August 9, 2013, 3:56 P.M. ETCoal Rallies on Improved Moody’s...

August 9, 2013, 3:56 P.M. ET

Coal Rallies on Improved Moody’s Outlook

BLOOMBERG
Coal stocks jumped Friday after credit rating agency Moody’s raised its coal industry outlook to stable from negative.

Moody’s report sums its view: “Business Conditions Hit Bottom.” Moody’s said it “does not expect industry fundamentals to deteriorate further over the next 12 to 18 months, though business conditions remain very weak.” According to Moody’s Senior Analyst Anna Zubets-Anderson:

“Sustained natural gas prices will prop up demand for the thermal coal used in power production through mid-2014 to early 2015, while supply rationalization should help stabilize prices for metallurgical coal, which is used in steelmaking. … The stable outlook reflects our expectation that over the next year or so coal-fired power plants will capture roughly 40% of US electricity generation, up from 37% in 2012 … Coal inventories had fallen to roughly 164 million short tons by July this year, so we expect modest improvements in thermal coal production and pricing next year.”