Alpha Natural Resources, Inc. (ANR), American Electric Power Company, Inc. (AEP), Cloud Peak Energy Inc. (CLD): One Coal Miner That Is Changing With The Times

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Building with steel

Infrastructure and other long-lived products, like cars and washing machines, require steel. As emerging economies continue their push upward on the socioeconomic scale, steel demand, and thus met coal demand, will head higher, too.

BHP Billiton plc (ADR) (NYSE:BHP), a major iron ore and met coal provider, expects steel demand in China and the rest of the world to converge at around 3% or so over the next 15 years. That should provide plenty of opportunity for Alpha to grow its met coal exports, too. For China, however, that’s a big drop from recent levels, which has led to a rebalancing of supply and demand that’s taken a toll on met coal prices.

With plenty of port capacity, Alpha will be in prime position to benefit when the met coal imbalance straightens out. In fact, it claims to be the number three producer of met coal in the world and the number one U.S. exporter. However, in the near term, the company has been pulling back some to balance its own supply and demand picture.

That’s meant reducing capital spending, with such costs in 2013 projected to fall between 35% and 45%. This type of retrenching is happening industry wide and should eventually lead to improved industry dynamics.

Not for the feint of heart

Alpha looks like it has positioned itself well for coal’s future while balancing against the current market dynamics. However, the company has posted losses in eight of the last ten quarters and doesn’t pay a dividend. Still, with the shares down about 90% from their early 2011 peak, investors looking for a turnaround play with notable upside potential may want to take a closer look.

The article 1 Coal Miner That Is Changing With The Times originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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