Why Coal Demand is Falling in America

Besides the obvious attack by the government on the coal industry, with regulations resulting in high operational cost designed to cripple coal in America, there are some other reasons why coal has been diminishing in the midst of a surge in coal demand outside of America.

In states like Kentucky and West Virginia, for example, easily accessed coal has already been mined, resulting in higher costs to mine the thinner deposits.

The other major challenge is the discovery and supply of natural gas in America, which has resulted in cheaper energy, putting pressure on coal as a fuel source in the United States.

One area that coal should continue to do very well in is high-grade metallurgical coal, which is used to produce steel. This won't save the coal industry in America, but it will keep some regions of the country in good condition.

Another key element is the lack of export terminals to meet the growing demand of coal in every other country in the world outside of the United States. At this time there are projects in the works to build five coal export terminals in Washington and Oregon to help meet that growing need. Most coal companies benefiting from that will be producing in the western part of the U.S. It is uncertain as to how many of those will be built and how long it'll take to bring them to operational status.

Projections by the International Energy Agency show that coal demand will jump by 1.2 billion tons over the next several years, which should make it the No. 1 global fuel source at that time.

So while coal demand is falling in America, every other country on the face of the planet that uses coal has been increasing it as an energy source for their needs.

China is the driving force behind coal demand, with India boosting its coal usage as well. For the United States, at this time Europe is the biggest importer of coal from the country.

If this continues for years into the future, which it undoubtedly will, coal demand in America could rise again, but it'll take many years before that happens. For now, investors should look for coal companies positioned to primarily serve the Chinese market, as Chinese demand accounts for half or more of all coal demand in the world as of this writing.

Puda (AMEX:PUDA) Files Registration Following Powerful Quarter

Puda Coal, Inc. (AMEX:PUDA), a consolidator of coal mines in China, as well as producer of clean metallurgical coal, has filed a registration with the U.S. Securities and Exchange Commission Tuesday in order to be able to sell any combination of Common Stock, Preferred Stock, Warrants and Units for up to $90 million.

Earnings for Puda in the last quarter were $0.36 a share, while the street was looking for $0.24 a share. Revenue came in at $82 million.

Sales of clean coal in the quarter rose to 601,000 metric tons, a 36.5 percent gain over last year in the same quarter. The average selling price of the coal increased to $137 a metric ton, up 25.7 percent over last year.

Gross margins almost doubled for 7.5 percent last year to 14.7 percent this year.

Profits grew to $12.1 million, soaring 235.2 percent.

Peabody (NYSE:BTU) Increases Macarthur Coal Bid

American coal company Peabody Energy (NYSE:BTU), has increased its offer for Macarthur Coal by 14 percent, raising it to A$16 a share, up from the most recent A$14 a share bid, and the original A$13 a share bid made by Peabody. That would bring the total offer to A$4.1-billion ($3.8 billion)if it goes forward and is approved.

Peabody is competing with an Australian company, New Hope, for control of Macarthur, and has a leg up on the company at this stage because the board of Macarthur likes their offer far better than the New Hope offer of A$14,5 a share.

Macarthur's board has recommended shareholders reject the New Hope offer as it now stands, possibly paving the way for acceptance of the Peabody offer.

Marcarthur is the leading global exporter of pulverized coal, which is in high demand from China.

Macarthur Coal (ASE:MCC), Arch Coal (NYSE:ACI) Will Profit from Metallurgical Coal Demand from China

Macarthur Coal (ASE:MCC) and Arch Coal (NYSE:ACI) stand to benefit strongly from the demand from China for metallurgical coal, a high-quality coal which isn't readily available in China.

While resisting the changes in the duration of iron ore contracts from Vale (NYSE:VALE), BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RTP), where China wants a longer contract period than that changed from a yearly to a quarterly basis recently.

They have made a deal for long-term contracts for metallurgical coal with a few coal producers, which stands now at above $200 a ton.

It seems the Chinese will attempt to use those contracts and the move to invest in more domestic iron ore production to get the large iron ore producers to bring back longer contracts.

Most other countries have agreed to the shorter contracts, making this an interesting dilemna for all involved. Because China buys the most iron ore, they feel they should get a discounted price in comparison to other countries and companies.

Teck Resources (NYSE:TCK) Increasing Coal Production by 50 Percent in 5 Years

Teck Resources Coal Production

Teck Resources (NYSE:TCK) has stated it wants to increase its coal production by 50 percent within five years as demand for coking coal skyrockets.

This is probably a realistic goal if it's predicated upon China's hunger for coking coal, as they can't get enough of it to feed their needs, even after they increased coal imports by 500 percent last year.

In 2010 expectations are China will import over 30 million tons of coal this year, as their domestic supply can't keep up with their demand from steel mills.

Steel production is projected to continue to increase in China for some time, and that will guarantee demand for coking coal will increase with it.

Teck Resources will increase revenue and profits with it if they can meet their coal production goals.