Coal stocks have in recent years been on a steady decline due to more environmentally conscious investors and bigger firms pulling funding out of fossil fuels for more greener alternatives which have been gaining popularity. Coal producers have had their own issues when it comes to increasing the value of their stocks, for which the market has suffered with as well. For the last couple of years coal stocks have been slipping on the Dow Jones and many are starting to wonder if its time that coal stocks coming back?
Past administrations have been more kind towards coal unlike the current one in power. In fact no other presidential administration has been so hostile towards the coal industry in history. As alternative fuels have become the vanguard for the future fueling of the nation, coal as an fuel for energy has taken on a dirty reputation. Many associate this dirty reputation as having to do with a war on coal which has allowed the producers of coal and coal based energy to struggle on the market. In recent years some of the damaging effects to the coal industry has also been self inflicted as companies and producers sought to end the negative outlook on the industry as a whole, while trying to take advantage of . The coal market peaked just before the 2008 financial crisis driven mostly by the high demand for coal used in the production of metals with a focus on steel. U.S. companies that were better known for producing coal for energy began searching for the in high demand metallurgical coal in hopes of boosting profits. The biggest reason for the shift in focus was to be a part of the desire and demand for steel production which was going into China to help with the updating and modernization projects being funded by the Chinese government within China and throughout the rest of the developing world.
Bad Investments and New Sources of Energy
In 2011 many of the world’s top coal producing companies bought out competitors in an effort to build a longstanding base from which business could be conducted globally and stabilize the availability of future profits. Peabody Energy which was the world’s largest private sector coal company purchased Macarthur Coal in Australia for 5.1 billion dollars in 2011. During the same year, America’s third largest supplier of coal purchased Massey Energy for 7.1 billion dollars and Arch Coal acquired International Coal Group for 3.4 billion dollars. The acquisition of International Coal Group made Arch Coal the nation’s fourth biggest metallurgical coal producer. Unfortunately for these companies, they purchased their competitors at the height of the market, so when the market dropped the companies took on massive amounts of debt due to the finance deals made. The situation tuned worse when the developmental projects for renovation and modernization in and by China began to slow. These newly made investment began to backfire on those who were becoming ever increasingly dependent on metallurgical coal. Sluggish markets and a boom in the shale and natural gas markets became much more attractive energy supplements to the former powerhouse that was coal produced energy making coal stocks relatively low in value.
In the wake of bad investments and other sources of fuel to provide energy, some industry and market analysts feel that we are on the frontlines of coal stocks that could be making a comeback. Stocks like Westmoreland Coal and Hallador Energy have been able to keep their bottom lines above water. The biggest reason is unlike their counterparts in the coal industry, they hadn’t invested so heavily into the metallurgical coal like many of their peers did. Industry experts agree that there will be a turnaround and coal stocks will eventually rise again, but like most investments…timing is everything. Many agree that the great days for the coal industry are passed but concede that there is still a future for coal based energy. The measure of success will be played out by the investments and lobbying made by those currently still in the coal game, and which companies live on and which fold into the fray. Even though the U.S. government is looking for cleaner and more efficient ways to fuel its growth, coal is a commodity that has the future of its success built on the world stage. Should the coal producing companies look worldwide at the best ways to invest their time and money, the industry will be able to survive well into the next generation of green fuel providers.
The coal industry saw metallurgical coal production to be the key to success with modernization programs abroad, so too can it be seen with rising nations looking to modernize as well. Coal is abundant and relatively cheap when in comparison to other forms of fuels for energy. The future of the coal industry is set on the global economic world stage, and as the global economy starts to level off, the stocks concerning coal producers will also see a rise in overall value. The death of coal isn’t as certain as many would like to think, since 40 percent of the U.S.’s energy is still based on coal, and industry which still employs U.S. workers. Coal stocks might be getting ready to reel in profits again and would be worthy looking into.
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