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What: Shares of Alpha Natural Resources, (NYSE:ANR) plunged 10% today, failing to escape a wild sell-off in the energy sector.
So what: Oil dropped another 4.3% today to end at just over $63 per barrel, sparking a sell-off in almost every energy based stock. For Alpha Natural Resources, part of the worry has to be that rigs currently drilling for oil will be moved to natural gas, putting price pressure on the commodity coal competes with most.
Alpha Natural did announce today that 8 of 11 mines it warned could be idled will remain operational. For now, that means that the company will keep producing revenue but long-term it's not a good sign that thermal coal demand is down and these mines are only barely economically viable.
Now what: Long-term, coal has become a declining part of energy production in the U.S. and even Chinese demand is expected to peak in the next two years. Plant closings are becoming common and therefore mines that supply coal are being shuttered as well. Alpha Natural may seem cheep near a 52-week low but it's still losing money and this is an energy stock I'd stay far away from in today's market.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.