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The coal industry powers the world. But there are some risks when investing in this plentiful fossil fuel — including the rise of natural gas, government policies and fluctuating demand.
Coal is a rock that’s predominantly made of carbon. Its combustible properties make it useful to burn for fuel and accounts for almost 40% of the world’s electricity generation.
Despite a growing climate change movement and calls for green energy, the coal demand is forecasted to remain stable into 2024. That being said, in 2018 the Government of Canada announced regulations that are intended to phase out traditional coal-fired electricity by 2030.
90% of of the world’s coal supply is produced by 10 countries with China, India and the United States leading the pack. Canada is in 13th place, producing 1% of the world’s coal supply. Canada is the 4th largest coal exporter in the world behind Australia, the US and Russia. Most of the coal produced in Canada comes from Alberta and British Columbia.
Coal stocks are stocks in any companies that mine and process coal for electricity plants and steel production.
China consumed over 50% of the world’s coal production in 2018, according to the BP Statistical Review of World Energy. While the global coal demand should remain stable through 2024, China’s coal demand is predicted to peak in 2025.
High demand for this fossil fuel is likely to bump coal stock prices in the foreseeable future. So although coal won’t be the dominant energy source that it once was during the Industrial Revolution, the industry is hardly disappearing.
Coal stocks face 3 primary obstacles:
Many coal stocks trade on the New York Stock Exchange, and some trade on the TSX. But certain stocks, including China Shenhua Energy Co. Ltd., are only available over-the-counter (OTC Markets, Pink Sheets) or from an international exchange.
One exchange-traded fund in the coal industry is the VanEck Vectors Coal ETF (NYSEARCA: KOL). This ETF tracks the overall performance of companies involved in coal operations.
You’ll need a brokerage account to purchase coal stocks. Take a look at a few popular brokers to find one that fits your investing goals.
To invest in coal, compare trading platforms to open a brokerage account.
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