Better than expected second quarter earnings from James River Coal sparked a rally in coal stocks Thursday. "The thermal market is just beginning to show signs of recovery," said James River Coal's Chairman and CEO Peter Socha. "We believe that this is due to production cutbacks throughout the industry as well as improved demand for both coal and natural gas due to warmer than normal temperatures." The Paragon Report examines investing opportunities in the Coal Industry and provides equity research on Arch Coal Inc. (NYSE: ACI) and Alpha Natural Resources, Inc. (NYSE: ANR).
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As the demand for coal has dropped significantly in the U.S. as a result of plummeting natural gas prices, coal companies have begun to look at foreign markets. The economies of India and China are still heavily on coal for their power generation. According to a recent Forbes article the latest reported data has shown that during the first half of 2012 China has seen coal imports rise to 140 million tons, a 66 percent year-over-year growth. India's thermal coal imports are expected to total 80 million tons in FY2012-2013. Asia's combined thermal coal demand is projected to be around 550 million tons.
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Arch Coal's core business is supplying cleaner-burning, low-sulfur thermal and metallurgical coal to power generators and steel manufacturers on five continents. The company reported a net loss of $436 million, or $2.05 per diluted share, in the second quarter of 2012. Shares of Arch Coal have rallied over 22 percent in the last month.
Alpha is the nation's largest supplier of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries. In 2011, the company had more than 200 customers on five continents. The company reported a second quarter loss of $2.2 billion, compared with a loss of $50 million in the second quarter of 2011.
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