ARCH Coal Filed For Bankruptcy
In 2015 we already published that ARCH Coal had to accomplish a large payment of a debt by December 2015. However, they opted to defer payment to mid-January 2016. The goal here was to buy some time with the holders of debt. We asked our sources which are the reasons for the request to defer the payment one month. Are they going to receive a line of credit? That did not happen and the company finally filed for bankruptcy.
Much as we anticipated, ARCH Coal, which is the second-largest coal mining company in the United States, filed for Chapter 11 bankruptcy.
All these problems in ARCH Coal do not mean that the industry is having problems at all. This 2020 was not the exception to this trend. Coal remains one of the world’s most important energy sources. Therefore, prices should continue to rise – much to the delight of some coal miners and their shareholders.
There may indeed be far more efficient and, above all, more environmentally friendly energy sources than coal. However, this raw material is still relatively cheap. That is why emerging and developing countries in particular are increasingly relying on energy generation from coal. The hunger for energy in China, India, and the like (that did not stop despite the pandemic of 2020) is gradually causing the price of coal to rise. At the end of June, the raw material in China was already more expensive than it had been in two years. In addition, given the increased energy demand in the summer months, demand is likely to continue to rise – much to the delight of coal producers, whose profits are likely to increase significantly this year.
ARCH COAL: From Bankruptcy To An Expansion?
The high price of coal comes at just the right time for Arch Coal. After all, the group is on a course of expansion. In mid-June, Arch Coal announced that it had completed the acquisition of rival International Coal Group with a volume of $ 3.4 billion. This deal makes the company the second-largest US producer of metallurgical coal, which is mainly used for steel production. The already strong growth will be further accelerated by the acquisition. After doubling profits in 2010, Arch Coal should be able to do the same in 2011. For 2012, analysts are again expecting a strong profit increase, which would mean the P / E ratio would drop to just 7. The stock is one of the top picks in the sector.