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:
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 forecast 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.
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.
Company summary
Warrior Met Coal, Inc. engages in the production and export of non-thermal steelmaking coal for the steel production by metal manufacturers in Europe, South America, and Asia. The company offers hard-coking coal through the operation of underground mines located in Alabama. It also sells natural gas extracted as a byproduct from coal production. The company was incorporated in 2015 and is headquartered in Brookwood, Alabama.
Arch Resources, Inc. engages in the production and sale of metallurgical products. It operates in two segments, Metallurgical and Thermal. The company operates active mines. It owned or controlled primarily through long-term leases of coal land in Ohio, Maryland, Virginia, West Virginia, Wyoming, Kentucky, Montana, Pennsylvania, Colorado, and Illinois; and 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 and internationally. Arch Resources, Inc. was incorporated in 1969 and is headquartered in Saint Louis, Missouri.
American Resources Corporation engages in the production of rare earth and critical mineral concentrates for the electrification market. It operates through the American Infrastructure, ReElements and Electrified Materials segments. The American Infrastructure segment engages in the extraction, processing, transportation, and distribution of coal with a focus on metallurgical quality coal to the steel industry. Its ReElements segment provides final stage, separated, and purified rare earth and critical elements to the electrification industry supply chain, which are used to manufacture permanent magnets and battery materials. The Electrified Materials segment aggregates and processes used metals for recycling into new steel-based products for the recovery and sale of recovered metal and steel. American Resources Corporation was founded in 2006 and is headquartered in Fishers, Indiana.
Ramaco Resources, Inc. engages in the development, operation, and sale of metallurgical coal. Its development portfolio includes the Elk Creek project that covers an area of approximately 20,200 acres located in southern West Virginia; the Berwind property covering an area of approximately 62,500 acres situated on the border of West Virginia and Virginia; the Knox Creek property, which covers an area of approximately 64,050 acres is located in Virginia; the Maben property covering an area of approximately 28,000 acres situated in southwestern Pennsylvania southern West Virginia; and the Brook Mine property that covers an area of approximately 16,000 acres located in northeastern Wyoming. The company serves blast furnace steel mills and coke plants in North America, as well as metallurgical coal consumers internationally. Ramaco Resources, Inc. was founded in 2015 and is based in Lexington, Kentucky.
SunCoke Energy, Inc. operates as an independent producer of coke in the Americas and Brazil. It operates through three segments: Domestic Coke, Brazil Coke, and Logistics. It offers metallurgical and thermal coal. The company also provides export and domestic material handling and/or mixing services to steel, coke, electric utility, coal producing, and other manufacturing-based customers. In addition, it owns and operates cokemaking facilities in the United States and Brazil. SunCoke Energy, Inc. was founded in 1960 and is headquartered in Lisle, Illinois.
NACCO Industries, Inc., together with its subsidiaries, engages in the natural resources business. 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. Coal is surface mined in North Dakota and Mississippi. The North American Mining segment provides value-added contract mining and other services for producers of aggregates, activated carbon, lithium, and other industrial minerals; and contract mining services for independently owned mines and quarries in Florida, Texas, Arkansas, Virginia, and Nebraska. 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. The company was founded in 1913 and is headquartered in Cleveland, Ohio.
BHP Group Limited operates as a resources company in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. The company operates through Copper, Iron Ore, and Coal segments. It engages in the mining of copper, uranium, gold, zinc, lead, molybdenum, silver, iron ore, cobalt, and metallurgical and energy coal. The company is also involved in the mining, smelting, and refining of nickel, as well as potash development activities. In addition, it provides towing, freight, marketing and trading, marketing support, finance, administrative, and other services. The company was founded in 1851 and is headquartered in Melbourne, Australia.
China Shenhua Energy Company Limited, together with its subsidiaries, engages in the production and sale 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 operates through six segments: Coal Operations, Power Operations, Railway Operations, Port Operations, Shipping Operations, and Coal Chemical Operations. The Coal Operations segment produces and sells coal from surface and underground mines. The Power Operations segment generates and sells electric power to power grid companies. This segment generates electric power through coal, thermal, water, photovoltaic, and gas. The Railway Operations segment provides railway transportation services. The Port Operations segment offers loading, transportation, and storage services. The Shipping Operations segment provides shipment transportation services. The Coal Chemical Operations segment produces and sells methanol; and polyethylene and polypropylene, as well as other by-products. China Shenhua Energy Company Limited was incorporated in 2004 and is based in Beijing, the People's Republic of China. China Shenhua Energy Company Limited is a subsidiary of CHN ENERGY Investment Group Co.,Ltd.
Historical performance
Stock information
Market capitalization: $752716414976
P/E ratio: 14.1596
PEG ratio: 14.9436
Dividend yield: N/A%
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.
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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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