Sep. 29, 2014, 5:53 PM
- Investors should generally stay away from coal stocks such as Arch Coal (NYSE:ACI), Alpha Natural Resources (NYSE:ANR) and Peabody Energy (NYSE:BTU) unless they are very long-term investors, J.P. Morgan’s John Bridges writes.
- Given growing supplies of natural gas and if there's no chilly winter, gas prices could weaken further and create a better buying opportunity for the coal space, the analyst says; coal bulls seem to have been seeing tax loss selling as a better opportunity than hanging on, and deep value buyers are failing to see positive catalysts.
- Bridges sees ACI and ANR as the “terrible twos," as ACI has $4.2B of net debt carried by $470M of market cap while ANR is only half as leveraged; both companies have balance sheet liquidity and have pushed out debt maturities to give themselves time for the coal market to recover, but there's no catalyst on the horizon to provide a boost.
- ETF: KOL
Sep. 29, 2014, 10:45 AM
- In an update on planned mine idlings provided after Friday's close, Alpha Natural Resources (ANR -2.5%) said it will idle three mines immediately, including one not previously included in its July WARN notices, which together produced 1.52M tons in H1 2014.
- Of the remaining nine operations affected by the WARN notices, ANR said one will continue to operate normally and the other eight were issued extensions to the WARN notice and will remain under review; five of the mines now have a revised idling date of Nov. 26.
- Brean Capital says it is encouraged that ANR is moving diligently to reduce the cost profile in its CAPP mines, but remains cautious on near-term improvements in the met coal market to provide any additional uplift.
Sep. 25, 2014, 3:40 PM
- Coal stocks take a pounding as the quarterly benchmark price for metallurgical coal drops to a six-year low, according to Doyle Trading, amid a global oversupply and a slowdown in Chinese demand (KOL -2%).
- Australian coal producers and Japanese steel mills agreed to a Q4 price of $119/metric ton, down $1 Q/Q, dashing hopes for a rebound in the steelmaking coal which has slumped 64% since reaching $330 in 2011.
- CLF -9.2%, WLB -6.6%, ANR -4.9%, ARLP -3.7%, WLT -3.5%, BTU -3%, ACI -2.9%, CLD -2%, YZC -1.9%, CNX -1.2%.
Sep. 22, 2014, 3:47 PM
- Cliffs Natural Resources (CLF -8.5%) plunges to 52-week lows as worries grow over the potential for an economic slowdown in China.
- Chinese steel production grew a mere 1% Y/Y in August, well off 2.6% YTD and 9%-10% growth recognized over the past few years; Wells Fargo's Sam Dubinsky views the data as negative for iron ore pricing, and thinks it means trouble for CLF, whose results could disappoint as the value of assets likely will diminish as pricing continues to fall.
- Also, a Bloomberg weekend report says coal demand in China may peak as soon as this year, which could further hurt coal miners such as CLF.
- Iron ore giants are lower: BHP -3.2%, RIO -2.7%, VALE -4.8%.
- Coal producers: ANR -9.7%, WLT -9.2%, ACI -7.7%, CLD -4.6%, BTU -4.4%, WLB -2.7%.
Sep. 18, 2014, 11:26 AM
- More on Goldman Sachs' downgrade of Peabody Energy (BTU -5.3%): The firm thinks coal prices are not yet close to the bottom, and it sees metallurgical coal falling as low as $120/metric ton during Q4 - bad news for all coal miners, but especially so for BTU and Alpha Natural Resources (ANR -4.1%).
- Goldman says it is focusing on three themes into year-end 2014: Avoid met coal stocks including BTU and ANR, given their high leverage and low-to-negative free cash flow; own sum-of-the-parts winners, reiterating its Buy ratings on SunCoke (SXC +1.9%) and Consol Energy (CNX -2%); prefer stronger balance sheets including SXC and CNX over weaker ones such as BTU and ANR.
- ETF: KOL
Sep. 18, 2014, 10:21 AM| Sep. 18, 2014, 10:21 AM | 8 Comments
Sep. 4, 2014, 5:36 PM
Aug. 28, 2014, 2:25 PM
- Concerns about falling iron ore prices are sending global miners and steel companies sharply lower: CLF -5.8%, SID -5.7%, VALE -4.4%, RIO -3.9%, X -3.9%, BHP -2.5%, ANR -2.5%, MT -2.4%.
- There’s too much supply of iron ore and prices will continue to fall further, deepening a slump that has hurt profits at the biggest miners, according to the head of Austria’s largest steelmaker.
- Iron ore prices fell to their lowest level in five years today to $87.30/ton, the lowest since 2009; Voestalpine CEO Wolfgang Eder sees prices at $90-$100/ton for the rest of 2014 before settling at $80-$90 in the medium term.
Aug. 14, 2014, 6:52 PM
- Coal imports to the U.S. surged 44% Y/Y to 5.4M metric tons during the first six months of 2014, even as coal mines close throughout central Appalachia.
- The main reason is price: It costs $26/ton to ship coal from central Appalachia to power plants in Florida vs. $15/ton to get coal from a mine in Colombia.
- Appalachian miners such as Alpha Natural Resources (NYSE:ANR) say imports from Colombia have added to their troubles; Colombia produces a high quality thermal coal, it's inexpensive to mine it, and relatively inexpensive to ship it to the U.S. east coast.
- The cheaper imports benefit some utilities such as Southern Co. (NYSE:SO), which has 63 coal-fired power generating units in four states and bought 25% more imported coal than expected.
- Low prices for international shipping also have helped Colombian coal, as the Baltic Dry Index has fallen to one-tenth of its level five years ago; U.S. rail rates have mostly held firm over the same period.
- ETFs: KOL
Aug. 6, 2014, 12:58 PM
- Alpha Natural Resources (ANR +5.8%) maintains strong gains after reporting Q2 results that are less bad than expected: Quarterly losses continued to widen, but Q2's $0.56/share loss was handily better than the expected $0.75 loss, and revenues tumbled 21% Y/Y to $1.1B but they also beat expectations.
- ANR's adjusted cost of coal sales for its eastern mines - spanning the Appalachian region in Pennsylvania, West Virginia and Kentucky - fell to $62.01/ton in Q2, down 6% from $65.73 in Q1, a drop that provided a $45M tailwind, according to Brean Capital analyst Lucas Pipes.
- ANR cut its forecast range for annual shipments from the Powder River Basin by 3M tons to 34M-37M tons.
- Q2 shipments of metallurgical coal fell to 4.5M tons from 5.6M tons a year earlier, and said that while pricing for the steelmaking coal may have bottomed, it does not yet see an imminent catalyst to spur a pricing uptick in the near term.
Aug. 6, 2014, 7:01 AM
Aug. 5, 2014, 5:30 PM
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Jul. 31, 2014, 5:23 PM
- Alpha Natural Resources (NYSE:ANR) announces plans to downsize its West Virginia mining operations, citing continuing weak markets, and current and impending EPA regulations that are weighing on central Appalachian operations.
- ANR is expected to cut ~1,100 jobs at 11 West Virginia surface mines, which produced 4.2M tons of thermal and metallurgical coal through H1 of this year.
Jul. 29, 2014, 10:33 AM
- Arch Coal (ACI +3.5%) moves higher after its Q2 earnings loss came in better than expected as operating costs per ton fell 7%.
- Q2 sales fell 7% Y/Y to $713.8M, missing analyst consensus, but operating costs per ton fell to $20.55 from $21.19.
- ACI lowers its FY 2014 sales volume targets, including cutting its thermal sales volumes forecast to 124M-130M tons from 124M-132M tons to reflect the effects of transportation bottlenecks and the impact of a fall in steel production.
- Other coal names also are higher: ANR +4.3%, ARLP +2.4%, PVA +1.9%, WLB +1.9%, BTU +1.4%, RNO +0.9%, WLT +0.8%, KOL +0.4%.
Jul. 16, 2014, 2:18 PM
- Unloved Alpha Natural Resources (ANR +6.4%), Arch Coal (ACI +1.9%) and Peabody Energy (BTU +2.4%) are popping today thanks to China’s strong GDP reading and CSX’s solid earnings, but FBR analyst Mitesh Thakkar is not optimistic about the coal stocks heading into earnings.
- FBR expects most of the earnings calls to be focused on the two major challenges for coal producers - weak met coal pricing and rail service limiting steam coal volume - over and above company-specific issues.
- The firm lowers its 2014 EBITDA estimates by an average of 12% for the group, and cuts stock price targets for Cloud Peak Energy (CLD +1.2%) and Walter Energy (WLT +5.2%) by a dollar each, preferring steam coal names and/or low-cost met coal assets with solid balance sheets.
Jul. 7, 2014, 12:44 PM
- Coal stocks suffer a beating after Deutsche Bank downgrades Peabody Energy (BTU -3.3%) to Hold from Buy with a $19 price target, down from $23, to reflect lower realized coal prices (particularly metallurgical coal) and anticipated ongoing cost pressures in foreseeable future.
- Consol Energy (CNX -1.7%) is the firm’s only Buy-rated coal stock because of the company’s “fast-growing natural gas business and solid financial position.”
- Although the Deutsche team says its focus is shifting to more company specific stories from an emphasis on sector performance, other coal companies are sharply lower: ACI -4.3%, ANR -4.8%, YZC -1.3%, CLD -2.4%, WLT -3.6%, RNO -1.5%, WLB -2%.
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