Coal has been one of the most essential providers of energy in our modern times. Humans throughout the course of history, starting with the caveman, have used it.
Today, it is still highly utilized, however, its importance has been drowned out by talk of alternative energy. People are focusing on renewable sources of energy like solar panels, hydroplants, and wind power in the face of climate change and decreasing costs of these alternative sources. Some investors have begun to pull out of coal, putting their energy investment portfolios into alternative energy.
If you are interested in energy investing, it’s critical to review every type of energy prior to making up your mind about what to include in your portfolio. After all, just because coal usage is on the decline doesn’t mean you can’t make money in that sector anymore.
Before energy investing in coal, here are five things you should know about the coal industry.
1. Humans Have Used Coal for Centuries
When you burn coal, you can make light energy and heat. The early humans, the cavemen, used coal to warm themselves and cook. They preferred it to wood because it burns for longer, which meant it didn’t have to be collected as frequently. After the cavemen, the Romans in England used coal for energy in the second and third centuries. In the 1700s, the English preferred coal over wood charcoal, since it burned cleaner and got hotter, and the Hopi Indians of North America utilized coal to cook, bake pottery, and keep themselves warm. Explorers to the United States then rediscovered coal and start using it in 1673.
Coal became a major player in the Industrial Revolution when James Watts used it to power the steam that ran his invention, the steam engine. Coals ended up providing energy to steam-powered railroads and steamships. In the 1880s, Americans started using coal for electricity in houses and factories, and by 1961, it was the top fuel used for generating electricity in the U.S.
Though it isn’t the number one fuel used anymore, the coal industry remains gigantic, and is a critical part of any energy investing plan.
2. The Coal Industry Is Huge
Today, coal continues to be a huge source of energy generation in the U.S. and around the world, which is why you may want to incorporate it into your energy investing portfolio. One-third of all the energy in the world is produced using coal, and it’s also the second largest electricity source in the United States, only falling behind natural gas. Total revenue for the coal industry in the U.S. in 2018 reached $26 billion. In 2016, worldwide, coal accounted for a 29.8% share of the total global non-renewable energy production.
So while alternative sources of energy are becoming more popular, and coal and other fossil fuels are not as widely used as they used to be, coal is still widely utilized. The demand for coal is predicted to be stable until at least 2022. President Donald Trump has also pledged to help out the coal industry by increasing jobs in it. In 2017, coal mining jobs in West Virginia jumped 11%, when 1,429 more positions were added. Alabama added 494 new jobs, Virginia added 243, and Pennsylvania added 124 that same year. In Wyoming, there was a 6% rebound in production as well.
3. Coal Is Mined in Half oftheU.S. and in a Number of Countries
The U.S. is one of the top producers and consumers of coal in the world. It produces 13% of coal globally, and together with China, Russia, India and Japan, it accounts for more than 75% of worldwide coal consumption. The U.S. contains the world’s largest coal reserves, which measures in at about 237 billion tons, and more coal reserves than any other country. There is enough coal in the U.S. to last over 250 years.
Coal is mined in half of U.S. states, which includes places like Virginia, Wyoming, Utah, Alabama, Texas, Pennsylvania, Maryland, Louisiana, Kentucky, Montana, and New Mexico.
Globally, China is the top producer of coal. Due to factors like a growing population, increases in manufacturing, and access to huge coal reserves, the country is now producing and consuming nearly as much coal as the rest of the world combined. Since the year 2000, its production has shot up by 139% and doesn’t look to be slowing down anytime soon.
When you’re putting together your energy investment portfolio, you may want to look in investing in companies in the U.S., as well as the other top four producers of coal.
4. You Need to Follow the Coal Industry
As any smart energy investing professional will tell you, it’s critical to stay in the loop about the coal industry before making any investment decisions. With the President’s pledge, high demand for coal and the emergence of alternative energy sources, the industry’s future is uncertain.
There are a number of resources where you can find coal and other energy investing news. For instance, Coal Age is a digital and print magazine that shows coal statistics and the latest news about the industry. Other exclusive coal news sources include Mining.com’s Coal Mining News section and WorldCoal.com.
5. Coal Should Be Considered for an Energy Investing Portfolio
When it comes to energy investing, you should look into a mix of fossil fuels and alternative energy resources, including coal. There are a few ways to get in on the coal market and start making money today.
For instance, one of your energy investing options are coal exchange-traded funds, also known as EFTs. EFTs are investment funds that you trade on different stock exchanges, kind of like mutual funds. The coal EFTs you choose will take the pool of money and invest in stocks that earn from things like coal exploration and production. A major player in the coal EFT sector is VanEck Vectors Coal ETF, which has a symbol KOL. This EFT invests in many aspects of the coal business including mining, storing and transporting.
You can also invest in coal stocks. Some of the top companies on the market are China Shenhua Energy Company Ltd., South32 Limited, Cloud Peak Energy Inc., and Rio Tinto Plc. These companies operate out of the U.S. and globally; Cloud Peak has projects in Wyoming and Montana, while China Shenhua Energy Company Ltd. is only in China and South32 Limited is in Australia, South America, and South Africa.
A third way to add coal to your energy investing portfolio is to invest in a coal contract for difference (CFD) derivative instrument. The way this kind of energy investing works is that investors will anticipate the value of coal mining shares, and then give a price to the stock based on the difference between the stock’s price and the price of shares when investors purchased them.
To buy coal stocks, EFTs, and CFDs, ask your broker about how to get in on the market, or sign up for an online brokerage like Ally or Fidelity. When you’re buying and selling stocks, EFTs and CFDs, remember to look at how much the platform is costing you per trade, because you don’t want all your profits to be eaten up by fees. This is especially critical if you’re only doing short-term investing and going in and out of the market frequently.
If you want to jumpstart your energy investing plan, it’s crucial to get the right advice to guide you. Thankfully, you can turn to Energy Advantage Investor (EAI) for information on energy investing news and the latest updates on coal opportunities.
The site and subscription service, which is led by internationally recognized natural gas policy and oil expert Dr. Kent Moors, will tell you what’s happening in the industry and what investments to watch out for. Instead of constantly seeking out valuable investment advice, you can have it delivered right to your inbox.
What you waiting for? It’s time to subscribe now to increase the value of your energy investing portfolio. Visit the EAI website to discover information that could change your portfolio, and your life, for the better.