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Coal industry a poor performer: IEEFA

The global coal industry is in continual decline and prudent investors should steer clear of coal holdings now and for the foreseeable future, the Institute for Energy Economics and Financial Analysis (IEEFA) said today.

The group says in a report that coal company stock prices have collapsed in recent years and the stocks of utilities burning the fuel are in decline.

IEEFA’s US-based director of finance Tom Sanzillo said coal faced obsolescence due to a range of factors, including market competition, concerns over climate and air pollution and new waves of  public opposition.

“Normal cyclical recoveries that have seen coal stocks and coal demand rebound are most likely a thing of the past, the coal industry is arguably the poorest-performing sector in today’s global economy and is in a state of structural decline,” Mr Sanzillo said.

The report, titled The Case for Divesting Coal from the Norwegian Government Pension Fund Global, says the Stowe Global Coal Index has lost 71 per cent of its value over the past five years, and the industry’s share of the global industry energy mix will continue to fall over time.

The IEEFA conducts research on financial and economic issues related to energy and the environment and says its mission includes reducing dependence on coal and other non-renewable energy resources.

The report also says the coal industry has failed to innovate, despite facing changed energy markets and a collapse in global demand, and the profitiability of the existing Australian coal mining industry is being eroded by building of excess supply.

“Continuing to advance additional greenfield coal export projects across Australia flies in the face of the dramatic and accelerating collapse in import demand from China over the last 18 months," IEEFA director of energy finance studies Australasia Tim Buckley, said.

"Likewise, India is building a plan to cease thermal coal imports by 202.”

“By building excess supply, these very projects further erode the profitability of the existing Australian coal mining industry.”

The report urges the Norway's GPFG to reduce its exposure to fossil-fuel risk by divesting more of its coal-related holdings.

The GPFG is the largest pension fund in the world, with total coal sector holdings valued at US$11.4 billion, the IEEFA says.

source: http://www.couriermail.com.au