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3 Coal Stocks to Benefit From Natural Gas Price Rise
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Coal has been sidelined as a fuel source due to rising awareness against emissions, and increasing usage of clean fuel sources like natural gas and other clean renewable energy as energy sources. However, the sudden rise in natural gas price has created a fresh opportunity for the Zacks Coal industry stocks. Per a current release from the U.S. Energy Information Administration (“EIA”), coal production in the United States in going to increase due to higher usage of the commodity in electricity generation.
EIA predicts that electricity usage in the United States will increase 2.2% in 2021, after falling 3.9% in 2020. Also, the usage of coal in electricity generation will increase, primarily due to higher natural gas prices in the United States. Per EIA, coal’s share in U.S. electricity generation will increase to 24% and 23% in 2021 and 2022, respectively, from 20% in 2020.
Given the expected increase in coal usage, EIA predicts coal production to total 582 million short tons (MMst) in 2021, suggesting an increase of 8% or 43 MMst (8%) from the 2020 level. Coal production is further expected to increase 4% or 23 MMst in 2022 from 2021 levels.
In addition, World Steel Association predicted global steel demand to increase 5.8% year over year in 2021 to 1,874.0 million tons (Mt) and further rise 2.7% to 1,924.6 Mt in 2022. Since metallurgical coal is an essential raw material for steel production, it will create export opportunity for U.S. coal producers. Per EIA, U.S coal exports are expected to touch 77 MMst and 87.5 MMst in 2021 and 2022, indicating 11.4% and 13.6% year-over-year growth, respectively.
So, the above prediction from EIA clearly indicates a change in the demand scenario for both thermal and metallurgical coal at least in the 2021-2022 time period. Coal companies that are fighting against drop in prices and demand will have to utilize their resources to meet the sudden change in demand for coal. It is evident that coal stocks will not only benefit from an increase in natural gas prices but also from higher demand from steel industries.
The 2021 Zacks Consensus Estimate for Peabody, CONSOL Energy and Ramaco Resources indicates a year-over -year increase of 89.9%, 572.9%, and 291.7%, respectively. All the stocks have outperformed the industry in the past six months.
Price Performance
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3 Coal Stocks to Benefit From Natural Gas Price Rise
Coal has been sidelined as a fuel source due to rising awareness against emissions, and increasing usage of clean fuel sources like natural gas and other clean renewable energy as energy sources. However, the sudden rise in natural gas price has created a fresh opportunity for the Zacks Coal industry stocks. Per a current release from the U.S. Energy Information Administration (“EIA”), coal production in the United States in going to increase due to higher usage of the commodity in electricity generation.
EIA predicts that electricity usage in the United States will increase 2.2% in 2021, after falling 3.9% in 2020. Also, the usage of coal in electricity generation will increase, primarily due to higher natural gas prices in the United States. Per EIA, coal’s share in U.S. electricity generation will increase to 24% and 23% in 2021 and 2022, respectively, from 20% in 2020.
Given the expected increase in coal usage, EIA predicts coal production to total 582 million short tons (MMst) in 2021, suggesting an increase of 8% or 43 MMst (8%) from the 2020 level. Coal production is further expected to increase 4% or 23 MMst in 2022 from 2021 levels.
In addition, World Steel Association predicted global steel demand to increase 5.8% year over year in 2021 to 1,874.0 million tons (Mt) and further rise 2.7% to 1,924.6 Mt in 2022. Since metallurgical coal is an essential raw material for steel production, it will create export opportunity for U.S. coal producers. Per EIA, U.S coal exports are expected to touch 77 MMst and 87.5 MMst in 2021 and 2022, indicating 11.4% and 13.6% year-over-year growth, respectively.
So, the above prediction from EIA clearly indicates a change in the demand scenario for both thermal and metallurgical coal at least in the 2021-2022 time period. Coal companies that are fighting against drop in prices and demand will have to utilize their resources to meet the sudden change in demand for coal. It is evident that coal stocks will not only benefit from an increase in natural gas prices but also from higher demand from steel industries.
We expect coal companies like Peabody Energy (BTU - Free Report) , CONSOL Energy Inc. (CEIX - Free Report) and Ramaco Resources, Inc. (METC - Free Report) , each currently carrying a Zacks Rank #3 (Hold), to gain from the increase in coal demand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The 2021 Zacks Consensus Estimate for Peabody, CONSOL Energy and Ramaco Resources indicates a year-over -year increase of 89.9%, 572.9%, and 291.7%, respectively. All the stocks have outperformed the industry in the past six months.
Price Performance
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>