Coal bounces back

Believing that the natural gas nightmare may be ending, investors are returning to coal.

Arch Coal (NYSE: ACI) jumped nearly 30% on Friday after reporting results that were better than Wall Street estimates.

Other coal miners who were caught in the up draft were Peabody Energy (NYSE:BTU), which is up 10.24% over the last three days to $20.99 a share, and Consol Energy (NYSE:CNX), which gained 5.85% to $29.49.

Energy companies have been switching to natural gas, which is currently half the price of coal. However, investors believe the low prices are unsustainable and the factors that were driving coal prices higher will resume.

“The coal investment thesis stands on two legs. First, U.S. coal producers will at some point no longer be held hostage to the natural gas oversupply. Secondly, the global super-cycle is being driven by the industrialization of China and other emerging nations,” writes Jeff B in Seeking Alpha.

On Friday Arch Coal reported a net loss of $436 million, or $2.05 per diluted share, in the second quarter of 2012.

To weather the sharp drop in demand for coal prices, Arch Coal has been shuttering high cost mining operations, like five thermal coal operations in Appalachia.

The company said business is looking up.

“We expect to see better balance in the second half of the year in the domestic thermal market given the ongoing rationalization of coal supply, increasing U.S. power demand, reduced coal-to-gas switching concerns and growing U.S. coal exports,” said John W. Eaves, Arch’s president and chief executive officer.

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