January 18, 2013 at 09:25 AM EST
Pre-Market Analysis on Peabody Energy and Arch Coal: Coal Industry Outlook Improves

LONDON, January 18, 2013 /PRNewswire/ --

After a challenging 2012, the outlook for the coal industry has improved in 2013. Last year turned out to be a tough one for this industry, especially in the U.S. Our commodities research team has initiated this year's first wave of technical analysis on two companies in this industry, namely Peabody Energy Corporation (NYSE: BTU) and Arch Coal Inc. (NYSE: ACI). Download these reports for free at http://www.stockcall.com/todaysopinions

A sharp fall in natural gas prices last year hurt the demand for coal from power generators in the U.S. Concerns over tighter regulations following the re-election of President Obama, who has been a proponent of clean energy, has also had a negative impact on the U.S. coal industry. However, the long-term outlook for the coal industry remains bullish due to expected strong demand from China and India.

The Chinese economy is starting to show signs of improvement and this augurs well for the coal industry. Data released earlier today showed that China's economic growth picked up for the first time in two years in the fourth quarter of 2012. The world's second largest economy grew 7.9% in the fourth quarter, according to the National Bureau of Statistics.

Despite the debt crisis, demand for coal in Europe has been strong. In a recent report, The Economist [1] noted that the amount of electricity generated from coal is rising at annualized rates of as much as 50% in some European countries.

U.S. coal companies have been capitalizing on rising demand for coal from Europe and Asia. While exports have helped in offsetting some of the weakness in the domestic coal market, U.S. coal companies have also been taking steps to adapt to the changing market dynamics.

In September 2012, Peabody Energy Corp. (NYSE: BTU) announced that it ceased production at the Air Quality Mine in Vincennes, Indiana and will permanently shut down the mine due to soft market conditions that make operations uneconomic. Our technical analysis report on Peabody Energy can be downloaded at http://www.StockCall.com/BTU011813.pdf  

Last month, Peabody also provided commentary on its first quarter 2013 outlook. The company said that it expects the first quarter to mark trough earnings, with results likely to improve as the year progresses. Peabody Chairman and CEO, Gregory H. Boyce, said last month that while the first quarter is challenged due to a combination of factors, the company expects quarter-over-quarter improvement throughout the remainder of the year.

While Peabody expects things to improve in 2013, Arch Coal Inc. (NYSE: ACI) [Free Research Report on ACI] [2] believes that 2013 will be another tough year. At the time of release of Arch Coal's third quarter results in October 2012, the company's Executive Vice President and COO, Paul A. Lang said that while 2013 is expected to be a difficult year for the coal industry, Arch Coal's ongoing efforts will allow it to emerge from the cyclical downturn as a stronger company.

John W. Eaves, President and CEO of Arch Coal, also noted that the company expects market conditions to remain challenging in 2013. Eaves said that the company is executing a strategy to successfully navigate the weak market and the company's plan is focused on improving operational efficiency, optimizing its asset base and preserving liquidity so it is well positioned to capitalize as the coal market recovers.

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  1. Source - The Economist Article - The unwelcome renaissance [http://www.economist.com/news/briefing/21569039-europes-energy-policy-delivers-worst-all-possible-worlds-unwelcome-renaissance]
  2. Arch Coal Inc. Technical Analysis [ http://www.StockCall.com/ArchCoalInc011813.pdf ]

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