Image Source: Alliance Resource Partners
Structure of the Industrial Minerals Industry
The volatile industrial minerals space contains firms that primarily focus on coal mining. The profitability of constituents largely depends on coal prices, which are tied to factors beyond their control–such as the price of alternatives (natural gas), the demand for electricity/steel, and the strength of the global economy. Customers typically have bargaining power under customary long-term supply agreements and can terminate contracts under certain scenarios (e.g. a spike in transportation costs). Regulations and organized labor add further uncertainty to operations. We don’t like the structure of the group.
We’ve dropped coverage of stocks in the Industrial Minerals space: ARLP, CCJ, CNX, HCR, NRP.