After a decade of wrangling, new clean-air rules are slated to come into effect in the new year, upending the coal market.U.S. environmental regulations will force power plants to reduce pollution as of Jan. 1. Although the industry is waging an effort to stop the rule’s implementation across 27 states, power plants already are ratcheting back purchases of thermal coal, which produces smog and soot-causing emissions as it is burned to produce electricity, in favor of cleaner fuels.
That has sent prices of thermal coal plummeting 13% on the New York Mercantile Exchange between the day the rule was announced on July 7 and last week’s one-year lows. While trading is relatively thin, it is used as a proxy for the billion-dollar cash market on the East Coast, where physical coal changes hands. On Friday, central Appalachian coal fell 18 cents, or 0.3%, to $69.07 a short ton.
Investors who want exposure to coal prices typically invest in coal-miner stocks. Some market watchers have urged investors to shift toward the types of coal used in steelmaking, known as metallurgical coal, or “met,” which trade at a higher price and has more exposure to China’s steel sector, an expanding market.