Predictions of further coal production cuts (I, II) are coming to fruition, as Patriot Coal (PCX...


Predictions of further coal production cuts (I, II) are coming to fruition, as Patriot Coal (PCX -8.2%) says it will again reduce production of thermal coal in response to persistently weak demand. Rock-bottom prices for natural gas have been a massive headwind for coal producers as they struggle to compete with the cheaper power source.

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  • Windsun33
    , contributor
    Comments (4431) | Send Message
     
    I wonder how much longer those NG prices can last though, given that the production is dropping pretty fast. I think that gas usage would have to go up 10-15% to start propping up prices enough to bring a lot of that production back online. And coal prices probably won't go up until NG prices do.
    20 Apr 2012, 03:42 PM Reply Like
  • J 457
    , contributor
    Comments (1000) | Send Message
     
    While I agree domestic coal prices typically follow NG, the global coal market is set to push much higher. There's blood in the street in the coal sector, and while tough to stomach days like today, those smart enough to buy at this level will no doubt have enormous gains eventually. It could be a month, or six, but no doubt companies like PCX, ACI, JRCC, BTU will see much upside.

     

    Some even view this production drop as bullish on near term future prices. The inventory/stock piles are dropping, and global demand is increasing. Once we slant to the side of a coal deficit prices I think prices will rebound sharply.

     

    Of course I'm long many of the coal names and loaded up today with more calls.
    20 Apr 2012, 05:59 PM Reply Like
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