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4 Coal Stocks to Avoid After China Signals Intervention

Published 10/28/2021, 09:28 AM
Updated 10/28/2021, 10:01 AM
© Reuters.  4 Coal Stocks to Avoid After China Signals Intervention

© Reuters. 4 Coal Stocks to Avoid After China Signals Intervention

The prospects for coal, a major pollutant, are not good amid increasing global momentum toward a decarbonized future world. Several nations have already set goals to phase-out coal. And recently, China’s intervention to temper rising coal prices has caused coal futures to fall sharply. Hence, we think it could be wise to now avoid weak coal stocks of CNX Resources (NYSE:CNX), Peabody Energy (BTU), Arch Resources (ARCH), and Warrior Met Coal (NYSE:HCC). Let's discuss.Coal generates large quantities of greenhouse gases when burnt, making it one of the most polluting substances used for energy generation. Michelle Manook, the Chief Executive of the World Coal Association (WCA), believes the industry is not doing enough to demonstrate how the adoption of cleaner technologies can reduce carbon emissions, which is making it harder to integrate coal into a decarbonized future.

In June, G7 country leaders pledged to transition away from coal, with the goal of completely phasing it out by 2040. The commitment includes Japan, the second-largest overseas coal power financier in the world. Recently, China, the world’s largest coal producer, intervened to tame surging coal prices as part of an effort to address power shortages. As a result, last Friday, China's thermal coal futures fell 13%, with the most-traded contract on Zhengzhou Commodity Exchange settling at 1,408.4 yuan ($220) per ton, representing a 30% decline from its record high on Tuesday and its largest weekly decline since May.

Given this backdrop, we think it could be wise to avoid fundamentally weak coal stocks of CNX Resources Corporation (CNX), Peabody Energy Corporation (BTU), Arch Resources, Inc. (ARCH), and Warrior Met Coal, Inc. (HCC).

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Latest comments

Arch and HCC are met coal companies. Do you even know the difference?
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