What is the advantage coal stocks have, looking ahead?
Coal companies should see more favorable margins than some of the E&P [exploration and production] players in the energy sector. While crude prices have been extremely volatile of late, the downward movement in prices since mid-July has spread to coal prices. Additionally, investors have worried about shrinking margins as futures market prices for coal from certain basins have pulled back somewhat inline with crude’s pullback. However, these futures markets are cash markets and don’t correlate with the prices for actual deliverable coal prices that are currently being contracted. As global supply and demand fundamentals have not changed, coal producers should maintain their outlook and their margins should not be adversely affected. I think that the main advantage coal companies have relative to other energy sector participants is that the global story supporting strong coal prices has not deteriorated. Additionally, coal companies don’t feel the effects of higher prices immediately as
