CSX Corp. (NYSE: CSX) has some somber words for the U.S. coal sector, despite what has been a handy recovery in the share prices of many of the sector leaders. The rail transportation giant is seeing shares rise almost 4% after beating its own earnings report expectations, but the big economic warning is that it expects the domestic U.S. coal market will remain weak throughout much of 2013. What is so interesting is that the coal players are holding up well, and that is after major recoveries.
CSX warned that its coal shipment volumes to power plants in the United States could be down by 5% to 10% in 2013. This is after domestic coal shipments were down 21% in the fourth quarter from a year earlier. The trends were like that all year, with a 26% drop in the third quarter and a 27% drop in the first half of 2012.
Some investors and market pundits want to blame low natural gas prices, but the environment of regulating coal into oblivion by the current regime in Washington, D.C., has been a known risk for some time. What was interesting is that some coal stocks have recovered even above where they were in late October and the very start of November, when it was looking possible that Mitt Romney might have had a better chance of beating President Obama. After all, Romney was the “I Like Coal!” guy and President Obama has favored renewables.
Here is how the coal players are faring, and we even posted the “Romney rally” highs of late October to early November for reference:
CONSOL Energy Inc. (NYSE: CNX) is up 0.3% at $32.83, against a 52-week range of $26.41 to $38.42. The Romney rally high was up around $36, but shares were back to $32 by the end of November.
Peabody Energy Corp. (NYSE: BTU) is down 0.5% at $26.12, against a 52-week range of $18.78 to $38.96. The Romney rally high was almost $30, but shares were back under $25 briefly by the end of November.
Arch Coal Inc. (NYSE: ACI) is up 0.7% at $7.88, against a 52-week range of $5.16 to $15.94. The Romney rally high was $8.79, and shares were back at $6.50 by the end of November.
Alpha Natural Resources Inc. (NYSE: ANR) is up 0.4% at $9.99, against a 52-week range of $5.28 to $23.68. The Romney rally high was $9.80, but shares were back down to $7 or so by the end of November.
All investors really need to do is to go back and see what Martin Sosnoff of Atalanta Sosnoff Capital told Forbes for the year-end special edition of “Get Rich from Obama” in his outlook. He said to sell the Market Vectors Coal ETF (NYSEMKT: KOL) by saying, “Stocks like Arch Coal and Alpha Natural Resources selling the single digits for good reasons.” He noted that depressed coal prices and leverage could spell disaster, and he even said the Romney rally in these stocks is over.
The Market Vectors Coal ETF (NYSEMKT: KOL) is down 0.6% so far this morning at $25.68, against a 52-week range of $21.49 to $37.40. The Romney rally high was $26.20, but this was challenging $23 by the end of November.
The good news for the coal sector is that Wall St. is not throwing in the towel on coal. If you saw CSX’s commentary about coal on CNBC this morning, you might have expected yet another round of pain. The split decision may be that the stock market tries to act as a discounting mechanism. If coal is expected to remain weak for much of 2013, maybe the market is trying to say that this is discounted and factored in.