Please ensure Javascript is enabled for purposes of website accessibility

Why Coal Stocks Crashed Today

By Travis Hoium - Jun 24, 2013 at 4:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Coal stocks are taking it on the chin today after being hit by two body blows over the weekend. Alpha Natural Resources (NYSE: ANR), Arch Coal (NYSE: ACI), and Peabody Energy (BTU) all fell 10% or more at some point today.

So what: The first hit was due to reports over the weekend that President Obama will include existing power plants in new emissions regulations due out this week. The president will make a speech on climate change tomorrow at Georgetown University and coal plants are a clear target, which will reduce demand for coal.  

The second blow was a reduction in China's growth estimates by Goldman Sachs earlier today. That helped drive Chinese stocks down 5.3% today, and lower demand means less growth, or even contraction, in coal demand.

Now what: Demand for coal in the U.S. has been declining for years and further regulation could be a huge blow to coal miners. The only savior for miners has been hope that China will increase demand and therefore export growth would follow. But if China's economy is slowing, then it pulls the rug out from under that thesis, putting more pressure on miners who are barely covering their costs right now. I would stay far away from coal stocks because the long-term trends simply aren't in the industry's favor.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Peabody Energy Corporation Stock Quote
Peabody Energy Corporation
BTU

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.