AP: Recession Resistant Coal Feels the Squeeze
Coal was one of our biggest winners in late 2007
thru mid 2008. Until HAL9000 (the
quant fund computer who treats all commodity stocks the same) took over, I used to have a thesis that on a RELATIVE basis fertilizer and coal would outperform commodities as a whole - because after all, heat and food are relatively inelastic demands a human would prefer to have. HAL blew my thesis up.
I'm gobsmacked (love those English terms) at the charts in this group - worst of breed, best of breed, metallurgical, thermal - doesn't matter. Weapons of mass capital destruction. We own one that has held up well but only on a RELATIVE basis... i.e. instead of losing all 4 limbs, it's only lost 3. Nine months ago you wanted companies who had unsigned contracts so that you could benefit from those who would benefit from ever rising prices (that should be familiar to our
DryShips fans in the crowd); now you want the exact opposite - you prefer companies who locked up as much capacity as possible at 2008 prices. How quickly the worm turns ....
A quick take
via AP:
- Anemic spending has begun spreading to the usually recession-resistant coal industry. Producers have slashed production, idled mines and cut jobs less than a year after soaring coal prices left the industry struggling to find enough workers. Two more big U.S. producers -- Arch Coal Inc. and Foundation Coal Holdings -- announced cutbacks Friday. Already, major producers such as Peabody Energy, Consol Energy, Alpha Natural Resources, Alliance Resource Partners and Patriot Coal have begun to retrench.
- At least 1,310 jobs have been trimmed at various Appalachian mines. Arch says it does not expect any layoffs, though it has trimmed up to 14 million tons of planned production in 2009.
- Plummeting demand for steel from automakers, the construction industry and others have slashed demand and prices for metallurgical grade coal used to fire blast furnaces.
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