Is This the Beginning of the End of Coal?
By Nick Cunningham
Arch Coal (NYSE: ACI) reported a big loss for the fourth quarter of 2013, its eighth straight. The numbers came in lower than many analysts expected and the company continues to struggle amid declining revenues. Arch posted a loss of $0.45 per share with revenues of $719.4 million. Part of the blame, according to Arch, was from a rail outage in the Powder River Basin and “geological” problems in Appalachia, which contributed to lower revenues.
With coal demand slumping, Arch Coal’s stock price has been in freefall since 2011. It closed at $4.01 on February 3, down from the pre-recession highs of $70 per share, and even much lower than $35 per share just three years ago. Arch Coal’s struggles mirror the sector as a whole. Shale gas is increasingly the fuel of choice for utilities as they make the switch away from coal to fire their power plants. In 2013, the coal industry produced only 984 million tons of coal, the first time since 1993 that the industry produced less than one billion tons. (Related article: Why Coal will Remain the Basis of Electricity Generation for Most of the World)
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However, the company believes it may be poised for a bit of a comeback. Natural gas prices have more than doubled since their lows nearly two years ago and they have continued on an upward trajectory from the remarkably cold weather in the northeastern United States. Record-low temperatures have led to high demand, and Henry Hub prices have rapidly jumped above $5 per million Btu. And with infrastructure bottlenecks, regional natural gas prices have temporarily spiked far beyond those levels.
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