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.
What is coal?
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.
Ten countries produce 90% of the world’s coal, with China, India and the United States leading the pack. Despite a growing climate change movement and calls for green energy, the coal demand is forecasted to remain stable into 2024.
Coal stocks are stocks in any companies that mine and process coal for electricity plants and steel production.
Why invest in coal stocks?
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, it’s not going anywhere yet.
Risks of investing in coal
Coal stocks face three primary obstacles:
- Government policies. When coal is burned for energy, it produces greenhouse gas emissions. Governments are adopting stronger climate policies to reduce air pollution by slowly phasing out coal power generation.
- Competition. Renewable energy, including wind, solar power and natural gas, are slowly edging coal out of the market. For example, coal generation is forecasted to drop by more than 5% every year through 2024 in Europe and the United States.
- Developments in China. Being a coal consumer giant, China strongly influences coal demand. China anticipates consumption to peak in 2025, while the International Energy Agency thinks demand could plateau as soon as 2022. Either way, coal demand will steadily fall as China weans off of coal and implements its cleaner energy strategy.
Many coal stocks trade on the New York Stock Exchange. But certain stocks, including China Shenhua Energy Co. Ltd., are only available over-the-counter or from an international exchange. Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
What ETFs track the coal category?
One exchange-traded fund in the coal industry is the VanEck Vectors Coal ETF (KOL). This ETF tracks the overall performance of companies involved in coal operations.
Compare trading platforms
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.
*Signup bonus information updated weekly.
Coal stocks could be a solid short-term investing opportunity. Demand should steadily increase in the upcoming years, but keep your eye on renewable energy and natural gas that’s slowly inching toward a bigger piece of the energy pie.
To invest in coal, compare trading platforms to open a brokerage account.
Frequently asked questions
More guides on Finder
Bitcoin sustains 15% loss as Bill Gates criticizes its climate footprint.
Debate rages over the carbon impact of Bitcoin transactions with “bitcoin sceptic” Bill Gates criticizing its power consumption
10 inverse ETFs for bearish investors
Bearish ETFs can earn you profits when the stock market is down. Learn more.
How to start investing in your 20s: 7 tips for beginners
7 tips for starting a portfolio if you’re new to investing.
Biden plans another boost for electric car stocks
Biden’s plan to replace the federal fleet with American-made electric vehicles gives another boost to a red-hot sector led by Tesla.
Investing in pet stocks
Here’s what investors need to know about the rising pet market and how to capitalize on its potentially high growth potential.
The new Ark Space Exploration ETF prepares for takeoff — but is it worth the hype?
Ark Investment Management is launching a space exploration ETF. Here’s what we know about the fund and its potential competitors.
How to invest in blockchain stocks
Comprehensive guide on blockchain stock investing, benefits, risks, main stocks, blockchain ETFs, and more.
Investing in entertainment stocks
Benefits and risks to consider before you back the entertainment sector.
Investing in pharmaceutical stocks
Benefits and drawbacks to consider before you invest in pharma stocks.
Investing in car stocks
Top car stocks and ETFs that track the category.
Ask an Expert