Coal companies are enjoying making money which they have not been doing for a number of years. In an article by Tim Loh of Bloomberg News who wrote about the coal industry in late October. US coal production is up and companies are trying to maximum shareholder returns rather than focusing on how many tons of coal they can dig out of the ground.

Investor interest is interested according to Jeremy Sussman of Clarkson Platou Securities Inc because the management teams are returning cash to shareholders as coal prices are at a level to make money. The other concern is from an operational standpoint are the results solid. Miners are benefiting from sustained high prices for both types of coal used by steel companies and power plants. The utilities which run coal power plants compare natural gas prices to coal, whatever is less expensive will get the larger share.

Coal’s long term future is unclear, it is helped by companies went into Chapter 11 bankruptcies and emerged with less debt and stronger balance sheets. Coal depends on China’s production (last year they slowed their production); it depends on electricity demand and demand has been flat and with alternatives of wind and solar helping to generate electricity, coal is needed but what are the growth prospects?

Linking to dividend paying stocks, coal is a commodity which means prices go up and down and when they are up companies make money, but cycles happen. There is and will be a demand for coal, but it is likely better to buy the customer or the utility which sells the electricity to consumers. The issue is the utility is regulated and often the regulator will raise prices and consumers have little choice but to pay more.

There are more questions than answers, till the next time – to raising questions.