I was looking at the coal spot prices this morning and they are up again. Appalachian coal is now well over $100/ton and Illinois coal is up over $60/ton. These are all time prices and they don't seem to have even peaked.
Given this environment, it is hard to see how any coal company can fail to make big money. I am, of course, still quite bullish. I am thinking that we are going somewhere near $70 for ARLP.
Everything looks good for ARLP this week: Its barely up this year vs. big coals like ACI and FDG up about 100% this year. Several states building soft coal to jet fuel converters. Last week Cramer said coal earnings won't dissapoint, we will look back at coal and think it was still cheap now. And McCain offering $300 million for the best electric car battery- Over 50% of the electric charging that battery comes from coal, so basically McCain is pushing to replace petro cars with coal powered cars. Offshore drilling won't produce oil for 10+ years... Europe recently said it will convert its oil powered electric plants to coal...
Everyone talks a good story against coal. The politicians propose "cap and trade", the euros sign the Kyoto accords, etc. Yet, when the sh?t hits the fan, economics always wins out. On a BTU basis coal is way cheaper then any other source out there (except maybe Nuclear, but that is a long way off).
At $13/mm BTU for NG, we are looking at the following costs:
Appalachian coal at 13,800 BTU/lb and $100/ton is 277,000 BTU/$
Power river basin coal at 8800 BTU/lb and $15/ton is 1,200,000 BTU/$
Natural gas $13 per MM scf is 77,000 BTU/$
Oil at $130/bbl is 44,000 BTU/$.
So, right now power river basic coal is about 1/30th the cost of oil on a BTU basis. See why coal to liquid makes so much sense (and why SSL has gone up so much the last year). I would think, if the US had any smarts, we would be building CTL plants in Wyoming right now.