Why did coal gain market share at the end of 2Q 2014?
Why natural gas may win the battle against coal in the long run (Part 4 of 5)
Coal gained market share in June
Natural gas prices for electric power generation dropped to $4.98 per million metric British thermal units (or MMBtu) in June. Moreover, natural gas and renewable energy capacities went up during the first half of 2014.
In this kind of scenario, coal should have lost its market share in electric power generation in June. On the contrary, coal’s share of electric power generation went up to 39% in June from 37% in May 2014.
During the same period, natural gas retained its 27% share while renewable energy sources and nuclear energy lost share, paving the way for higher coal share. Electricity generation in June went up to 357 million megawatt hours from 324 million megawatt hours in May to meet the summer cooling demand.
1H 2014
Coal’s market share in electric power generation went up to 42% in January and 44% in February as natural gas prices spiked to over $7 per MMBtu at the start of the year from $5.1 in December 2013. This spike was due to the higher demand arising out of an unusually severe winter.
Electricity generation in January 2014 came in at 377 million megawatt hours. This was 8.2% higher than in January 2013. Coal lost market share in March (at 41%) and April (at 37%) as natural gas prices moderated and generation from renewable energy sources went up.
Coal producers (XME) like Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD) all reported increased steam coal shipment in 2Q 2014 over the same period last year.
Meanwhile, Alpha Natural Resources’ (ANR) steam coal shipments came in lower in 2Q 2014. This result was primarily due to the underperformance of the rail network in the Powder River Basin. To learn more about these rail connectivity issues, read the Market Realist article Powder River Basin rail connectivity hampers Cloud Peak Energy .
The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies and has invested in major coal producers.
While June brought good news for coal producers, the future for steam coal looks bleak. Read on to the next part of this series to see why.
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