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Coal stocks double, tonnage prices up

Stocks for major coal companies doing business in and around Letcher County reached new highs this week during what America’s top investment magazine called a “perfect storm of severe weather affecting both supply and demand.”

The magazine, Barron’s, predicted that coal prices, which have already risen dramatically, will continue on the upswing in 2011.

Massive flooding in northeast Australia and a cold and snowy winter in the U.S. have combined with an increase in global demand to hike the price of metallurgical coal used in steelmaking to well over $205 per U.S. short ton, up nearly 70 percent over last year’s price. Prices are also rising for steam coal used to produce electrical power.

Stocks for Arch Coal Inc., Massey Energy Company, International Coal Group, and Alpha Natural Resources have all risen significantly.

The news service Reuters reported this week that flooding in northeast Australia has brought most mining operations to a halt in Queensland, which produces the bulk of Australia’s steelmaking coal. Australia is the largest exporter of the metallurgical coal, exporting about 125 million tons, with the United States a distant second at 33 million tons in 2009.

Steelmakers globally are feeling the effect and are bidding up prices for U.S. exports of high-grade coal that is a key ingredient for producing steel, Reuters said, adding that U.S. metallurgical coal is among the world’s best.

Massey Energy’s stock reached its 52-week high of $56.05 per share on Tuesday, nearly double its low of $25.85 per share on July 1. Massey, which does business in the Harlan, Letcher and Wise County, Va. as Cumberland Resources, is the largest coal producer in Central Appalachia. The company’s recent stock surge — up 109.35 percent during the last six months — has also been fueled by rumors it wants to take over International Coal Group, which also has reserves in Letcher County, or that it is about to be taken over itself by Alpha Natural Resources.

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Alpha, which operates in Letcher County as Enterprise Mining Company, was expected to see its stock open at $63.10 on Wednesday, up from its June 7, 2010 low of $32.00 per share.

Shares of Arch Inc., which does business in Letcher County and Cumberland River Coal Co., were expected to open Wednesday at $35.48 per share, down slightly from its 52-week high of 36.50 reached on Monday but well above its July 1, 2010 low of $19.09 per share.

Even though International Coal Group had one of the industry’s lowest stock prices when the New York Stock Exchange closed Tuesday ($8.23), that is still more than double the $3.36 per share low it had fallen to on February 5, 2010.

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