers may be best positioned to access that infrastructure, in a forthcoming discussion later this week. For now, let’s get a status report on the particular hotbeds of demand for exported U.S. coals that are so important to these impaired domestic producers. But first, a quick word on the broader outlook for global coal demand.
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