In December 1900, a group of forward looking people put together a list of predictions for the year 2000.  The list has 29 entries  in all; some are quite amusing.   In case you’re interested, it can be found at:

http://www.yorktownhistory.org/homepages/1900_predictions.htm

Here is my favorite excerpt from the Ladies Home Journal, December 1900:

Prediction #20: Coal will not be used for heating or cooking. It will be scarce, but not entirely exhausted. The earth’s hard coal will last until the year 2050 or 2100; its soft-coal mines until 2200 or 2300. Meanwhile both kinds of coal will have become more and more expensive. Man will have found electricity manufactured by waterpower to be much cheaper. Every river or creek with any suitable fall will be equipped with water-motors, turning dynamos, making electricity. Along the seacoast will be numerous reservoirs continually filled by waves and tides washing in. Out of these the water will be constantly falling over revolving wheels. All of our restless waters, fresh and salt, will thus be harnessed to do the work which Niagara is doing today: making electricity for heat, light and fuel.

Reading the list of the other predictions certainly makes one think about how different things were back in 1900.  Coal polluted the land and people couldn’t open the windows on trains for fear of breathing in the foul air.  People cooked with coal and used it to heat their homes causing soot and dirt to be everywhere (sort of like China today!).   It is hard to imagine just how horrible coal made life at the turn of the last century.    We are certainly better off today as coal is used primarily only to fire turbines supplying the electricity directly into our homes as well as acting as an agent in steel making, both far removed from us.   As to whether coal is scarce or will run out in the year 2050, it’s anyone’s guess.  Of course, coal is not very popular right now, certainly not as popular as nuclear because of the Green Machine.  When I mentioned coal to someone recently, they exclaimed:  No one wants that anymore!   And, as predicted in 1900, this is very true.

Metallurgical coal is used in making steel and occurs only in specific areas of North America and Australia.  It is, in a sense, scarce.  However, with the drive towards cleaner alternatives, the whole coal group has been ignored.  Recently, demand and prices have been picking up and supply is limited.  It is one of the few resources where this can be plainly seen and predicted.   Some are forecasting prices to rise by 33% in 2008 and that’s after a 29% price increase in 2007.  This is due to a decline in exports from China, now  a net importer of coal for the first time.

Coal stocks are cheap.  They trade on low multiples and some have high yields (Fording has a 7.6% yield). They have not been caught up in any of the other mining frenzies like moly and uranium.  (Perhaps someone will launch a coal fund in the future?)

Earlier this year there have been rumors that some Indian companies are interested in acquiring coal companies in Canada.   This rumor moved first one stock, then another.  Because their stocks are cheap, it is a likely scenario.  Indian companies are becoming more acquisitive and like to buy companies cheaply.

What are the risks:  Coal companies are hostage to the vagaries of weather, in particular with regard to the transportation of their product.  There is only one rail line and this can limit their ability to ship.  Coal prices are also a risk, and the Chinese don’t always play fair in this market, as in others.