Reuters: ANALYSIS-U.S. coal production unlikely to sate world demand
Same concerns all the major utilities spoke about at the Goldman Sachs Eighth Annual Power and Utility Conference on May 13-14, 2008. The long term problem of electrical power shortage due to shortage of coal and high quality coal is just rearing it’s ugly head. I’ll have to do a bit more research to see if coal miners like Peabody Energy (BTU) and Arch Coal (ACI) are the ideal plays in this situation. If they can’t open new mines and increase capacity, their long term (5 years or more) potential to benefit is still unclear to me. I’m not saying they won’t…they’re great companies and great companies find ways to profit, especially off of ginormous trends like this. Just got to do more research. Same with the mining equipment like Joy Global (JOYG) and Bucyrus (BUCY). One thing’s for sure though, electrical power use will only grow, so power plants will have to become more efficient. I’m thinking engineering and construction companies like McDermott (MDR), Fluor (FLR), Shaw Group (SGR), and Foster Wheeler (FWLT) will do well along with power plant components like Flowserve (FLS), SPX Corp (SPW), Woodward Governor (WGOV), and Thomas and Betts (TNB). Preliminary thoughts…more on this later…
RPT-ANALYSIS-U.S. coal production unlikely to sate world demand
“By Bruce Nichols
HOUSTON, June 16 (Reuters) - U.S. coal production has room to grow, but expansion is unlikely to meet surging world demand because miners fear a boom-bust cycle, key reserves are declining, and regulation has tightened.
Despite soaring prices, the U.S. Energy Information Administration has cut projections of U.S. output rather than raised them, and now foresees a total of 1.166 billion short tons by 2010, barely up from a record 1.163 billion in 2006.
That is not enough to overcome what some coal officials see as a shortage of 25 million to 35 million tons this year in the 6-billion-ton world market and a shortfall of perhaps 70 million tons next year.
Closing the gap with U.S. coal would require spending billions of dollars to expand mines, rails and ports, investment difficult to recover if — as has happened before — supply growth exceeds demand and prices fall…”
Full Article: http://uk.reuters.com/article/oilRpt/idUKN1637587220080616
**Disclosure: I own shares of MDR, FWLT, and SPW as of this post. **
