Coal miners have been getting a big boost because of rising coal prices, and Alpha Natural (NYSE:ANR), International Coal (NYSE:ICO) and Peabody Energy (NYSE:BTU) have been among the big beneficiaries, and should bet an even bigger boost because of the demand created from the nuclear problems as a result of the Japan earthquake.
"Coal stocks have generally performed very well in the last six months. This is no surprise, as global coal prices, both thermal and metallurgical, are reaching multiyear highs. We think this momentum will continue in the coming year," said Morningstar.
"The coal industry has benefited from two relatively unlikely events in the last few months. First, in late 2010, torrential flooding in Australia severely disrupted metallurgical coal shipments out of Queensland. As Australia is a linchpin of the global coal trade, this sent Asian coal prices soaring to levels unseen since 2008. Metallurgical coal prices in particular jumped perhaps 40% to over $300 per ton.
"Then, a giant earthquake and tsunami plowed into Japan, severely damaging the Fukushima nuclear power plant. Although the Japanese authorities seem to have the situation under control, the near-meltdown at the plant shook the world's confidence in nuclear power to its core. In the days since the disaster, China temporarily halted its ambitious reactor building program, and Germany peremptorily shut down its pre-1980 plants. Regulators from the United States and Japan are also scrutinizing plant safety and may mandate additional safeguards and increased inspections going forward.
"In the medium term, damage to Japanese nuclear power will slightly increase demand for thermal coal. However, the most profound consequences will be the long-term impact on the global energy mix. All of the upcoming challenges to nuclear power will diminish its contribution to world electricity generation. The shortfall will have to be made up somewhere, and one of the big sources is coal."
That last comment about the diminishing of nuclear power to to generating electricity is ridiculous in my view. No one but the some of those in the developed world have even made comments they're going to change nuclear policies. China and other Asian countries, while performing the obligatory inspections to ensure safe nuclear power, has already said they're going to continue their focus and strategy of using nuclear as a big part of its energy production. Nothing has changed that.
Coal is more likely to be an increasing part of the generation of electricity because of the irrelevance of wind and solar power, which is still a nonsensical and irrelevant energy source, which are extremely limited in being effective and consistent. The price for solar also remains astronomical and countries can't afford to subsidize the sector any longer and are pulling support out from underneath it.
Other coal companies which will strongly benefit from rising prices and increasing demand are Peabody Energy (NYSE:BTU), Arch Coal (NYSE:ACI) and Cloud Peak Energy (NYSE:CLD).
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