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NEW YORK (AP) — The tickers of coal companies occupied the top of the Standard and Poor's 500 index Tuesday, with investors seeing a potential for miners to capitalize on cooler temperatures and higher natural gas prices.
Natural gas prices on the futures markets have risen nearly 80 percent since hitting a 10-year low of $1.91 per 1,000 cubic feet on April 19, ending Monday at $3.403 per 1,000 cubic feet.
Natural gas prices that range from $3 to $4 or more per 1,000 cubic feet would make coal more competitive as a fuel for utilities to use in making electricity, Sterne, Agee & Leach analyst Michael S. Dudas said.
In addition, coal companies have made cuts in production that are helping shrink inventory levels, which could benefit prices, he said.
The coal industry has been battered this year by anemic demand for thermal coal, used to generate electricity, and for metallurgical coal, which is used in steel manufacturing.
A mild winter cut demand from utilities for coal to power generators. Many switched to natural gas, which was cheaper as an energy boom produced a glut of supply. Record summer heat reduced some of the inventory because utilities burned more gas than expected to meet demand for electricity to power air conditioning.
The slower global economy has cut demand for steel. Global inventories are plentiful which means steel manufacturers need less coal for production.
Mining companies probably will have to make additional cuts in coal production, Dudas said. He believes most of the cuts have been completed for thermal coal but the metallurgical coal market still is pressured by plentiful supplies.
In afternoon trading, shares of Peabody Energy (NYSE: BTU ) rose 88 cents, or 3.9 percent, to $23.52; Arch Coal (NYSE: ACI ) increased 18 cents, or 2.7 percent, to $6.82; Alpha Natural Resources (NYSE: ANR ) gained 39 cents, or 5.7 percent, to $7.17; Consol Energy (NYSE: CNX ) gained $1.08, or 3.4 percent, to $32.81 and Cliffs Natural Resources (NYSE: CLF ) was up $1.30, or 3.2 percent, to $41.88.