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Coal Stocks Will Struggle In 2023


Regular readers, God bless you all, will know that I rarely talk about specific coal stocks. There have been occasions when I have identified short-term opportunities to buy one or two, but they are few and far between. When that advice did come, it was almost always accompanied by a warning to, at a certain level, take a profit or even reverse to a short if you were somebody who actively traded on margin. More often though, if I have mentioned the industry at all, it has been to caution against involvement or evenly encourage actively shorting coal stocks. That is why I kept my mouth shut last year. In the exact opposite of what my mother always told me, I couldn’t find something bad to say, so I said nothing at all. I will break that silence today, though, because the temporary headwinds that caused coal stock to show good gains last year are fading, reversing even, and it is a good time to short at least one high-profile name.

2022 was a good year for US coal stocks. As inflation took hold, commodity prices of all kinds pushed higher, and coal was no exception. It, along with other energy commodities, faced supply limitations as Russia invaded Ukraine and as China went back to 2020 style lockdowns, and supply chains there were massively disrupted. That enabled American producers like Peabody Energy (BTU) to ramp up production even as they achieved higher prices. As a result, BTU swung from a loss in the first quarter of the year to quite substantial profits in Q2…

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