While the domestic coal industry continues to adjust to epic market disruptions within its customer base, a clear vision of the near-term outlook has remained the hottest commodity of all. This Fool continues to scan the horizon with some high-powered binoculars.
Carbons in context
Earlier in the year, I had to send my own canary into the coal mines just to glimpse the state of the sector. After the second quarter, a major chunk of uncertainty was wiped from our Foolish lenses as the miners found consensus in the view that market conditions had bottomed during the period. Massey Energy
As third-quarter results from major coal miners continue to cross the wires, this Fool's binoculars are beginning to achieve greater focus. Peabody Energy
A bullish blurry spot
Into that crystallizing vision of the near-term domestic outlook, Appalachian miner Patriot Coal
Patriot CEO Richard Whiting declared: "We believe the (coal) markets are at an inflection point poised to see a substantial improvement in demand in 2010 in both metallurgical and thermal coal ... I am now more optimistic that the timeline is within our near-term sight." Whiting's outlook appears to be based largely upon the supply side of the equation, focusing upon anticipated impacts of increased regulatory scrutiny of Appalachian mining operations. Fools may recall my prior discussions of the changing political environment regarding surface mining permits.
Whiting also suggested that rising natural gas prices will end much of the fuel-switching that domestic utilities have resorted to this year, adding that this alone could account for 20 million to 40 million tons of resurgent coal demand in 2010.
Meanwhile, CONSOL Energy
Whether Fools focus in on Patriot Coal's optimism or CONSOL Energy's caution, it's clear that natural gas prices and Appalachian permitting remain key factors at play that coal investors must continue to track closely. What's your focus when building your outlook for the sector? Please share your thoughts in the comments section below.