Coal Stumbles As Production Ramp Kicks In

In one of the classic trades in the energy sector, lower energy prices have dissuaded some investors from backing what had emerged as an increasingly appealing fundamental story for the coal sector, sending shares of several producers sharply lower.

Shares of Alpha Natural Resources (ANR)fell 6%, Massey Energy (MEE)lost 5%, and Peabody Energy (BTU)retreated6%, part of what has been a steeper selloff for the energy-related sector as investors turn morecircumspect about the prospectsfor the sector’s continued recovery.

Coal producers have taken their hit Monday as crude prices droppedback to $66 a barrel amid widespread concerns that the U.S. economy’s recovery willcome later and prove less powerful than someeconomists had been anticipating. Sluggish consumer demand in the U.S. has proved the key to the downbeat reaction toequities Monday, but it’s also hit parts of the marketwhere consumer demand is nothing more than a derivative of the demand picture.

Traditionally, as oil prices decline, coal producers suffer on expectations that consumers like utilities can be more-selective about thefuel sourceof choice.

The pullback in crude prices has come at an inauspicious time for coal producers, who, after months of sluggish output and idled plants, had begun to restart some capacity on expectations of increasing demand.

No comments:

Post a Comment