Coal 02 (Jul 12 - Dec 25)

[winston]

These Commodities Are at "No-Brainer" Prices By Matt Badiali

Coal producers are losing money.

Coal is probably the most hated fuel in the U.S. today… It's dirty and old-fashioned. Combine this with the cheap abundance of natural gas, and U.S. coal demand has collapsed over the past few years.

You see, natural gas is a direct competitor with coal as a fuel for electric power. And natural gas is cheap at less than $5 per thousand cubic feet today. This has spurred a massive switch from coal to natural gas. As demand for coal dropped, so did its price.

It now costs more to produce coal than it's worth in the market. And this creates an opportunity for smart investors…

According to Bloomberg, the 28 primary coal producers around the world that report coal production are selling their coal for an average of around $76 per ton. The average operating profit of these miners is -$2.82 per ton.

So on average, these companies are operating at a loss. Coal producers need prices to hit around $80 per ton for them to make money.

If prices don't head higher, most coal producers will have to close some of their mines or face bankruptcy. Take coal producer Arch Coal, for example.

Arch supplies the coal used to produce more than 5% of the electricity in the U.S. It has a market cap of $700 million. The company has posted an operating loss for the past six quarters. In the most recent quarter, its EBITDA (earnings before interest, taxes, depreciation, and amortization) was $12 million. This isn't enough to pay all the company's expenses like interest and taxes.

Think about that for a second. At current coal prices, Arch can't generate enough money to pay its bills. We've seen coal companies in a similar situation – like Patriot Coal and James River Coal – go bankrupt in recent years.

So Arch – and producers like it – will have to cut expenses to earn enough money to pay its bills. It will do so by closing unprofitable mines.

This is exactly what contrarian investors like to see.

You see, natural resources like coal are tremendously cyclical. That means their prices move in waves. They go through big booms and busts. The best time to invest in natural resources is when everyone hates them and they're at "no-brainer" prices.

After the market leaves a natural resource for dead, things often get better. Production from Arch – and producers like it – will soon drop. But eventually demand will pick up… causing prices to boom.

And as I've told you before, coal is still a critical piece of the world's energy supply. The International Energy Agency (IEA) forecasts coal will still provide more of the world's energy supply in 2035 than any other source. As coal demand holds steady and even increases, prices will boom.

That's why I like owning the beaten-down coal sector today.

But this isn't just a trend in coal. Commodities like uranium, platinum, palladium, and water are all in the same situation today. Each is as vital to our way of life as coal… And master resource investor Rick Rule says they're all too cheap today.

Rick is the founder of Sprott Global Resource Investments. He has spent decades in the resource markets, making himself and his clients many millions of dollars in the process. He has also financed several of the most important resource companies in the world. He's a brilliant investor, and a walking encyclopedia of business knowledge.

Rick believes we're about to see a massive rally in several commodities' prices. And investors who get in early could make a fortune.

Timing is everything in natural-resource investing. And commodities like coal, platinum, and uranium are at "no-brainer" prices.

Source: Growth Stock Wire

[winston]

Get Ready to Buy This Beaten-Up Energy Sector By Jeff Clark

The coal sector is starting to attract contrarian investors.

As my colleague Matt Badiali pointed out last week, the price of coal is currently below its cost of production. Coal miners can't sell the stuff at a profit. Plus, new regulations proposed by the Obama administration threaten to make it more difficult for miners to make money – even if the price of coal recovers.

As a result, coal-mining stocks are trading near multiyear lows. But as Matt said, "this is exactly what contrarian investors like to see."

As we've explained before, buying into beaten-down natural resource sectors like coal is a proven, time-tested way to make money in the stock market. These sectors go through big booms and busts.

The problem with most contrarians, though, is they tend to be early.

Think about it… Everything we're saying about the coal industry today was also true at the start of 2013. The sector was beaten-up… hated… and cheap. It was an attractive contrarian bet. But coal-mining stocks are down 20% from 2013. Contrarian investors who bought the sector last year were too early.

Folks buying today, though, may be closer to getting the timing just right…

Take a look at this chart of the Market Vectors Coal Fund (KOL) – which holds a basket of global coal stocks.

Please Enable Images to See this

KOL broke above the blue down-trending resistance line on the chart in the middle of 2013. That was the first sign the sector was preparing for a turnaround. But KOL still had to deal with the resistance of its 50- and 200-day moving averages (DMA).

Earlier this year, KOL retested the down-trending line as support. And it held. Since then, the stock has been chopping back and forth in a tight trading range – which has given the 50- and 200-DMAs time to come together and start curling higher. This indicates KOL's momentum is changing to the upside.

With KOL trading above its former resistance line, and with the stock and its moving averages all coiled together, the sector is poised for an upside move.

It won't take much to start a move higher. If KOL can rally decisively above its moving averages, and if the 50-DMA can rally above the 200-DMA, that should be enough to kick off a new uptrend for the sector. If KOL rallies above $19 per share, traders should look to buy.

Source: www.growthstockwire.com

[winston]

Coal – China

Key Takeaways From BP’s Annual Report On Global Energy

Due to price competitiveness, coal was unexpectedly the fastest-growing fossil fuel in the 2013 global energy consumption (+3% yoy) with market share reaching a
record high of 30.1%.

Oil & gas consumption grew 1.4% yoy each with market share easing to 32.9% and 23.7% respectively.

While China’s shift from coal-intensive industrialisation remains the main demand theme, the oil & gas market’s tightness due to geopolitical risks may play a more important role in rebalancing the global coal market.

Maintain MARKET WEIGHT.

Source: UOBKH

[winston]

NDRC to reserve 6.7M tons of coal
2014-06-20

National Development and Reform Commission (NDRC) released the 2014 coal contingency reserves task which requires relative department to arrange the reserves of 6.7 million tons of coal in order to ensure the coal supply in case of emergency.

Source: AAStocks Financial News

[winston]

The 'Magic Number' for the Next Coal Rally By Porter Stansberry
Thursday, June 26, 2014

It's the single greatest contrarian opportunity today…

Yesterday, I explained how most investors are underestimating coal's dominant position in the global energy complex. In short, coal isn't going anywhere…

Despite the nearly universal negative outlook people have for it, and growing regulatory pressure in the U.S., coal remains the world's leading energy source.

And thanks to emerging markets – most notably India and China – its consumption continues to grow by about 2% annually.

But while environmentalism is no threat to coal's place in the global energy complex… cheap natural gas has been devastating.

Today, I'll explain how rising natural gas prices are making coal look more and more attractive… and how close we are to the "magic number" for the next coal rally.

Let's get started…

Exactly two years ago, the June 2012 Investment Advisory focused on the rivalry between natural gas and coal. We pointed out that thanks to drilling innovations like hydraulic fracturing (fracking) and horizontal drilling, the U.S. was suddenly drowning in natural gas.

Since many power plants can run on either natural gas or coal, cheap natural gas is bad news for steam-coal producers.

"King coal's dominant position as the fuel for electric generation has never been more threatened," we wrote at the time. Coal companies would suffer if the shale-gas boom could keep natural gas prices at less than $4 per mmBtu. And that's what has happened. In recent years, coal stocks have collapsed in the face of cheap gas.

But what investors today are missing is that natural resources are inherently cyclical. As the market abandons a natural resource for dead, prices drop to reflect lowered demand. Production follows. But low prices eventually attract more demand… causing prices and production to boom again.

So far, natural gas has spent all of 2014 at more than $4 per mmBtu. Rising natural gas prices are making coal look more attractive today.

Natural gas prices surged to $6 per mmBtu in February after the harsh winter. They're now a little more than $4 per mmBtu. Coal prices – after adjusting for lower power-plant efficiency and higher transportation prices – are right around that same level.

The magic number for the next coal rally could be a natural gas price of more than $5 per mmBtu.

That's the level that will drive a "significant" return to coal from natural gas, according to a recent Bank of America Merrill Lynch report. As natural gas prices climb and stay above $5 per mmBtu, we'll see coal-fired power plants come back online.

And the tipping point may be even lower than $5…

"Natural gas prices approaching $4.50/mmBtu are making even the least-competitive Appalachia coal basins viable in some cases," the Bloomberg financial news service recently reported. "In addition, the gap between coal prices expressed in mmBtu in the Powder River… and Illinois basins and gas has widened since [the fourth quarter], ensuring greater certainty in demand in those regions."

Why do we think there's a decent chance for an increase in gas prices?

Right now, no global market for natural gas prices exists. Natural gas costs more than $16 per mmBtu in parts of Asia and $11 in Europe. It's no surprise that the world is clamoring to get its hands on the U.S.'s abundant and cheap natural gas reserves.

Looking at the facts of the global market for coal and its key role in electricity production globally, we agree with T. Boone Pickens and commodity investing expert Rick Rule, who told the audience at our Dallas conference last month that coal is a "when" investment – not an "if" investment.

In short: We know that the price of coal will eventually rise substantially.

In some regions, mining coal costs a lot more than the current price. So miners will either stop production or go out of business. As a result, sooner or later, stockpiles will dwindle, supplies will disappear, and prices will soar as shortages "suddenly" cause the market to panic.

We're not at the panic point yet. But investors have obviously abandoned coal. That's fantastic for us.

The chart below shows the Dow Jones U.S. Coal Index – a basket of domestic coal-producing stocks. The last time extreme pessimism ruled the day, investors brave enough to step in and buy could have ridden the rebound for a stunning 1,200% gain from 2000 to 2008. (Keep in mind, we're not predicting four-digit gains. We simply want to show how dramatic the cyclical swings can be.)

Before the bull run started in 2000, coal stocks had lost more than half their value. Today, coal stocks have suffered similar devastation. Coal companies Cliffs Natural Resources (CLF), Peabody Energy (BTU), and Alpha Natural Resources (ANR) are down 83%, 76%, and 95%, respectively.

And back in 2000, as now, every elected official seemed to be on an anti-coal soapbox. The utilities scrambled to settle billion-dollar government lawsuits on Clean Air Act claims.

Today, the government has been increasing regulations faster than at any time in history. When it's not pressuring the miners, it's focused on the coal users. And yet… even as coal prices fell and mining companies failed… the U.S. produced 1.1 billion tons of coal in 2013.

While the industry faces some headwinds, we feel the coal markets could be forming a bottom. And as we learned in the years following the last coal crash… with nearly 40% of the country's power grid tied to coal, share prices beaten down by regulatory backlash are not going to permanently cripple the coal markets.

It's only a matter of time. Coal is a "when" investment, not an "if."

Source: Daily Wealth

[winston]

Coal companies mulling further price cut

After a substantial downward adjustment to coal price last week, Shenhua Group will increase its efforts in adopting further price concession this week as it intends to use the lowest price among the listing prices of thermal coal supplied by China Coal, Datong Coal Mine Group and Yitai Group as the settlement price for the current month;

Besides, for the part exceeding the demand rate according to customers' contracts, another special offer of RMB5-8/ton will be provided, China Securities Journal reported.

Source: AAStocks Financial News

[winston]

One more BIG reason this "left-for-dead" commodity is practically guaranteed to go higher

Sentiment in the thermal coal market is nearly as poor as it gets right now.

The mood has been further dampened this week by price cutting from Chinese coal producers. With sellers slashing prices in an attempt to clear out inventory.

That’s led to an almost complete loss of appetite for imports into China. With buyers simply adopting a “wait and see” posture–looking for domestic supplies to get even cheaper.

But amid all the negativity, the data shows that the fundamentals for the global market are still strong. Driven by major supply issues looming in one part of the world: India.

Data released this week by the Press Bureau of India reveals that the supply-demand situation is growing worse here. With power plants across the country simply not being able to obtain all the coal they need to keep operations going.

The chart below tells the story. Showing coal deliveries by major producer Coal India to power users, as a percentage of total contracted volumes.

The numbers here suggest a growing supply crisis. For the most recent fiscal year (2013-14), for example, Coal India committed to deliver 412.3 million tonnes to power users. But was only able to come up with 353.82 million tonnes–resulting in a contract delivery rate of just 86%.

And the numbers show that trend of under-delivery is only getting worse. In May of this year, Coal India was only able to deliver 84% of the 35.92 million tonnes it had contracted to power plants. During April, the delivery rate came in at just 82%.

That’s a large and widening gap between supply and demand across the country. With flagging production at existing coal mines, and problems in starting up new output increasingly pushing coal users toward imports as a go-to source.

That trend is going to continue for the foreseeable future. Which is why news emerged this week that India’s power companies are aggressively seeking coal mining acquisitions in South Africa and Indonesia. Watch for more moves on that front over the coming months.

All of this remains a major bullish force for the global coal market. We’ll see when surging import demand here starts to have an effect on international pricing.

Source: Pierce Points

[behappyalways]

Miners Face Pain as China’s Coal Appetite Falls
http://blogs.wsj.com/chinarealtime/2014 ... ite-falls/

[winston]

Coal miners are stuck in a downtrend… Peabody Energy hits a three-month low.

[winston]

Coal stocks are working on a new uptrend… sector fund KOL jumps to its highest level since the start of the year.