Two Coal ETFs Expected To See Upside

Over the past week numerous analysts have raised their outlook on the U.S. coal sector as global demand for the commodity continues to rise amidst disruptions in global supply.

According to the U.S. Energy Information Agency, U.S. coal exports rose 49% during the first quarter of 2011 from the same quarter a year ago, pushing exports to their highest quarterly levels since 1992.  This growth has primarily been supported by a recent surge in demand for steam coal, which witnessed a 160% increase during the same time period, followed by a 21% increase in coking coal exports.  Although steam coal appears to be the larger catalyst in export growth of coal, coking coal remains the primary coal export, accounting for 64% of all coal exports. Read more of this post

Two Coal ETFs Impacted By Australian Floods

Australia is currently witnessing the worst flooding that it has seen in over thirty years, causing many open pit coal mines and railway links to submerge having a major impact on coal supply.

The excessive rainfall and flooding has resulted in the closures of many of Australia’s businesses, with the most recent announcement of New Hope, the Sydney-listed thermal coal miner, announcing that it was suspending operations.  In fact, the floods have influenced the operations of more than 40 coal mines throughout the nation and could impact more if Mother Nature doesn’t let up and the rainfall spreads to other parts of the country. 

This inclimate weather is of such importance because Australia is the world’s largest exporter of coking coal, accounting for nearly one-third of global supply, which is a major component in steelmaking as well as the world’s second largest in thermal coal which is used in operating power plants for generation of electricity.   According to Australia & New Zealand Bank, coal production in Queensland represents more than 40 percent of the world’s metallurgical coal exports and 8 percent of the world’s thermal coal exports, which is one of the hardest hit parts of Australia and is practically underwater.  Read more of this post

Two ETFs To Play Coal’s Appeal

Over the last year coal has been performing well as economies around the world continue to expand and demand for global energy continues to rise.  As for the future of the commodity, both microeconomic and macroeconomic factors suggest that the commodity will likely continue to remain hot.

China

In the coming year, China is expected to be a net importer of coal. This phenomenon in the Asian nation is two-fold. From a demand perspective, China continues to grow and therefore demands more coal, to generate electricity and fuel its power plants. From a supply perspective, China has been known to be the largest coal producer in the world, however, the nation in the middle of a major consolidation of its coal industry which is restricting supply. Additionally, unseasonably cold weather has increased the energy demand for home heating. Therefore, demand for coal in China will likely far outweigh supply.    Read more of this post

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.  Read more of this post

The Future Of Coal ETFs Remains Prosperous

Coal is the second largest overall source of energy and has witnessed demand grow at rates higher than oil and natural gas over the past few years and is expected to continue do so paving the path to opportunity for the Market Vectors Coal ETF (KOL) and the PowerShares Global Coal Portfolio (PKOL).

One of the reasons coal is attractive is that it is cheap in relative terms.  When compared to crude oil, the average price of coal over the past fifteen years is roughly one-third the price and is less than half the price of natural gas.    Read more of this post