Alpha Natural Resources and Clean Power Plan Hurt Coal Stocks



Alpha Natural Resources

Alpha Natural Resources filed for bankruptcy on August 3, 2015, as we expected. Market Realist had raised the red flag on the company on various occasions. In our October 2014 Industry overview: The shifting sands of US coal production, we highlighted the inherent risks that may push the company to bankruptcy.

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Slump in coal ETFs

During the week ending August 7, all the coal stocks under our coverage slumped as the US Environmental Protection Agency published a draft of its Clean Power Plan, a step in reducing carbon emission from power plants. Coal, which is already under pressure due to President Obama’s plans for a cleaner environment, is expected to see its market share continue to fall, as the Clean Power Plan encourages energy generation from renewable sources.

The VanEck Vectors Coal ETF (KOL) slumped 4.6% to $9.35 during the week ending August 7. American coal companies make up 30% of KOL’s total holdings. The SPDR S&P 500 ETF (SPY) dropped 1.2% during the same week.

Top losers

Arch Coal (ACI) lost a whopping 31.7% last week, as it is widely believed to be next in line after Alpha Natural Resources if the market remains weak. The company reported wider net losses in 2Q15.

Westmoreland Coal Company (WLB), a better managed coal producer, dropped 27.8% last week. Consol Energy (CNX), which diversified into natural gas production in 2011, lost 20.4% as coal remained under pressure and natural gas prices remained low, even after an increase.

Cloud Peak Energy lost 17.9% during the week ending August 7. Peabody Energy (BTU) and Natural Resource Partners (NRP) also lost more than 10%.


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