The coal industry is strengthening and could continue to gain momentum as a substitute fuel source to costlier natural gas. According to Bank of America Merrill Lynch Global Research, the higher gas prices have been driving a “significant” return to coal, RTCC reports.
“Prices have risen to the $4.70-5.00 level where gas to coal switching is very significant,” the bank said in a report. “While near-dated contracts in 2014 have surged, calendar 2015 and 2016 prices have only moved up modestly. As a result, prices are now encouraging coal burn near-term, but are not yet incentivizing a big ramp up in drilling activity across the country.”
Market Vectors Coal ETF
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Max Chen contributed to this article.