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How Natural Gas Affected Coal and Power Utilities in Early April (Part 3 of 5) (Continued from Part 2) Natural gas prices
The US shale gas boom led to a massive rise in production. It also led to a fall in natural gas prices. As a result, natural gas became a competing fuel for coal. It ate away market share from coal in terms of electricity generation.
Natural gas prices and coal’s share of the electricity generation market are related. When natural gas prices rise, coal gains market share. It becomes more economical to burn coal for power generation. A fall in natural gas prices generally leads to a drop in coal’s market share. Natural gas is available at cheaper rates.
Week ending April 3
Despite lower-than-expected inventory, natural gas prices slid during the week ending April 3. The Henry Hub benchmark price dropped to $2.61 per MMBtu (British thermal units in millions), down from $2.69 a week earlier.
During the same period, front month contract prices dropped to $2.65 per MMBtu over $2.76 per MMBtu a week earlier.
Impact on coal and utilities
A drop in natural gas prices is negative for coal producers (KOL) such as Alpha Natural Resources (ANR) and Arch Coal (ACI) because natural gas becomes cheaper than coal as a fuel for electricity generation.
For utilities (XLU) such as PG&E (PCG) and Southern California Edison (EIX), the impact depends on the level of regulation. If contracts are negotiated strictly on a cost-plus basis—where the companies get a fixed return over and above costs—it doesn’t affect them much. For utilities with fixed-price contracts—where they get a fixed price irrespective of changes in input costs—the fall in natural gas prices is positive.
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Arch Coal Inc
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PRODUCER |
CODE : ACI |
ISIN : US0393801008 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Arch Coal is a coal producing company based in United states of america. Arch Coal holds various exploration projects in USA. Its main assets in production are WEST ELK, BLACK THUNDER and JACOB'S RANCH in USA and its main asset in development is SPRUCE N° 1 in USA. Arch Coal is listed in Germany and in United States of America. Its market capitalisation is US$ 366 000 as of today (€ 317 981). Its stock quote reached its highest recent level on June 27, 2003 at US$ 99.96, and its lowest recent point on October 04, 2018 at US$ 0.01. Arch Coal has 36 600 000 shares outstanding. |