Coal discomfort

11 August 2010 By Christopher Swann

U.S. miners celebrated the ditching of capandtrade by Congress. But they still look vulnerable. Carbon tax or not, many geriatric coal generators are heading for retirement. And demand from China may not be the silver bullet investors expect.

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U.S. coal firm stocks have been helped by a congressional decision to drop proposals for a capandtrade system that would have put a price on carbon.

Since late July, when it became clear that Democrats would not push for a carbon tax, the larger coal firms including Peabody Energy, Walter Energy and Alpha Natural Resources have outperformed the S&P 500 composite index by between 12 percent and 17 percent. Meanwhile, Consol Energy, a coal company that has diversified into natural gas, has merely matched the market.

The latest forecasts from the U.S. Department of Energy predict that global demand for coal will rise just 1.1 percent a year to 2020, with weak consumption in Europe helping to offset booming usage in China.

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