In another blow to the coal industry, the Environmental Protection
Agency, recently announced rules demanding that power plants should
reduce carbon emissions by 30% from 2005 levels by 2030. The likely
effect of enacting these rules will be to damage prospects for U.S. coal
miners, and with China increasingly concerned with reducing its
dependence on coal, their (coal miners') export prospects could also be
adversely affected in the future. With that said, it's time to look at
which companies have upside and downside opportunities if the "war on
coal" continues.
False dawn for coal mining?
You don't need to be Einstein to understand the importance of relativity, and the fact that Joy Global's management recently predicted U.S. coal production would be incrementally positive this year is obviously a short-term positive.
However, it's far too early to conclude that coal has passed an inflexion point on the way to another multi-year expansion. For example, Caterpillar recently lowered its forecast for full-year resource industry sales from a negative 10% to a negative 20%. Caterpillar's stock price is doing well this year, but it's more about the construction sector exceeding expectations and successful implementation of manufacturing cost reductions.
In addition, A quick look at U.S. coal production over the last 30 years demonstrates the demise of coal in recent years. Moreover, Fools should note that the extent of the period of decline since the last recession indicates that this isn't just an adjustment to a slowdown in global growth.
False dawn for coal mining?
You don't need to be Einstein to understand the importance of relativity, and the fact that Joy Global's management recently predicted U.S. coal production would be incrementally positive this year is obviously a short-term positive.
However, it's far too early to conclude that coal has passed an inflexion point on the way to another multi-year expansion. For example, Caterpillar recently lowered its forecast for full-year resource industry sales from a negative 10% to a negative 20%. Caterpillar's stock price is doing well this year, but it's more about the construction sector exceeding expectations and successful implementation of manufacturing cost reductions.
In addition, A quick look at U.S. coal production over the last 30 years demonstrates the demise of coal in recent years. Moreover, Fools should note that the extent of the period of decline since the last recession indicates that this isn't just an adjustment to a slowdown in global growth.
US Coal Production data by YCharts.
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