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17 Jul 2015 00:00
Coal bond prices fell by 17% in the second quarter. (Paul Botes, M&G)
Coal is having a hard time lately. United States power plants are switching to natural gas, environmental restrictions are kicking in and the industry is being derided as the world’s number one climate criminal.
Prices have crashed, sure, but what’s happening in the bond market offers a real sense of coal’s diminishing prospects.
Bonds are where coal companies turn to raise money for such things as new mines and environmental cleanups.
Bonds fluctuate less than stocks, because the payoff is fixed and pretty much guaranteed as long as the borrower remains solvent. A 17% decline is huge and it happened at a time when other energy bonds – oil and gas – were rising. Three of America’s biggest coal producers had the worst-performing bonds for the quarter:
Coal powered the Industrial Revolution and helped lift much of humanity out of poverty, but its glory days are ending. Four of the biggest pressures facing coal today are:
In the past year, global stock prices for coal companies are down almost 50%, but it’s in the bond market that coal is really getting hammered. The focus of energy finance has shifted from coal to renewables, and it’s not likely to turn back. – © Bloomberg
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