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Coal stocks surge on anticipated uptick in China demand

October 11, 2012: 1:52 PM ET

Coal stocks soared Thursday after an analyst predicted an uptick in demand from Chinese steel manufacturers.

One analyst at Dahlman & Rose predicted that China's steel mills might see a renewed appetite for coal.  That was enough to send shares of coal companies like James River Coal Company (JRCC), Arch Coal (ACI) and even coal ETFs like Market Vectors Coal (KOL) surging. And that made both coal and China hot topics on StockTwits Thursday.

It was a welcome turnaround for coal companies that have seen their shares battered this year on fears over slowing global growth. Both James River Coal Company and Arch Coal are down more than 40% this year.

ChristopherWallace: $JRCC Role reversal: coal a bright light in a dark market. $ACI $KOL

The market's swift response to the acceleration of China's steel manufacturing came soon after Goldman Sachs downgraded Arch Coal. People wasted no time in mocking that call.

upsidetrader: And a special thanks to the Goldman analyst who put a sell on $ACI Monday morning...but he went to Wharton

bclund: $GS once again showing how their "downgrades" mark bottoms. $ACI

Still not everyone was buying the rally.

LSValue :$CNX$ANR Can't wait until the first Coal company reports earnings and everyone realizes that volumes and prices have collapsed

But other traders thought that this might mark the beginning of a broader bounce for China's stock market. While other stock markets are up this year, the Shanghai SE Composite is down nearly 5% this year.

StockTwits: Shanghai Composite trades at 11.3X the earnings of China's biggest companies, the lowest level since at least 1997 $FXI

ivanhoff: Back in the time price action in Chinese &coal stks used to be highly positively correlated. China is the world biggest consumer $KOL $FXI

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Maureen Farrell
Maureen Farrell
Staff writer, CNNMoney

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.

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