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Coal Leads Natural Gas in Market Share Gains—Barely

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Electricity output

The monthly electricity output data published by the EIA (US Energy Information Administration) is a key indicator for coal industry investors. The current report for June 2015 was published on August 26 and specified that electricity output in the US came in at 361.7 million mWh (megawatt-hours) in June 2015—compared to 321.9 million mWh in May 2015, and 384.8 million mWh in June 2014.

Warmer weather led to higher electricity usage for air conditioning during the month compared to the previous month.

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Market share

Both coal and natural gas gained market share during June 2015, as wind generation faltered and generation from other sources remained roughly constant. Coal continued to be the most widely used fuel for electricity generation—but only by a narrow margin. Coal’s market share in June 2015 came in at 34.9%, compared to natural gas’s market share of 33.3%.

For various natural gas companies’ market exposure, check out the First Trust ISE Revere Natural Gas ETF (FCG).

Coal’s market share remains far below the percentage that it held at the start of the century, which was in the low 50s. As a result, the latest news from the EIA definitely isn’t sufficient to cheer up US coal producers—companies like Peabody Energy Corporation (BTU), Cloud Peak Energy (CLD), Alliance Resource Partners (ARLP), and Arch Coal (ACI)—or to encourage investors in coal-related funds, such as the VanEck Vectors-Coal ETF (KOL).

Why it matters

Since thermal coal is used mainly in electricity generation, electricity output is an important indicator for tracking the outlook of thermal coal’s demand. For more insight, we might also look at how much coal is contributing to the total electricity output.

In the next part of this series, we’ll discuss how recent coal inventories have responded to energy trends.

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