Despite environmental concerns, coal remains a vital source for energy generation. Coal prices recently surged to reach two-year highs, driven by renewed demand amid tight supply. Rising natural gas prices have primarily led to the increased demand for coal. Given this backdrop, coal stocks such as Alliance Resource Partners (NASDAQ:ARLP), CONSOL Energy (NYSE:CEIX), and Natural Resource Partners (NRP) could be solid additions to one’s portfolio now.Coal remains vital for various utilities despite climatic concerns and the push for cleaner energy. The United States Energy Information Administration projects electricity generation from coal to be 24% in both 2021 and 2022, up from 20% in 2020. Moreover, the global coal mining market is expected to increase at a CAGR of 2% between 2021 and 2025.
Natural gas prices are witnessing record rallies recently, prompting the utilities to switch to coal. The rising demand amid the prolonged supply cuts has led the U.S. coal prices to hit a two-year high. Coal from the central Appalachia region rose to $73.25 a ton last week, up 35% from the start of the year and the highest since May 2019.
The surging natural gas prices are expected to keep increasing the demand for coal. Thus, fundamentally strong coal stocks Alliance Resource Partners, L.P. (ARLP), CONSOL Energy Inc (NYSE:CNX). (CEIX), and Natural Resource Partners L.P. (NRP) should benefit from these industry tailwinds.