While the Coal Industry has taken a beating in recent months regarding global economic worries and difficulty competing with low natural gas prices, most analysts argue that the coal market is set to explode. Coal demand is projected to increase significantly over the next 25 years due to the growth in industry and infrastructure in emerging markets which could benefit companies in the industry. The Paragon Report examines the outlook for companies in the coal industry and provides equity research on Cline Mining Corporation (TSX: CMK) (PINKSHEETS: CLNMF) and Walter Energy Inc. (NYSE: WLT) (TSX: WLT). Access to the full company reports can be found at:
Coal use swings up and down seasonally, and varies from week to week and region to region, depending on electricity demand to run air-conditioners or power heaters. Coal plants produce slightly less than 50 percent of U.S. electricity. Power generation accounts for more than 90 percent of U.S. coal consumption.
Sterne Agee analyst Michael Dudas said in a note to clients that recent earnings reports from coal companies show that demand has been stronger than expected. That is raising hopes that coal prices will stay firm, and deliver better profits to companies like Peabody Energy Corp. that mine and sell coal.
The analyst noted that inventories of coal are not piling up -- considered the first sign that demand is dropping. He said monthly coal inventories have fallen for five straight months and are now 13 percent lower than 2010 levels.
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The International Energy Agency said the demand outlook for coal and natural gas may have to be reassessed as it examines the negative impact of the Fukushima nuclear disaster and political turmoil in the Middle East and North Africa on oil-sector investment.
Drummond Coal Sales president George Wilbanks says Coal demand rose over the past decade as China led growth in Asia and may accelerate to push up export volumes after the potential shock of Fukushima to the previously anticipated role for nuclear power generation.
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