Cold winter to boost coal prices

Coal prices are to average $59.28 a ton this yearÔÇöup 17 percent from $50.75 on February 19 last year and 41 percent more than last yearÔÇÖs low in April, according to a report by Bloomberg.  The coldest US snowfall in nine years will play a big part in the price boost, analysts say. Record snowfall this year buried parts of the USÔÇöthe worldÔÇÖs second biggest consumer of coalÔÇöincluding Dallas and the mid-Atlantic states.  A surplus of coal began to accumulate last year following the mild summer and the effects of falling demand as a result of the global recession.  However, the cold weather is now reducing the surplus, as well as giving producers such as Missouri-based Patriot Coal Corp., Pennsylvania-based Consol Energy and Alpha Natural Resources, which is headquartered in Virginia, the power to negotiate higher prices.  According to the report, US utilities have 57 days worth of coal on hand, down from more than 70 days at the start of winter.  The 2009-2010 winter season in the US has been the coldest since the 2000-2001 season and ranks in the coldest third of winters in the past 115 years, said the report.  Meanwhile, China, the worldÔÇÖs biggest coal user, imported 16.4 million metric tons of coal in DecemberÔÇöa sixfold increase from a year earlier.  The country has maintained the record import pace set in December because it too has experienced a harsh winterÔÇöits coldest in at least 50 years.  ChinaÔÇÖs demand for coal has led to the country importing much of its supply from South Africa, which in turn has diverted supplies from Europe. This has created opportunities for eastern US coal companies such as Alpha Natural Resources, Consol and Patriot to increase sales across the Atlantic.  This year, Consol sold almost 500,000 tons of coal into Asian marketsÔÇöa 23 percent increase from the 400,000 tons that it shipped to the region for the first time last year.  Hedge funds have been rushing to buy stakes in energy producers and caol-mining companiesÔÇöan indication that the market is expected to accelerate. Duquesne Capital Management LLC recently bought 6.2 percent of Virginia-based coal miner Massey Energy Co., the sixth-largest US coal company, whose earnings are projected to double this year.  Coal is used to generate electricity and produce steel, which makes it a good overall indicator on the health of the economy.  The US relies on coal for about half of its power generation, compared with about 20 percent for gas.