Coal is renewing its claim to being the fuel of the future. It’s plentiful, with enough proven reserves to last the world 164 years, and unlike oil and natural gas, supply isn’t dependent on political stability in the Middle East, as Jim Jubak of Moneycentral.msn.com points out.
What’s more, coal needn’t be environmentally unfriendly. New technologies that remove sulphur dioxide gases released when it burns render it no more polluting than other fuels. And coal-to-liquids (CTL) technology, pioneered in Germany and South Africa, can convert the fuel into petrol, diesel and aviation fuel. This technology, economical with oil over $40 a barrel, is now set for wide-scale development in the US.
Demand is growing quickly, with China adding more power generation capacity every two years than France has in total, 70% of which is coal-fired. US coal consumption is expected to jump by 73% by 2030. While prices have risen over the past few years, “coal is dramatically underpriced” compared to competing fuels, says Nick Louth on Dailyreckoning.co.uk. Given all this, coal producers are set to generate better returns than oil firms over the next decade, reckons Kevin Bambrough on Bloomberg.com.
Possible coal plays include the world’s biggest producer, Peabody Energy (BTU, $36), which is on a price to earnings growth ratio of 0.7; Stifel Nicolaus sees scope for a 70% rise from here. Arch Coal (ACI, $29) is also one of America’s best coal operators, says TheStreet.com’s Jim Cramer.