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Coal - July 22

Coal carves a place in the future of global energy

Chris Kraul, Los Angeles Times
As the price of oil and natural gas soars, many customers are looking to coal as an alternative fuel. That means a boon for suppliers -- and a potential bane for the environment.
... As the global price of oil and natural gas soars, some customers are taking a new look at other fuels -- including coal. And countries such as China and India, whose demand is contributing to the price of petroleum, need even more energy. Besides petroleum products, they are buying vast amounts of coal, as well.

The worldwide demand for oil has its own set of environmental consequences -- drilling in pristine areas where it previously was uneconomical and continued emission of greenhouse gases. But environmentalists warn that renewed reliance on coal takes the threat to another level.

"Growing coal use threatens nothing less than the end of civilization as we know it," said Henry Henderson, the Chicago-based Midwest director of the Natural Resources Defense Council.
(20 July 2008)
The headline at the LA Times is rather wimpy and misleading ("Coal carves a place in the future of global energy") when the article's key point is the threat coal poses. -BA

Coal’s fundamentals ‘may be stronger than oil’s’

Energy Tech Stocks
As if the oil price shock that has thrown the world into turmoil isn’t bad enough, there’s reason to believe at least four more commodity price shocks may be headed straight for investors’ portfolios.

First up: coal, the commodity whose supply-demand fundamentals “may be stronger than oil fundamentals,” according to a new report from Raymond James Associates, the investment banking firm.

Raymond James’ energy analysts conclude that, “Like oil, rapidly growing Asian coal demand has begun to outpace the world’s ability to grow global coal supplies.” While they don’t believe the world is yet at “peak” coal production, they fear a pattern similar to oil is developing that could send prices higher.
(21 July 2008)

How coal shortages in China will spark more foreign takeovers of U.S. assets

Jason Simpkins, Money Morning
The recent buyout of Alpha Natural Resources Inc. (ANR) by Cleveland Cliffs Inc. (CLF) could ignite more than $50 billion worth of M&A deals in the U.S. coal industry over the next few years as Mainland China rushes to solve a major energy shortfall.

"In the next 12 months there will be an unprecedented amount of both domestic and cross-border mergers and acquisitions," Wilbur Ross, chairman of International Coal Group Inc. (ICO), told Bloomberg News. "U.S. reserves are undervalued relative to those in the rest of the world."

Ross, the billionaire investor who helped consolidate the U.S. coal and steel industries, considers this the start of a round of mergers that will prove Cleveland-Cliffs prescient in its Alpha bid.

The top eight U.S. coal producers, which are worth more than $50 billion, are possible takeover targets for a country desperate for resources. And compared with China, American coal companies are bargains...
(21 July 2008)
This is the other side of the globalization coin. Stripping resources in the US to feed demand on the other side of the world - SO

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