Coal stocks are getting absolutely smoked.
On Thursday, amid a huge broad-market sell off, no sector was taking it on the chin harder than coal stocks.
Among the big losers were Walter Energy, down 8%, Arch Coal, down 8%, Cliffs Natural Resources, down 10%, Peabody Energy, down 6.5%, and Alpha Natural Resources down 7.4%.
And the ‘KOL’ Market Vectors ETF that tracks the coal sector was also down more than 3.4% on Thursday.
The broader energy sector is also under serious pressure Thursday, with the ‘XLE’ ETF that tracks the Energy Sector is down more than 3.3%.
Thursday’s moves in the coal sector market just the latest in what has been an absolutely brutal year for the sector.
The biggest loser is Walter Energy, which is down almost 90% year-to-date, and currently has a market cap of around $US110 million, down from about $US1.1 billion at the start of the year.
The ugly action in Walter Energy also follows a move by analysts at Morgan Stanley on Wednesday to take their rating on the stock to Equal Weight from Overweight, writing that, “while evidence points to a bottom for coal prices, the recovery will likely take longer and be weaker than our previous forecasts,” according to Benzinga.
And it appears that the whole coal sector is in an almost untenable financial position.
On Twitter, Conor Sen of New River Investments noted that the combined market cap Arch Coal, Cliffs Natural, Alpha Natural, Peabody, and Walter Energy is $US5 billion, while the total debt burden between those companies is $US21 billion.
Back in June, we highlighted weakness among coal stocks after the EPA proposed regulations to cut carbon pollution from existing power plants. It has gotten much worse since then as the entire commodity sector has taken an absolute bath over the last few months.
Here’s the year-to-date chart including all five of the aforementioned coal companies, which is really remarkable. The smallest decline is 47%.