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Coal is here to stay for a long, long time

April 1, 2011 Leave a comment

I have liked coal for the last couple years despite of the global warming/green energy/fierce environmental protection backdrop… for the foreseeable future I see demand for coal to keep rising regardless of what happens with the renewable energy sources.

Why I feel that way?

Two stats from World Coal

Coal provides 27% of global primary energy needs and generates 41% of the world’s electricity

Approximately 13% (around 717Mt) of total hard coal production is currently used by the steel industry and almost 70% of total global steel production is dependent on coal.

If you prefer to view graphics like I do, here are some key figures from IEA’s World Energy Outlook 2010

So… if you are still not convinced, too bad J

Moving forward, I plan to analyze some coal stocks and present my analysis here.

Grande Cache Coal (GCE.TO)

I’ll start with the easy technical stuff for Grande Cache coal – a metallurgical coal miner (i.e. coal used for steel making)

  1. The stock has broken out of the recent downtrend channel (blue) and closed above the 50, 100 & 200 day moving averages on reasonably high volume
  2. Green lines are support, Red lines are resistance and there is immediate resistance around 10.5, then at 11 and 12

In the next post, I will delve in to the fundamentals of GCE

Update: Right after posting this article I stumbled upon this piece from FP via  Alphaville. Trust me I’m not looking for an opinion that confirms my thesis (confirmation bias) quite the contrary. Here are the salient points from the FP piece:

According to official data, Chinese investment in coal was about the same as its investment in oil, gas, and scientific research combined. The investment in coal at home was larger than the PRC’s outward investment in all non-bond assets — all energy, all metals, and so on — in 2010.

From 1980-1996, coal consumption growth was about 5 percent annually. From 2003-2009, under leaders Hu Jintao and Wen Jiabao, it was over 13 percent annually.

Coal previously accounted for less than 70 percent of Chinese electricity use; now it is over 80 percent.

 

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