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Mitt Romney may "like coal," but utility companies love natural gas more - it’s cheaper...

Mitt Romney may "like coal," but utility companies love natural gas more - it’s cheaper and cleaner and is likely to remain so regardless of the next president, even if prices double from today’s levels. "Until the U.S. runs out of cheap natural gas, coal miners face dim prospects," Paul Ausick writes. Among coal names, only James River (JRCC +1.3%) is adding to yesterday's big gains.
Comments (14)
  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    Mr. Ausick needs to do his homework: Utilities don't "love" natural gas. They use it because it is a little bit cheaper than coal right now. If NG prices double, expect to see dispatch switching back to coal.
    5 Oct 2012, 02:21 PM Reply Like
  • wigit5
    , contributor
    Comments (3964) | Send Message
     
    Yeah the dude needs give his degree back to whatever school gave it to him...

     

    The only reason they are using NG is because it's cheaper on the whole. Come $4 NG the mass switching back will begin.
    5 Oct 2012, 02:31 PM Reply Like
  • J 457
    , contributor
    Comments (947) | Send Message
     
    It wouldn't take nearly a double in NG price. Another 10-15% rise in NG and the switching would increase. Right now its almost break-even in US market.
    5 Oct 2012, 02:32 PM Reply Like
  • daro
    , contributor
    Comments (1506) | Send Message
     
    I read in the FT that the US has sharply increased coal exports to europe. I am not sure that coal is finished even with cheap nat gas.
    5 Oct 2012, 02:26 PM Reply Like
  • J 457
    , contributor
    Comments (947) | Send Message
     
    Exports increased not only to EU but also China. Met coal is down temporarily with slowing manufacturing, but thermal will do fine as its significantly cheaper than NG in EU. ACI and ANR will be (IMO) big gainers and could double in price in a few weeks. ANR was at $9 two weeks ago, and now its back to $6.50- so you can see how quick it can rise (and fall) in price. By Nov/Dec I see both double todays price. I've been wrong before and thought they would be higher than they are today. We'll see. They are one of my few remaining long positions.
    5 Oct 2012, 02:37 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    That article also said average prices for coal were cut in half from last year. Coal isn't done, but profits for the miners will remain under pressure.
    5 Oct 2012, 03:02 PM Reply Like
  • Terry330
    , contributor
    Comments (866) | Send Message
     
    All in GOP love coal, more pollution in US equals more families buying expensive $$$ water to drink. Its no secret that Conservatives have bought up the clean water companies.
    5 Oct 2012, 02:32 PM Reply Like
  • wigit5
    , contributor
    Comments (3964) | Send Message
     
    You realize the nonsense you spew only furthers the GOP agenda right?

     

    Here let me explain it for you... Extremists in the middle east hatch a plan to fly planes into US buildings. US gets pissed off and goes beserk starting wars that probably didn't need to be killing thousands of people on both sides.

     

    Extremism is your problem Terry, you are so extremely liberal no one who isn't exactly the way you are takes you seriously.
    5 Oct 2012, 02:34 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    Hugo Chavez ? ? ?
    5 Oct 2012, 03:22 PM Reply Like
  • George Fisher
    , contributor
    Comments (1443) | Send Message
     
    Here is a quote from a recent article on SO that discusses the EIA forecast for 2013.

     

    "Southern Company has been moving away from coal as its primary fuel source. Year-to-date, natural gas is the firm's largest fuel source by generating capacity with 45%, coal 35%, nuclear 9% and alternative 6%. However, according to a report from the Energy Information Agency, EIA, the switch from coal to natural gas may have run its course industry wide. The primary driver has been cheaper costs from gas, but that advantage may dissipate. On a Btu basis, the EIA estimates for 2013 coal to cost utilities $2.38 per Mmbtu versus $3.20 for natural gas. The EIA suggests that the switch back to coal could be as fast as the recent switch to natural gas if coal maintains its cost advantage. For 2013, EIA estimates coal use could increase by 9% over 2012 while natural gas use could decline by 10%."

     

    Full SA article: http://seekingalpha.co...
    5 Oct 2012, 02:33 PM Reply Like
  • jimhagedorn
    , contributor
    Comments (13) | Send Message
     
    Utility managers are generally not stupid. Fact is that the United States has a 300 year or more supply of coal. Meanwhile, the natural gas glut (with record low prices that are not sustainable) could become a tight supply with high prices in a matter of weeks or months. Utilities are looking for a reliable supply and low cost to generate power and the only way natural gas can "out compete" coal is with historically low prices and massive excess supply, which is not sustainable and something that natural gas energy companies have an interest in undoing to drive up the price of their product to levels that generate profit.

     

    As for natural gas being "cleaner," or more environmentally friendly than coal, wait until the liberals go after natural gas companies for fracking and other practices that they believe are a grave threat to mother nature. The liberal plan is to first use low natural gas prices along with draconian anti-coal EPA regulations to beat down the coal industry and cause bankruptcy then go after drillers to dry up the supply and dramatically raise the cost of natural gas, thus making wind and solar more cost competitive. The reason this election is so important is that Romney will put a big wrench in the extremist environmental agenda, which will greatly help coal suppliers and U.S. electricity consumers.
    5 Oct 2012, 05:13 PM Reply Like
  • comcity
    , contributor
    Comments (101) | Send Message
     
    What Utilities love is MAKING MONEY. And if NG is a feed stock to profits and if its costs less to make electricity burning NG than Coal, they will burn NG. However, if the converse is true, they will burn that. If Coal costs less than NG, they will burn Coal.

     

    Note: NG is over $4, so at this point, you can bet that every utility that can burn Coal instead of NG is burning Coal. So everyone stop complaining. The end result is cheaper electricity...and cheaper electricity means a better economy because we can spend money on things we don't need instead of electricity.

     

    It has NOTHING to do with Obama or the GOP. The utility companies could care less who is office and this is still a democratic republic using capitalism for its economic system. So until Obama seizes all state run Utility companies, they will burn whatever the heck they want to. If you don't like it, move to Russia.

     

    And whoever wrote the Utility companies LOVE NG is totally clueless.
    24 Nov 2012, 05:17 PM Reply Like
  • wigit5
    , contributor
    Comments (3964) | Send Message
     
    comcity, $4 isn't the breaking point for Central App lots of utilities still burning NG > Coal. The $4.50-$5 range is the sweet spot when all utilities will start looking to coal. We should see it in the summer of 2013 if we have a normal to colder than average winter.

     

    In conjunction with NG inventory dropping that is... if producers jump back on the bandwagon of over producing then all bets off.
    26 Nov 2012, 08:59 AM Reply Like
  • comcity
    , contributor
    Comments (101) | Send Message
     
    I disagree. The problem with coming up with an absolute number is not just the grade of coal but the transport costs.

     

    First, you are forgetting about PRB coal. Most of the coal miners have exposure to PRB. In addition, different parts of Appl yield different priced coal. PRB coal is cheaper than NG at the $2 price NAT gas price. At $3.50 Nat. Gas, then some of the appl. coal becomes profitable especially if you have low transport costs and are close by. At $4.00 Nat. Gas (over half) of the Appl. coal is profitable if you are close by. At $5.00 Nat. Gas, all coal is profitable to burn instead of Nat. Gas.

     

    IMHO, the January contract for Nat Gas will be right near $4 on Jan 12 and so will HH. By then the Feb Nat Gas contract will be flirting with $4.50.

     

    Look the recovery from thermal will be slow but steady. However, if you couple Met coal recovery due to a China/Asia recovery, then you also have to add that to the mix. So for a long term investor with a 12 month horizon, I believe you will make money on coal...too many winds blowing in your favor.
    5 Dec 2012, 05:54 PM Reply Like
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