NEW YORK _ The future of coal is getting darker.
Economic forces, pollution concerns and competition from cleaner fuels are slowly nudging nations around the globe away from the fuel that made the industrial revolution possible.
The U.S. will burn 943 million tons of coal this year, only about as much as it did in 1993. Now it's on the verge of adopting pollution rules that may all but prohibit the construction of new coal plants. And China, which burns 4 billion tons of coal a year _ as much as the rest of the world combined _ is taking steps to slow the staggering growth of its coal consumption and may even be approaching a peak.
Below is a select group of North American coal stocks
Market Vectors-Coal ETF (
NYSE: KOL,
Stock Forum). The coal exchange traded fund is a basket of coal companies that traded at $20.54 this week, leaving a market cap of $182.8 million, based on 8.9 million shares outstanding. The 52-week range is $26.38 and $17.16.
Teck Resources Ltd. in (
TSX: T.TCK.B,
Stock Forum) (
TSX: T.TCK.A,
Stock Forum) trades at $29.44, leaving the Vancouver-based mining giant with a market cap of $16/7 billion, based on 566.8 million shares outstanding. The 52-week range is $38.13 and $21.11.
Arch Coal Inc. (
NYSE: ACI,
Stock Forum) trades at $5, leaving the company with a market cap of $1.06 billion, based on 212.3 million shares outstanding. The 52-week range is $8.86 and $3.47.
Peabody Energy Corp. (
NYSE: BTU,
Stock Forum), trades at $18.88, leaving the company with a market cap of $5.1 billion, based on 269.8 million shares outstanding. The 52-week range is $29.84 and $14.34.
Consol Energy Inc. (
NYSE: CNX,
Stock Forum) trades at $35.56, leaving the company with a market cap of $8.1 billion, based on 228.8 million shares outstanding. The 52-week range is $37.39 and $26.25.
Walter Energy Inc. (
NYSE: WLT,
Stock Forum) trades at $15.03, leaving the company with a market cap of $940.5 million, based on 62.6 million shares outstanding. The 52-week range is $41.05 and $10.39.
Michael Parker, a commodities analyst at Bernstein Research, calls the shift in China ``the beginning of the end of coal.'' While global coal use is almost certain to grow over the next few years _ and remain an important fuel for decades after that _ coal may soon begin a long slow decline.
Coal has been the dominant fuel for power generation for a century because it is cheap, plentiful, and easy to ship and store. But it emits a host of pollution-forming gases and soot particles, and double the greenhouse gas emissions of its closest fossil fuel competitor, natural gas. Now utilities are relying more on natural gas to generate electricity as discoveries around the world boost the fuel's supplies.
The big, expanding economies of China and India are building more nuclear and hydro-electric power plants. Renewable energy sources such as wind and solar, while still a small fraction of the global energy mix, are growing fast as they get cheaper. And a greater emphasis on efficiency is tempering global growth in electricity demand.
In the U.S., coal production is on track to fall to a 20-year low of just over 1 billion tons this year. In the first half of the year, 151 U.S. coal mines that employed 2,658 workers were idled, according to a study conducted by SNL Energy, an energy-market data and analysis firm.
Last month the U.S. government held an auction for mining rights to a prime, coal-rich tract of land in Wyoming and didn't attract a single bid.
Later this week, the Obama Administration is expected to announce a rule that would cap the amount of carbon dioxide that new power plants are allowed to emit. The new limits appear to be impossible for coal plants to meet without carbon-trapping technology that analysts say would be prohibitively expensive _ if it were even available commercially yet.
The coal industry and energy forecasters have long known that clean-air rules and competition from natural gas would make the U.S. a tough market for coal. But they predicted that rising coal demand in Asia, and particularly China, would more than make up for the slowing U.S. demand and power strong growth for coal companies for years to come.
Now even that last great hope for coal may be fading. In a report published earlier this month Citibank analysts suggested that ``one of the most unassailable assumptions in global energy markets'' _ that coal demand would continue to rise in China for the foreseeable future _ may be flawed. Bernstein Research reached similar conclusions in a report published in June.
Both reports predict coal demand in China will peak before 2020. Bernstein researchers predict Chinese demand will top out at 4.3 billion tons in 2015 and begin to fall by 2016. China is far and away the most important country for the world's coal industry: Between 2007 and 2012, growth in Chinese coal consumption accounted for all of total global growth, according to Bernstein. Without China, world demand fell 1.2 per cent over the period.
But Chinese economic growth, which averaged 10 per cent for the 10 years ended in 2012, is expected to slow to 5 per cent to 8 per cent over the next decade. At the same time, the Chinese economy is expected to require less energy to grow, and other forms of generation such as nuclear, hydro-electric and renewables are elbowing into coal's turf. And government officials are responding to public outcry over China's notoriously unhealthy air.
Last week Chinese authorities announced they would ban new coal fired power plants from three important industrial regions around Beijing, Shanghai and Guangzhou.
``All industrialized societies eventually decide that, while cheap sneakers are nice, the environmental damage caused by uncontrolled industrial activity is no longer tolerable,'' Bernstein analysts wrote.
If these new predictions come to pass, it would spell more lean times for coal miners in major coal exporting countries such as the U.S., Australia and Indonesia. At the same time, the shift would be give a major boost to efforts to curb emissions of carbon dioxide, a greenhouse gas, and pollutants such as mercury and sulfur dioxide.
Outfitting coal plants with scrubbers and other pollution-trapping equipment makes coal-fired power much more
expensive and makes other technologies, including renewable power,comparably less expensive.
``The economics, finally, are at our backs,'' says Bruce Nilles, who directs the Sierra Club's Beyond Coal campaign.
To the coal industry, this is simply a lull that plagues commodity markets every few years. A global oversupply of coal that developed last year pushed prices dramatically lower and forced companies to cut back. That glut is now being burned through, the industry says.
Even if economic growth in places like China and India isn't quite what it was over the last decade, it will still remain strong enough to keep global demand rising for many years, some analysts and industry executives say.
``Coal has several decades of long-term growth ahead of it,'' says Vic Svec, investor relations chief at Peabody Energy.
Peabody, which is the world's largest investor-owned coal producer, predicts that between 2012 and 2017 the world will need an additional 1.3 billion tons of coal per year _ one-third more than the entire U.S. consumes in a year.
``Maybe today (Asia) doesn't need our coal because there is over-supply and lower prices, but that will change,'' says Michael Dudas, a coal company analyst at Stern Agee.
But a growing number of experts are beginning to reconsider the long-held assumption that the developing world will consume ever more coal just the way the developed world once did.
``The era of wanton Chinese coal demand growth is approaching an end,'' wrote Citibank analyst Anthony Yuen