Global financial markets reflect terminal decline in coal

Global financial markets reflect terminal decline in coal


The power plants in USA are switching off towards natural gas due decreasing natural coal. Environmental restrictions — popping into the industrial atmosphere — are being mocked as world’s top most climate criminals.

There has been a decrease in price of coal as reported but coal has been decreasing.

Let’s briefly have a look at the *bond market:

(*coal comprising companies earn revenues in the form of environmental cleanups and mines)

Even investors are reluctant to lend something to the bond market. According to an analysis by Bloomberg Intelligence, coal bond prices have had fallen at 17% in 2Q-2015 which unfortunately was the cost decline in the fourth consecutive Qs.

Not to mention, Bonds have been reported to fluctuate less in comparison to stocks as the payoffs is fixed and guaranteed for long time duration till borrower remains solvent.

No doubt, a decline of 17% is huge and that too in a time period where oil and gas are on the peak. Three of America’s biggest coal producers had the worst-performing bonds for the Q:

  1. Alpha Natural Resources: -70 percent
  2. Peabody: -40 percent
  3. Arch: -30 percent

According to an analysis by Bloomberg New Energy Finance (BNEF):

  1. About 17% of USA coal-fired power generation is expected to disappear over the next upcoming few years.
  2. The biggest power investments are now happening in renewable energy, but fossil fuels will be with USA for decades to come.
  3. While China’s electricity demand will soar in the coming decades, its coal use will remain relatively flat, peaking by 2030 and then declining.

Self-bonding: Coal companies are allowed to avoid costly insurance premiums by showing they have the capital to clean up after themselves.

INSIGHT: In year 2015, the federal government started to take a closer look at whether the struggling coal companies could compete well or not.

UPDATE: Drastic new energy policies are still needed to avoid catastrophic climate change.

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She is the Managing Editor for in-depth discussions and analysis as well as breaking news at Markets Morning. She works closely with Editor-in-Chief Zac Berry on content and publishing initiatives for the site. Brianna Clemons has worked as a financial journalist and editor since 1997. She lives in Bucks County, PA, with her husband, four young children and one dog.