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Mike Havrilla submits:
The accompanying chart presents an 8-week analysis of global coal futures prices as a follow-up to my previous 5-month analysis last month of Market Vectors Coal ETF (KOL), PowerShares Global Coal ETF (PKOL), S&P 500 ETF (SPY), U.S. Natural Gas (UNG) + Oil (USO) Funds, and the Energy Sector ETF (XLE). The global price of coal is tracked by the near-month coal futures contracts from the U.S. (QL – Central Appalachian NYMEX Coal Futures), South Africa (AFR – Richards Bay ICE Coal Futures), and Europe (ATW – Rotterdam ICE Coal Futures) – posting a decline of 38% on an equally-weighted average of the three coal futures contracts. Complete Story »
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Greentech Media submits: By Jeff St. John For someone working on the forefront of efforts to make the "clean coal" buzzword a reality, Jonathan Barr's concerns over what President Barack Obama and a Democratic Congress will do to reduce greenhouse gas emissions may seem a bit odd. Complete Story »
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Research Oracle submits: Globally, coal prices are witnessing a significant spike, thanks to the growing steel demand and supply constraints. Coal, which is one of the major raw materials for producing steel, is already short of 25 to 35 million metric tons in FY 2008 across the globe, which is likely to reach 70 mn metric tons in FY 2009 (as per Steve Leer, Arch Coal Inc. chairperson and CEO). Recent floods in Australia, the world's second largest coal exporter, forced several coal producers to shut down their mines, resulting in a huge decline in coal output in the first quarter of FY 2008. According to Macquarie Bank Ltd., coal production from Australia may decline by approximately 15 million metric tons, or about 12 percent of Australia's annual exports in FY 2008. In addition, a power crisis faced in South Africa in January 2008 and thereafter a reduced power supply from Electricity Supply Commission (Eskom, South Africa's national power supplier), resulted in a shutdown of several mines and forced coal producers to cut their output, which further decreased the coal production. Meanwhile, International Iron and Steel Institute forecast that demand for steel is going to increase by 6.7 percent in FY 2008, led by an 11.5 percent increase from China. The shortfall in production of coal along with the increasing demand for steel led world's leading steelmakers such as Nippon Steel Corporation, ArcelorMittal (MT), JFE Holdings Inc. and Pohang Iron and Steel Corporation ((POSCO)), to increase contract coking coal prices approximately 200% to US$300.00 a metric ton for the 2008 coal year (commenced 01 April 2008). On a similar trend, contract prices for thermal coal, used in power plants, more than doubled to US$125 a metric ton for FY 2008. Complete Story »
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Trader Mark submits:This is the 2nd/3rd of 4 coal stocks we are exiting, for reasons I outlined last week in the sale of Alpha Natural Resources (ANR). There is no reason to hold 4 names, when quant hedge funds who pile in and out of these stocks on 'sector' moves see no difference between each business. Arch Coal (ACI) = Peabody Energy (BTU) = Massey Energy (MEE) = insert any coal name or in fact any commodity name.
So to keep life simple we are reducing positions and due to the fact this is a traders market and not an investors market we are simply going to use James River Coal for our "coal" stock, or in reality our natural gas/iron ore/oil/corn/coffee/steel stock. It's all the same to the hedgies. Complete Story »
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 Jeff Miller submits: The quest for performance sometimes drives a rapid shift from one market sector to another. This can come from major hedge fund reallocations, but also due to marginal changes from large mutual funds. Our TCA-ETF model shows us the direction of these moves by capturing recent trends. It also includes some sectors that we expect to return to favor on a cyclical basis. Even for those not interested in trading based upon a sector program, looking at the changes in ratings paints a picture of overall market interest and activity. Based upon a reader's suggestion we recently added a "prior week" rating to our report. It is interesting information. Complete Story »
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Callum Roxburgh submits:Democrat Presidential Nominee Barack Obama in his acceptance speech in Denver promised that he would rid America of her dependence on foreign oil within 10 years. He has obviously recognized that access to resources over the next few decades is going to be the main source of international conflict. Even many who disagree with him about whether it was wrong to invade Iraq would not argue that the reason America found it had a national interest in that country was its petroleum resources, and America’s dependence on foreign oil was the imperative that drove the decision making. But how realistic is it to think that America could achieve energy independence within 10 years? America currently consumes 20.7 million barrels a day and meets 6.9 million barrels of that consumption through domestic production. The other two-thirds comes from foreign sources. America imports 2.4 million barrels from Canada and Mexico, with the rest coming from much more unstable sources such as West Africa, South America and the Persian Gulf, regions where you have to deal with endemic corruption, resource nationalization or Islamic fundamentalism as a by-product of your dependence. It is obvious that given a choice, you would not want to depend on the stability of any of these regions for something as important as energy security. Complete Story »
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 Richard Shaw (QVM Group) submits: Commodity and energy funds of all sorts have proliferated in this recent commodity cycle. There are so many and they are so diverse, it is difficult to keep them all in mind. We put together this table of a variety of broad and narrow focus commodity and energy funds (and related funds) to provide some perspective. Complete Story »
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Hard Assets Investor submits: By Julian Murdoch A while ago, energy and energy stocks were the hottest thing since Google. But that bubble may have burst - or has it? Complete Story »
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Frank J. Maura submits:Since the hedge funds dropped commodities in early July, you have seen a dramatic sell-off in oil, coal, and fertilizers. This despite the fact that these commodities have excellent fundamentals going forward, stellar earnings, and continued demand. The recent "rally" on Wall Street, with the illusion that with lower oil everything is right with the world, came to a reality check Tuesday when JPMorgan (JPM) reported a loss of 1.5 billion. What the market fails to accept is that the financial crisis is still in the middle innings and as long as the credit crunch, credit card defaults, mortgage crisis, and lower consumer spending continues, this crisis will not go away simply because oil is down in price. Complete Story »
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Michael B. Smith submits:In late 2006, China for the first time in its history became a net coal importer. This changed the dyanmics of the world's energy market. Korea and Japan, previously importers of Chinese coal, were sent scrambling for alternative sources of energy. What they found in the winter of 2007 was LNG for $18-$20/BTU. China too was a willing buyer. The coal scramble was also felt in Europe. Australian coal was bottlenecked and/or kept in the Asian region. Power outages in South African coal mines made the situation worse for Europeans as they lost out on significant supply. What followed was a ramp in coal prices as coal was shipped off the east coast of the U.S. to willing buyers in Europe. Complete Story »
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Jacob Taylor submits: The future of U.S. coal is burning bright and long-term options may be the best way to capitalize on the trend. Growing demand in China combined with higher comparable valuations abroad will create a catalyst for the U.S. coal industry, according to many experts. The environment may also spark an unprecedented number of domestic and cross-border mergers and acquisitions. Investors looking to take advantage of these trends with leverage and limited risk should consider purchasing LEAPS options. China is expected to generate the majority of demand for coal over the next decade. The fast-growing developing market economy requires coal to supply 80 percent of its energy needs, which makes it the largest consumer of coal in the world. The country may also be the largest producer of coal, but it may still become a net importer within the next couple of years. The increased demand in China has helped jumpstart global coal prices, which have risen substantially over the past year. Complete Story »
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Sean Butler submits:Continued poor performance by the very sector that acts as the glue for capital markets has a nasty habit of unhinging the markets all together, creating wide instability across a menu of sectors, asset classes, and the market in general. It’s unfortunate then for bulls that financials will continue to serve as the market’s 800 pound anchor, dragging stocks down at worst, and keeping them from moving forward at best. Many traders are now cautiously calling a bottom on financials, but they will have to keep searching, because the end ain’t here yet. While valuations on financials have come down quite a bit, and large sums of money have been written off, there is still plenty of turmoil to come. Ordinary people are struggling with rising commodities prices, increasing monthly mortgage payments and an upward trend in inflation. They are struggling to make credit card payments and cover their mortgage payments in full every month. Plenty of people are walking away from homes they have sunk tens of thousands of dollars into. Complete Story »
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Trader Mark submits:Thanks to a reader for sending this article... quite fascinating really when you sit and think about it. Especially the fact the Gulf countries, sitting on piles of dead dinosaurs, are moving into coal. We've been talking a lot about this sector of late, almost as much as fertilizer in the fall. Hopefully the drama in this sector modifies soon and we can move into calmer times where fundamentals trump paranoia.
I can sum up this thesis very succinctly - economics trumps environment. Unfortunately in a bottom-line business of making investors money, I can only worry about the economics. Complete Story »
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