Coal stocks aren’t turning into diamonds anytime soon it looks like. Arch Coal (ACI) is down nearly 11%. Alpha Natural Resources (ANR) is down about 10%. Patriot Coal (PCX) is down almost 12%. Why are these coal stocks getting crushed? Well, Patriot Coal was the culprit when they said there was a weaker demand for metallurgical coal:
Already hit by a mild winter that’s dampened demand for thermal coal used for power plants and electric heat, Wall Street is now bidding down shares of coal firms based on softness in the market for metallurgical coal.
Patriot Coal PCX -11.81% triggered the sell-off by revealing plans to curtail higher cost production at its Rocklick and Wells operations.
“Metallurgical coal demand has trended steadily downward in recent weeks, most notably in the export market,” said Patriot CEO Richard Whiting. “These production cuts, in conjunction with other cost-reduction measures … are aimed at lowering our mining costs, aligning production with identified sales, and preserving high-quality reserves for a stronger market.” (MarketWatch)
CNBC’s Fast Money trader Joe Terranova tweeted that he wouldn’t touch the coal stocks:
However, there was this report by Five Star Equities earlier in the week that said demand for coal will remain high do to growth in China and India – and other emerging markets:
Coal demand has remained strong in recent quarters as massive capacity addition plans in both China and India drive the industry. The latest findings from the International Energy Agency find that coal demand in China alone will rise by 606 million tons of coal equivalent (mtce) to 3,123 mtce by 2016.
Who do you believe? Are you buying the coal related stocks as they get crushed today?