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.

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While demand for coal is expected to fall long-term amid concerns over climate change and a shift to other fuels, the sector still remains pretty 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.

How to invest in coal stocks

  1. Choose a platform. If you’re a beginner, our share-dealing table below can help you choose.
  2. Open your account. You’ll need your ID, bank details and national insurance number.
  3. Confirm your payment details. You’ll need to fund your account with a bank transfer, debit card or credit card.
  4. Search the platform for coal stock codes.
  5. Research the shares you want to buy. The platform should provide the latest information available.
  6. Buy your shares. It’s that simple.

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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, are only available over-the-counter or from an international exchange. Select a company to learn more about what it does and how its stock performs, including market capitalisation, 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?

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

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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Name Product Finder score Min. initial deposit Price per trade Frequent trader rate Platform fees Offer Link
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CMC Invest share dealing account
4.4
★★★★★
£0
£0
N/A
£0
Earn up to £1,000 when you transfer a minimum of £25,000 into your CMC account, plus get your first 3 months free when you upgrade to Plus plan. T&Cs apply. Capital at risk.
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XTB
4.4
★★★★★
£0
£0
£0
£0
Earn up to 5.2% interest on uninvested cash.
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InvestEngine
4.4
★★★★★
£100
£0
N/A
0% - 0.25%
Get a Welcome Bonus of up to £50 when you invest at least £100 with InvestEngine. T&Cs apply.
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Saxo Share Dealing Account
4.3
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£0
£3
N/A
0.12% per year
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eToro Free Stocks
4.3
★★★★★
$100
£0 on stocks
N/A
£0
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Wealthify
4.2
★★★★★
£1
£0
N/A
0.6%
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Hargreaves Lansdown Fund and Share Account
4.2
★★★★★
£1
£11.95
£5.95
£0
Get back up to £100 of online trading fees until 21 June. Capital at risk. T&Cs apply.
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Halifax share dealing account
4.1
★★★★★
£20
£9.50
£2
£36 per year
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interactive investor Trading Account
4.1
★★★★★
£0
£3.99 (free regular investing)
£0
£4.99-£19.99
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TILLIT
Not yet rated
£1
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0.4%
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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