Bold Dry Bulk Call Could Mean Strength for Coal Stocks

Coal stocks sold off with the market on Wednesday, but a bullish shipping call could translate into future gains.

Coal stocks are selling of today as oil and the benchmark indexes turn south, but yesterday’s call by a dry bulk shipping executive suggests gains could be on the way. Kong Fanhua, a senior researcher at China Ocean Shipping (Cosco), told Bloomberg the Baltic Dry Index could rally by 80% to 4000 by the end of the year. His reasoning was that local governments in China are encouraging increased output, especially of steel. If Fanhua’s forecast comes to fruition it could mean bolstered demand for metallurgical coal heading into the winter months when other supplies will be headed to power plants.

Meanwhile, Mongolia is putting its stake in a coal mine on the market, according to Reuters. The estimated $2 billion price tag means multiple companies could get their share.

As a whole, the Coal Stocks Index is down by -2% today. It is now outperforming the S&P 500 by 5.8% over the last month.

The weaker than expected PMI figure is putting stocks on sale across the board today, and the coal sector is no exception. Westmoreland Coal (WLB), Patriot Coal (PCX), and International Coal (ICO) are among the sector’s worst performers.

Peabody Energy (BTU), Consol (CNX), and Yanzhou Coal (YZC), the industry’s largest players, are all slipping by more than -1%.

Evergreen Energy (EEE), formerly one of the week’s worst performers, is the lone winner today, up by more than 2%. The stock is still -63% from its 52-week high, among the industry’s worst.

As of this writing, the Coal Stocks Index is one of the top-50 performing tickerspy Indexes over the last month, up by 7.2%.

Tags: BTU, CNX, EEE, ICO, PCX, WLB, YZC