Coal Stocks Fall On Economic, Political Concerns

29th Jun 2010 16:19

By David Benoit Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--As the stock market tumbled Tuesday, the coal industry was at the front of the declines on renewed concerns about world-wide demand and political pressure from all corners of the globe. Concerns from Europe and China sparked more fears of another economic drop while more potential safety regulation in the U.S. as well as political concerns from China and Australia also pressured coal stocks. Peabody Energy Corp. (BTU) fell 5.4% to $40.20, while Arch Coal Inc. (ACI) dropped 6.3% to $20.25. Massey Energy Co. (MEE) slid 5% to $28.70, Patriot Coal Corp. (PCX) lost 5.1% to $12.31 and Alpha Natural Resources Inc. (ANR) fell 5.3% to $34.51. James River Coal Co. (JRCC) fell 6.2% to $16.91 and Consol Energy Inc. (CNX) fell 3.6% to $34.98. Shares of global giants BHP Billiton Ltd. (BHP, BHP.AU) and Rio Tinto PLC (RTP, RIO.LN) were both down 4.4%. The broader market's fall was being pinned on concerns about China and Europe, where weak economies could reduce the demand for coal used in both steelmaking and energy production. When fears about Europe and China abound, the market worries that a so-called a double-dip recession will hit the U.S., which Raymond James analyst James Rollyson said would be particularly bad for coal. "If it happens, it's probably the last sector you want to be invested in," Rollyson said. "But if it's not the case, these stocks have gotten down to historically low levels." Meanwhile, in the U.S., lawmakers moved by the explosion at Massey's Upper Big Branch mine in West Virginia were close to introducing legislation giving federal regulators more authority over mines with safety problems. The stricter rules, which could be introduced as soon as Tuesday, could include increased fines for violations and protections for whistle-blowers. And this week the coal industry lost one of its biggest backers in the Senate, as West Virginia's Robert Byrd died early Monday. Still, the legislation has largely been expected since the April accident in West Virginia. FBR analysts also listed in a note a series of global concerns including reports that China was telling its coal companies to keep coal prices flat there and that U.K. steam coal imports had fallen 50% in April. One potential positive, however, were reports that the new Australian prime minister could be willing to reduce the high tax that her ousted predecessor had been proposing on coal profits. The super-profits tax has been a big concern for world-wide coal. Also Tuesday, a mine explosion at Canadian miner Teck Resources Ltd. (TCK, TCK.A.T) was likely to reduce, at least temporarily, the supply of metallurgical coal, or coal used in steel production, even further after incidents at other mines. Teck Resources' stock was down 6.8% to $30.32, but the reduction in supply will likely be a positive for competitors. All in all, Raymond James' Rollyson said a conference last week in New York reinforced his positive long-term outlook because the industry itself was more bullish than Wall Street analysts, though at this point it remains unclear which way the ball will fall. "All the guys that work in the industry were generally positive on the long term, and that's the difference between what the short term focus guys in Wall Street are looking at," Rollyson said. "Somebody's wrong and it's hard to tell right now who is." -By David Benoit, Dow Jones Newswires; 212-416-2458; [email protected] (END) Dow Jones Newswires June 29, 2010 11:19 ET (15:19 GMT)