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XMFSinchiruna (26.50)

Dig Deep for Diligence on U.S. Coal



February 02, 2011 – Comments (2) | RELATED TICKERS: ANRZQ , PCXCQ.DL , BTU

Whether you own coal or not, you have something important to learn by tracking this market. Better yet, if you don't have time to do it yourself, you have your fellow Fools on the case.

If you feel like posting a brief comment to the article just to show the world that I'm not just whistling dixie about the vibrancy of this community, I'd love to know your thoughts on thermal coal, met coal, or whatever. :)


Each investor charts his or her own road to success, but the best gurus I've known share one defining trait. Invariably, they approach each individual market with boundless inquisitiveness. Information and insight become the currency they most crave, while realized gains are more like gravy on that savory academic feast.


In a nutshell, Patriot fell prey in 2010 to ramped-up regulatory scrutiny that found added zeal in the wake of Massey's tragic mine blast. More westerly focused miner Arch Coal (NYSE: ACI), by contrast, nearly quadrupled its full-year 2010 profit from prior-year levels. In fact, the nimble investor may have found greener pastures in 2010 by taking a westward migration to coal. As Patriot reengineered mines to maintain compliance, causing production volumes to dip and costs to rise, Patriot's underwater sales contracts leftover from its 2008 acquisition of Magnum Coal left their mark on the earnings statement.


Railroad operator Norfolk Southern (NYSE: NSC) referenced weather-related service disruptions in its quarterly report, so Fools are reminded that fourth-quarter sales volumes for the likes of Massey Energy and Patriot Coal were less robust than they could have been. Arch Coal appeared less than thrilled, characterizing eastern rail service as "poor." With export demand for both met coal and high-quality thermal coal gaining serious traction, the inquisitive Fool will wonder whether those weather-related issues are combining with the sort of rail capacity constraints that the coal industry endured prior to the global financial crisis. Last I checked, it seems the snow has never stopped falling, so investors may wish to build a margin of error into their first-quarter sales projections for the Appalachian operators. Inter-industry insight, you see, travels in two directions.


Corroborating the outlook that Peabody Energy (NYSE: BTU) terms a global supercycle, Patriot Coal avows: "The structural shortage in metallurgical coal is expected to continue for at least the next few years, as a result of limited supply in established coal basins, coupled with long lead-times to bring on significant production in new basins." For coal investors focusing their related investments upon such bullish forecasts for met coal, unanimous agreement among all the world's producers can itself yield a golden nugget of valuable market insight.

2 Comments – Post Your Own

#1) On February 23, 2011 at 10:22 PM, TruffelPig (< 20) wrote:

There is a small CAP (CLD) reporting tomorrow I believe. This could be a good one. The produce emission low coal and do some environmental stuff (probably so that we all feel better). I have not gone into details though but it seemed to look interesting for a play on coal.

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#2) On February 23, 2011 at 10:27 PM, hnhm644 (< 20) wrote:

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