Analysts at brokerage Sterne Agee find coal stocks moving upward based on several supporting factors including US natural gas/coal pricing dynamics, Chinese industrial data, European economic improvement and a bounce in emerging market currencies relative to the dollar. While overall US power generation is down year-on-year, more coal than natural gas was burned to generate those electrons.

“We find some more supportive dynamics for coal. Current natural gas economics encourage coal consumption, Chinese industrial data generate supportive energy usage, steel/iron ore firming, production and capital discipline continuing as coal equities grind higher since bottoming shortly after late June’s Georgetown climate speech. As recent Q4 benchmark indications move past $150 per tonne, shares should react favorably.”

The US power sector burning more coal:

“Net electricity generation in June dropped 1.4 % y/y despite a 2.1% increase in cooling degree days. But coal consumption increased 4.9% y/y while natural gas consumption dropped 16% y/y. All regions in the U.S. saw an increase in coal generation compared to last year. All regions except the West witnessed a drop in natural gas consumption compared to last year…Genscape estimates coal-fired generation dropped 2% y/y in July while natural gas lost 6% y/y. Coal-fired generation accounted for 39% of supply for electricity in July, while natural gas-fired generation accounted for 32%.”