NEW YORK (AP) -- An analyst report released Monday said increasing urbanization and global industrialization should push shares higher for companies associated with the coal mining industry.
Sterne Agee analyst Ben Elias said demand for coal will rise over the next five years, even taking into account a possible tax on carbon emissions.
"The demand for coal appears promising given future global consumption trends, the expected build-out of new coal fired capacity in China and India, and the normalization of inventory to (about) 50 days in North America," Elias said in the report.
Elias compared coal to the "new gold," and said a variety of companies stand to benefit from its increasing extraction and use. Heavy machinery companies such as Caterpillar Inc., for example, are cashing in on the use of coal. Caterpillar said earlier this month it plans to buy mining equipment maker Bucyrus International.
Increasing industrialization and urbanization will boost demand for electricity, which is produced largely through burning coal in spite of increasing wind and solar power production, Elias said.
As electricity use jumps, coal inventories that built up during the economic slowdown are being burned through.
Coal "supply in 2010 is down a further 1.6 percent, while demand is up 6 percent from (fiscal year) 2009 levels." Elias wrote.
Elias maintained his "Neutral" ratings on mining equipment makers Bucyrus International and Joy Global. He set a $92 price target for Bucyrus shares and an $82 price target for Joy Global.
Shares of Bucyrus rose 7 cents to $89.12 during afternoon trading. Shares of Joy Global fell 71 cents to $75.60. Shares of Caterpillar fell $1.05 to $83.08.