Due to the shortage of natural gas supply, coal prices are surging worldwide and could be the most expensive in 13 years this winter. Given this scenario, it could be wise to bet on fundamentally sound small-cap coal stocks Warrior Met Coal (NYSE:HCC), SunCoke Energy (SXC), and Ramaco Resources (NASDAQ:METC).Australian thermal coal at Newcastle Port, the benchmark for the vast Asian market, has more than doubled this year to about $180 a metric ton, driven by surging demand from utilities and plunging stockpiles. According to Goldman Sachs (NYSE:GS), coal prices are expected to average $190 from October to December. Moreover, in Europe, coal prices have risen to $169, up from $65 in mid-March. In addition, with China’s bulk of electricity still being generated by coal, growing demand from the power sector should further drive the prices higher.
According to the Energy Information Administration, in the U.S., the share of electricity generation from coal is expected to rise from 20% in 2020 to about 24% in both 2021 and 2022 due to increased natural gas prices.
Therefore, fundamentally sound small-cap coal stocks Warrior Met Coal, Inc. (HCC), SunCoke Energy, Inc. (SXC), and Ramaco Resources, Inc. (METC) could benefit significantly from the rising coal prices and deliver solid returns in the near term.