Just listened to ACI's presentation. The slides are posted on Arch's website. Excellent update. I continue to be convinced that Arch is very well positioned for what I believe will be a big turn-around in the coal market next year.
PCI has bottomed (arch is profitable at current price) and they are seeing beginnings of a demand uptick out of China. PRB is really looking good. They had a chart showing that the energy equivalent price for PRB would be $20 when Natgas is selling for $4/mmcf. They are not predicting a $20 PRB price but rather that current market dynamics strongly support a margin improvement from here.
A total of 40GW of coal plants scheduled to close by 2015. The supply situation has already pretty much adjusted to this reality. What hit me though is that the remaining 280 GW of coal fired plants are operating at only 57% for 2012 (due to NG). Arch believes this number will go back up to the historic average of 72% possibly as soon as next year. When it does, it will bring back a total of 100 Mtons of coal demand. In answering an audience question, he stated that the US presently has only 10 GW of total generation capacity from all energy sources (coal, NG, Nuclear) over the next several years. He basically felt that the US can easily run into an overall electricity shortage because of this. Calmed my fears that potentially more coal plants will be closed that those already slated.
Done rambling. Look at the presentation. Pretty bullish in my view. Only risk I can see is if the US economy collapses. If that happens, we all have bigger problems than which stocks we may be invested in.
Cross referencing Slide #13 on CAPP cash cost/ton of $69.50 and EIA SPOT today (generally lower than contract for 2012) at $68.15, the gap is almost closed!!! Of course there are other factors but remember when CAPP SPOT was $56 not too long ago?
Again, this is for SPOT, not year delivery contracted. Good news.