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Zacks Industry Outlook Highlights: HSBC, Arch Coal and Peabody

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For Immediate Release

Chicago, IL – May 25, 2018 – Today, Zacks Equity Research discusses Health Insurance, including HSBC Holdings plc. (HSBC - Free Report) , Arch Coal Inc. (ARCH - Free Report) and Peabody Energy (BTU - Free Report) .

Industry: Coal, Part 1

Link: https://www.zacks.com/commentary/164271/coal-industry-outlook---may-2018

The coal industry has been losing its charm with increasing emphasis on reduction in carbon emissions. The U.S. coal industry has faced stringent environmental regulations over the last few years. However, conditions have started to change for the better after the election of President Trump, who wants to revive the industry and relax regulations.

The new administration has initiated steps to remove the restrictive provisions of the Climate Power Plan and has already walked out of the Paris Climate Agreement.

But the industry’s problems aren’t restricted to regulatory hurdles alone. Coal faces a far stronger challenge from natural gas. What this means is that coal’s competitive position will remain challenged even as the regulatory landscape is starting to become less onerous. Moreover, the global banking and financial services provider HSBC Holdings plc. said that it will stop funding new coal power plants across the globe, except projects in Bangladesh, Indonesia and Vietnam. The action will align the bank policy with the Paris Agreement.

The Climate Power Plan and Paris agreement have the same objective of lowering emission levels. Coal usage to generate electricity and in other heavy manufacturing industries are the primary sources of greenhouse gas emissions.

All major U.S. coal producers have been affected by a drastic fall in demand, and consequently prices have dipped. The coal companies have tried different ways — like cutting production, idling coal mines, lowering expenses, selling off coal mines and producing coal from low-cost mines — to remain commercially viable.

Thanks to coal industry-friendly moves by the new government and the ensuing change, we have seen Arch Coal Inc. and Peabody Energy successfully completing their financial restructuring and trading again.

The recent release by the International Energy Agency (“IEA”) forecasts global demand to remain flat between 2017 and 2022. The drop-in demand for coal in China, European Union and the United States is being filled up by the increase in demand for coal in India and some countries in South East Asia. We believe that it is a positive forecast for coal as it is able to retain stable global demand despite strong competition from other sources of fuel.

Coal and its various byproducts also find use in the industrial sector, underscoring its manifold advantages. However, unchecked usage of this fossil fuel has raised concerns in all quarters, especially those concerned with carbon emissions leading to greenhouse gas effects.

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