What happened
Shares of Peabody Energy (BTU 0.98%) jumped as much as 14% in trading on Wednesday as coal prices continued to spike. Shares of the energy stock closed the day up 6.4% and are up 38.7% so far this month.
So what
Spot prices for coal have jumped 1.8% as I'm writing this today and are now up 98% for the year. The increase in commodity prices could help push Peabody's operations toward profitability in 2021.
Image source: Getty Images.
Increasing demand for coal as the global economy recovers is happening just as output from Indonesia and China decline. It's not entirely clear how long the increase in prices will last, but Peabody Energy could see a windfall from its operations in 2021.
Now what
Should you be buying coal stocks based on the price increase in coal? I think the clear answer is no.
Coal demand is in structural decline around the world as renewable energy beats it on cost and countries try to reduce emissions. The spike in spot coal prices could be very short-lived until Asian mines increase output and we get through a hot summer season -- with its peaking electricity demand for air-conditioning -- in North America. Coal is hot today, but that's not likely to last.
