Yesterday, I went into my backyard to grill some tasty treats, as it was a pleasant evening and…well…grilled food be good. As I cleaned out my Weber to start my fire, I went into my shed to pick up some fuel for the fire…lo and behold nothing was there. My coal was stolen.
I figured…why steal coal now? I mean, coal shares are in the midst of a nasty correction…why in the world would anyone want to try to catch that falling knife? In such a situation most people would have just went out and bought more charcoal..but not me. I had a hunger…but not for burgers.
Here are some links to recent earnings reports of Massey Energy, Arch Coal, and Peabody Energy:
Massey reports earnings
Arch reports earnings
Peabody reports earings
Sure there are other coal companies, but I will focus on these three widely helds as I have followed them for some time. These are impressive results to be sure. Yet these shares have declined 20 - 40% from their highs. Technically speaking, such activity in the face of good news screams slowing growth going forward. Never mind some of these quotes from earnings calls:
Coal consumption within the United States has risen an estimated 13 million tons in 2008, and coal exports are up an estimated 10 million tons year to date. Yet coal production has only increased 5 million tons. As a result, U.S. generator stockpiles, which are already 17 percent below prior-year levels on a days-use basis, are being reduced at a rate of 2 to 3 million tons per week. Stockpile reductions are likely to accelerate through the third quarter, due to seasonal use and growing exports, and are expected to be below targeted levels by the end of summer. (Source: Peabody Energy’s results quarter end June 30)
Furthermore, continued strength in the international coal marketplace is contributing to strong domestic coal market conditions. Based on U.S. Department of Commerce data, coal exports reached 32.0 million tons through May - a 56 percent increase from the prior year five-month period. At the same time, coal imports into the United States totaled 13.3 million tons through the first five months of the year, nearly 6 percent below the prior year-to-date import levels. As a result, Arch now estimates a 4-million-ton decline in U.S. coal imports for 2008, while raising its forecast for U.S. coal exports to 83 million tons, which represents a 24-million-ton increase over last year’s improved levels. (Source: Arch Coal’s results quarter ended June 30)
Pricing for Massey’s core products was very strong in the second quarter and remains so to date.
– Eastern U.S. steam coal prices increased dramatically during the second quarter, driven by continued strong demand from the export market. Pricing for prompt delivery NYMEX spec coal increased approximately 85 percent from March 31 to June 30, ending the month and quarter at nearly $140.00 per ton.
– Prompt delivery coal prices for 12,500 btu steam coal continue to be $150.00 to $160.00 per ton in July and we believe the underlying market fundamentals remain unchanged. Global supply of coal remains tight and demand for coal is increasing.
– Bench mark prices for metallurgical coal have been established at $300.00 per metric tonne, FOB terminal.
