Investing in coal stocks

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:

1. 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.
2. 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.
3. 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.

Coal stocks

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.

• Warrior Met Coal (HCC.US)

  Company summary

  Warrior Met Coal, Inc. produces and exports non-thermal metallurgical coal for the steel industry. It operates two underground mines located in Alabama. The company sells its metallurgical coal to a customer base of blast furnace steel producers located primarily in Europe, South America, and Asia. It also sells natural gas, which is extracted as a byproduct from coal production. Warrior Met Coal, Inc. was founded in 2015 and is headquartered in Brookwood, Alabama.

  Historical performance

  Stock information

  • Market capitalization: $996306368
  • PEG ratio: 0
  • Dividend yield: 0.0111%

  Get more detailed information and learn how to buy HCC.US stock

• Arch Resources (ARCH.US)

  Company summary

  Arch Resources, Inc. produces and sells thermal and metallurgical coal from surface and underground mines. As of December 31, 2020, the company operated seven active mines. It also owned or controlled primarily through long-term leases approximately 28,292 acres of coal land in Ohio; 1,060 acres of coal land in Maryland; 10,095 acres of coal land in Virginia; 306,253 acres of coal land in West Virginia; 81,470 acres of coal land in Wyoming; 234,437 acres of coal land in Illinois; 33,047 acres of coal land in Kentucky; 403 acres of coal land in Montana; 358 acres of coal land in Pennsylvania; and 19,146 acres of coal land in Colorado, as well as smaller parcels of property in Alabama, Indiana, Washington, Arkansas, California, Utah, and Texas. The company sells its products to utility, industrial, and steel producers in the United States, Europe, Asia, Central and South America, and Africa. The company was formerly known as Arch Coal, Inc. and changed its name to Arch Resources, Inc. in May 2020. Arch Resources, Inc. was founded in 1969 and is headquartered in St. Louis, Missouri.

  Historical performance

  Stock information

  • Market capitalization: $978210624
  • PEG ratio: 0
  • Dividend yield: 0%

  Get more detailed information and learn how to buy ARCH.US stock

• American Resources Corporation (AREC.US)

  Company summary

  American Resources Corporation supplies raw materials for the global infrastructure marketplace. The company offers metallurgical coal and coal used in pulverized coal injection that are essential building blocks in the steel manufacturing process. It has a portfolio of operations located in the Central Appalachian basin of eastern Kentucky and southern West Virginia. The company was founded in 2006 and is headquartered in Fishers, Indiana.

  Historical performance

  Stock information

  • Market capitalization: $133146200
  • Dividend yield: 0%

  Get more detailed information and learn how to buy AREC.US stock

• Ramaco Resources (METC.US)

  Company summary

  Ramaco Resources, Inc. produces and sells metallurgical coal. The company's development portfolio includes the Elk Creek project consisting of approximately 20,166 acres of controlled mineral and 25 seams located in southern West Virginia; the Berwind property comprising approximately 31,200 acres of controlled mineral and an area of Squire Jim seam coal deposits, which is situated on the border of West Virginia and Virginia; the Knox Creek property consisting of approximately 62,100 acres of controlled mineral that is located in Virginia; and the RAM Mine property comprising approximately 1,570 acres of controlled mineral, which is situated in southwestern Pennsylvania. The company serves blast furnace steel mills and coke plants in the United States, as well as international metallurgical coal consumers. The company was founded in 2015 and is headquartered in Lexington, Kentucky.

  Historical performance

  Stock information

  • Market capitalization: $290198880
  • PEG ratio: 0
  • Dividend yield: 0%

  Get more detailed information and learn how to buy METC.US stock

• SunCoke Energy (SXC.US)

  Company summary

  SunCoke Energy, Inc. operates as an independent producer of coke in the Americas and Brazil. The company operates through three segments: Domestic Coke, Brazil Coke, and Logistics. It offers metallurgical and thermal coal. The company also provides handling and/or mixing services to steel, coke, electric utility, coal producing, and other manufacturing based customers. In addition, it owns and operates five cokemaking facilities in the United States and one in Brazil. SunCoke Energy, Inc. was founded in 1960 and is headquartered in Lisle, Illinois.

  Historical performance

  Stock information

  • Market capitalization: $657185024
  • P/E ratio: 44
  • PEG ratio: -3.65
  • Dividend yield: 0.0352%

  Get more detailed information and learn how to buy SXC.US stock

• NACCO Industries (NC.US)

  Company summary

  NACCO Industries, Inc., together with its subsidiaries, engages in the mining and natural resources businesses. The company operates through three segments: Coal Mining, North American Mining, and Minerals Management. The Coal Mining segment operates surface coal mines under long-term contracts with power generation companies, as well as with activated carbon producers in North Dakota, Texas, Mississippi, Louisiana, and Navajo Nation. The North American Mining segment provides value-added contract mining and other services for producers of aggregates, lithium, and other minerals; and contract mining services for independently owned mines and quarries in Florida. The Minerals Management segment is involved in the leasing of its royalty and mineral interests to third-party exploration and production companies, and other mining companies, which grants them the rights to explore, develop, mine, produce, market, and sell gas, oil, and coal; and provision of surface and mineral acquisition, and lease maintenance services. NACCO Industries, Inc. was founded in 1913 and is headquartered in Cleveland, Ohio.

  Historical performance

  Stock information

  • Market capitalization: $179243984
  • P/E ratio: 10.117
  • PEG ratio: 0
  • Dividend yield: 0.0306%

  Get more detailed information and learn how to buy NC.US stock

• BHP Group (BHP.US)

  Company summary

  BHP Group engages in the natural resources business in Australia, Europe, China, Japan, India, South Korea, rest of Asia, North America, South America, and internationally. It operates through Petroleum, Copper, Iron Ore, and Coal segments. The company engages in the exploration, development, and production of oil and gas properties; and mining of copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal. It is also involved in mining, smelting, and refining of nickel; the provision of towing, freight, marketing and trading, marketing support, finance, administrative, and other services; and potash development activities. The company was founded in 1851 and is headquartered in Melbourne, Australia.

  Historical performance

  Stock information

  • Market capitalization: $202886823936
  • P/E ratio: 29.1782
  • PEG ratio: 0
  • Dividend yield: 0.0197%

• China Shenhua Energy Company (601088.SHG)

  Company summary

  China Shenhua Energy Company Limited and its subsidiaries engage in the production and sales of coal and power; railway, port, and shipping transportation; and coal-to-olefins businesses in the People's Republic of China and internationally. The company's Coal segment produces coal from surface and underground mines; and sells coal to power plants, metallurgical and coal chemical producers, and provincial/regional electric grid companies. As of December 31, 2020, this segment had the recoverable coal reserves of 14.42 billion tones. Its Power segment generates and sells electric power to power grid companies. This segment generates electric power through coal, thermal, wind, water, and gas. The company's Railway segment provides railway transportation services. Its Port segment offers loading, transportation, and storage services. The company's Shipping segment provides shipment transportation services. Its Coal Chemical segment produces and sells methanol; and polyethylene and polypropylene, as well as other by-products. The company was incorporated in 2004 and is based in Beijing, China. China Shenhua Energy Company Limited is a subsidiary of China Energy Investment Corporation Limited.

  Historical performance

  Stock information

  • Market capitalization: $322180612096
  • P/E ratio: 8.9615
  • PEG ratio: 14.9436
  • Dividend yield: 0.1072%

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.

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Bottom line

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

• How does the Paris Agreement affect coal?

  When the agreement was signed in 2015, coal demand was in the middle of a three-year decline. The agreement pushed to phase out coal and caused some investors to pull out of the coal power sector. But in 2017, the global demand for coal rebounded. And the demand expects to remain steady through 2024, according to the International Energy Agency.

• Who is the largest coal producer in the US?

  Peabody Energy Corp. (BTU) is the largest producer in the US.

• How much coal does the US produce?

  The US generated 702 million tons of coal in 2018 and is the third-largest coal producer worldwide.