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Investing in coal stocks

Stocks related to this fossil fuel critical to energy production have surged. Here's what you need to know before investing.

Global demand for coal is surging as the pandemic slowdown ebbs, and that has coal prices hitting new records. Numerous news reports this week tell of low stockpiles as prices rise. And that has stocks in the industry surging.

  • Shares of Arch Resources (ARCH), the second-largest coal supplier in the US, are up 25% in the last week and 123% year-to-date.
  • Peabody Energy (BTU), the largest supplier, saw shares jump 21% in the last week and 549% YTD.
  • Denver-based Hallador Energy (HNRG) was up 27% in the last week and 103% YTD.

And while other factors may be at work on some stocks in the sectors, these kinds of gains are common right now. Demand for coal is still expected to fall long-term amid concern over climate change and a shift to other fuels, right now the sector is hot.
Here are some basics for those considering an investment in coal.

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 forecast to remain stable into 2024.
Coal stocks include 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 forecast 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. See how the following stocks are performing, and view details like market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield.

What ETFs track the coal category?

The only ETF tracking the coal industry shut down recently. So ETF investors can’t find a clean-cut coal play.

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.

Compare more stock trading platforms to invest in coal stocks

Compare online trading platforms by fees, asset types and bonuses to find the best for your investment in coal stocks.
1 - 7 of 7
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SoFi Invest®
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Make unlimited commission-free trades, plus earn 5% interest on uninvested cash in your account with Robinhood Gold. Subscription fees apply.
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Automated stock and bond ETF investing with the ability to trade individual stocks for as little as $1 apiece.

Bottom line

Coal stocks could be a solid short-term investing opportunity. Demand should steadily increase in the coming 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.

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