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Coal Prices

Written By Brian Hicks

Posted April 26, 2008

China coal inventories are down to a 10-day supply.

For a country burning through more coal than the U.S., the E.U. and Japan combined, that’s bad news.

With country reserves at 46 million tons, as of Thursday, it only enough supply to last maybe two weeks. Some regions, like Hebei only have enough reserve to last a week.

We’re talking about a country where 70% of its energy is generated by coal-fired power plants. Lucky for China there aren’t any big events coming up that’d attract millions and put extra strain on the country’s power grid.

Phew! That would’ve been a disaster.

Oh… wait.

According to China officials, the country “is likely to be short of 10 gigawatts of electricity generating capacity by this summer,” meaning that brown-outs and severe power shortages could be commonplace for millions watching the Summer Olympics.

But this shouldn’t come as a shock. The once abundant and reliable source of energy is in short supply and under high demand. And if you think the 50% rise in coal prices over the last five months was bad, just wait. It’ll get worse.

More than 40 ships are waiting in Australian port waiting for coal deliveries, slowed by rain. China and Vietnam banned coal exports. India demand is up. Blackouts are common in South Africa and the Indonesia island of Java.

But while it’s bad for China, it’s great news for U.S. coal companies, which are predicting that global coal demand, will outstrip supply by 25 to 35 million metric tons. Coal consumption could rise 74% by 2030. India alone is expecting for its current annual demand of 460 million metric tons to quadruple by 2031.

That’s great news for coal company earnings potential.

Digest that and we’d recommend keeping an eye on Arch Coal (ACI:NYSE), which just raised its dividend, and the Market Vectors Coal ETF (KOL), which tracks the performance of a Stowe Coal Index that includes 60 global coal production and transportation companies.

Sure, not every one is thrilled with coal. Eco-friendly friends worry that increased carbon emissions will put Earth one step closer to the grave. But we’re investors. We’re trying to show you how to reach financial stability.

Ian L. Cooper


In case you missed our other investment opportunity highlights, here’s what we covered in Wealth Daily, Gold World, Energy and Capital, and your free blogs for the week of April 21, 2008.

U.S. Economic Collapse: How to Protect Your Assets With Troubling Times Ahead
You don’t have to look very far in the news to see one shocking headline after another. The New York Sun suggests that America is on the verge of food rationing while the Washington Post reports that burglaries have surged 21% in Washington DC, the absolute heart of the United States, because of a slumping economy.

Gas Saving Tips: Easing the Pain of $4 Gas
I usually reserve my personal gas saving tips for July, when the summer driving season is in full swing. Unfortunately, we don’t have that much time. In order to keep your car fuel efficient, I’ve scrounged up ten tips you can use to squeeze every penny you can out of each gallon of gas.

High Gasoline Prices Are Here to Stay: Debunking the Myths about High Gas Prices
Big Oil controls only about 10% (at best) of the world’s remaining oil reserves, and their share of daily production is slowly eroding. They have reached the point where the oil they produce is coming out of their total reserves, because they can’t replenish it with new-found oil anymore.

Retail Gasoline Hits Record High in the US: Average of $3.51 per Gallon
The average price U.S. drivers paid for gasoline soared to a new high of $3.51 a gallon, rising 11.9 cents over the last week, according to the federal Energy Information Administration.

Subprime Resets: The Reset Catastrophe of 2009
“The folks who say the housing market will stabilize anytime soon must be smoking some really strong stuff,” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

Biotech Stocks: 276% Gain Potential and More in Biotech
We’ve waited long enough for the next biotech boom… and it’s finally here. But be warned, when these stocks start moving, there’s no stopping the run, which makes buying the undervalued, beaten down, and cheap biotech stocks crucial. “The high price [GlaxoSmithKline] it is paying for such early-stage research underlines the current hunger among large pharmaceutical companies for promising biotech assets,” mentioned Reuters after GlaxoSmithKline bought Sirtris Pharmaceuticals (SIRT.O) for $720 million in cash.

Whitney vs. Merrill, Citigroup, and Wells Fargo: My Money is on Whitney’s Call
Months after issuing a dire forecast for Citigroup, the stock now trades at $24, with a forecast of even more doom and gloom from Meredith Whitney. It was Halloween 2007 when she suggested that Citigroup was a growing train wreck since the ratio of tangible assets fell to 2.8%, the lowest in decades. She even said Citigroup may have to cut its dividend, raise cash, or sell assets to raise more than $30 billion to raise capital.

Shiller: 30% Drop Likely: Bottom? No Way
As my colleague Ian Cooper noted yesterday in The Trader’s Pit Blog, California foreclosures have literally gone off the charts. In fact, with the current pace over 517 new filings a day, serving foreclosure notices must be the only thing California deputies are doing these days. But there was more bad housing news on the day. Existing home sales came in light again according to the National Association of Realtors.

Owning Visa at $23…
Credit delinquencies are at 16 year highs. There’s no relief for consumers, especially with oil jetting to $120. And more than 2.6% of all bank loans are 30-days delinquent. Write offs are up 24%. Late payments are up 16%. Yet, COF is a buy because of a P/E ratio. Come on.

That’s all for this week… Have a great weekend.