Coal
Earlier this week (on July 2, 3008), coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement for next year dropped 13% or $27.50 to $190 a metric ton, making it the largest decline in more than 3 years.
With the power outages in South Africa, Europe’s principal source of power coal constricting supply in the face of insatiable demand from Asia, the coal price had risen 36% since June 2, 2008. Amid speculation that the rally of the past four weeks was overdone, coal stocks worldwide faced a massive liquidation.
For example, in Canada, shares of Fording Coal, the Canada’s largest producer, closed down $15.60 or 16.2% at $81.70 on July 2, 2008.
Furthermore, Western Canadian Coal fell 10.7% or 96 cents to $8, and Grande Cache Coal declined 15.9% or $1.36 to $7.21. (Source: CBC Money )
Erstwhile, in the United States Arch Coal closed down 17.2 percent at $62.21, Consol dropped 14.6 percent to $95.57, Massey fell 18.9 percent to $74.87 and Peabody Energy was down 9.3 percent at $77.90. (Source: Reuters )
In response to the sell-off, on July 3, 2008 Citigroup analyst John Hill puts out a research note saying:
“We see the recent 10 – 18% correction in the equities to be excessive, in response to a downtick in European spot from records. This seems profit-taking amid a deteriorating economy, and the "End of the beginning, not the beginning of the end." Coal has benefited from structural change, with historically isolated/fragmented regional markets linking up and "going global." Mine shortfalls, transport constraints, thin stockpiles, and voracious BRIC-country demand suggest that this process has several years yet to run.”
My exposure to coal comes via an investment in Sprott Resource Corp. (SCP: TSX), which in turn owns a 37.5% interest in a Vancouver based company called PBS Coals Corporation (PBS Canada). PBS Canada owns a 59.6% indirect interest in PBS Coals Inc. (PBS). PBS, together with its affiliates, produces approximately 3 million tons per year of primarily high quality, low volatility metallurgical coal in Somerset Country, Pennsylvania. PBS and its affiliates have operated open-pit and underground coal mines for more than 20 years, and have long standing relationships with many of the most significant global consumers of metallurgical coal. Production is sourced from 9 operating underground and open-pit mines and treated at its wholly owned Shade Creek processing facility.
According to BP's Statistical Review of World Energy 2008, in 2007, world coal consumption grew by 4.5%, much higher than the 10 year average. Coal was the world's fastest growing fuel for the fifth consecutive year.
World's Proved Reserves at year end 2007
 
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Last update : 03-07-2008 20:02
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