Increased Demand Could Boost Coal ETFs

As emerging markets continue to grow at stellar rates and developed markets continue to rebuild their economies, the demand for coal is expected to increase providing positive price support for the Market Vectors Coal ETF (KOL) and the PowerShares Global Coal Portfolio ETF (PKOL).

The primary driver in increased demand for coal is expected to come from global power generation.  Coal is absolutely essential when it comes to the generation of power.  In fact nearly 40% of the world’s electricity is produced using coal and continues to remain the main fuel in electricity generation in China, India, US, Germany, Australia and many parts of Europe.   With the expected growth in purchasing power of emerging markets and the overall growth in global population, the demand for global electricity is likely to follow.  Increased demand has already been seen in the US, as electricity consumption increased by nearly 2% over the previous year. 

Another driver behind enhanced demand in coal is expected to come from increased demand for steel from developing markets.  In fact, nearly 70 percent of the world’s steel is produced using coal.  As nations like India and South Africa focus on improving infrastructure and China continues to expand its manufacturing sector, demand for steel and indirectly coal will follow.

Although there is an ample supply of coal in the global markets, increased demand driven by global energy consumption and the focus on improving infrastructure in developing nations could potentially bolster coal and the aforementioned ETFs.

Disclosure: No Positions

Advertisements

About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: