Coal Prices Cause Worry for Investors

Yahoo Finance has reported that the coal industry is suffering tremendously. SNL Financial has reported through data collected that the industry is deteriorating much quicker than experts had anticipated. The second quarter performance has been reported by SNL Financial to be “horrific”.

In the last few weeks, the coal mining sector has had many companies report dismal news. According to the Yahoo Finance article “Bankruptcies Starting To Pile Up In Coal Industry”, Walter Energy announced bankruptcy, Alpha Natural Resources was delisted from the New York Stock Exchange because its share price was “abnormally low”, and Arch Coal pulled off a one-for-ten reverse stock split in an effort to keep from being delisted as well.

Coal prices are down 70 percent from four years ago.

With the U.S. is shifting towards natural gas in the electric power sector and the Obama administration trying to reduce greenhouse gas emissions, the U.S. is seeing a weaker demand for coal which is reportedly leading to mine closures.

Yahoo Finance suggests that there are other regulations that are piling on the coal industry and deepening the crisis. “The Interior Department proposed a new rule this month that would require surface mines to maintain a buffer zone from their operations and streams nearby. They would also be required to monitor water quality before, during, and after mining. Reactions were predictable – environmentalists said the rules didn’t go far enough and coal companies said the rules were unnecessary and draconian.”

The rising costs of production coupled with new regulations is being undercut by a weakened demand for coal. The international markets have been saturated and the oversupply is sinking prices. China has reportedly posted a 31 percent decline in imported thermal coal, this could be due to the slowing of China’s economic growth, because it is implementing air pollution measures, or because it is supporting domestic measures.

The coal industry could be facing a steep decline, according to SNL Financial, “The combined market capitalization of the entire publicly-listed coal industry in the United States was less than $9.30 billion. And around 40 percent of that total can be attributed to just one company, Consol Energy. The coal sector’s market cap is more than 80 percent down from April 2011.”

With dim predictions, the market is looking at a tumultuous future.

The foregoing information, which is all publicly available, is being provided by The White Law Group.  The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit www.whitesecuritieslaw.com.