While the sell-off in commodities may be putting near-term pressure on coal equities, some see a disconnect between these stocks and the relatively firm physical market. They cite positive fundamentals behind coal, such as infrastructure spending in China and India, which is considered a necessity regardless of a potential slowdown in the United States and Europe.

In the U.S., meanwhile, both candidates for President agree on the need to reduce the nation’s dependence on imported energy. But, as John Bridges at JPMorgan noted, they have provided little detail on how this will be achieved.

If a large amount of natural gas is diverted to transport, the utility sector will need more coal.

Since coal is expensive and gas is cheap, operating margins (spark spreads) for gas-fired power generators are at a six-year high versus their coal-fired counterparts.

Higher coal prices are not necessarily affecting coal consumers, because most coal is sold according to long-term contracts, with power producers paying by cost-plus arrangements with coal producers.