In today’s world, the news covers a lot about alternative energy. There’s chatter about solar panels, electric cars, hydropower plants, and much more. And we all know that global warming is causing us to change our habits and develop more sustainable sources of energy.
However, fossil fuels, including coal, are still big producers of energy. In fact, one-third of all the energy in the world is produced by coal. In the United States alone, fossil fuels are the largest source of power generation. If that isn’t convincing enough, according to statistics from the EIA, in 2017, utility-scale facilities throughout the nation generated about 4,034 billion kilowatt hours of electricity. Sixty-three percent of it came from fossil fuels, and 29.9% of that came from coal. Only 17% of electricity was generated by renewable energy like wind, landfill gas, solar, and wood.
If you are wondering whether or not your energy investing portfolio should include coal, you first need to research the industry and find out where it’s headed. By looking at the hard facts, you can make your own conclusions.
Let’s take a look at more information about coal and the industry at large.
All About the Coal Industry
If you’re going to include coal in your energy investing portfolio, you need to know all about it.
How is coal made? When layers of plant matter are packed into rock deposit, coal forms. Over millions of years, the pressure and temperature create the rock.
Coal is mined through underground shafts and open pits. Coal can be found in China, Russia, and in Midwestern and Eastern parts of the United States. The top five hard coal producers around the world include China, India, Australia, Indonesia and the United States.
Since 2000, China’s coal production has increased by 139%, according to the World Coal Association. In the United States, Pennsylvania has the most coalmines, and Texas is the state that consumes the most coal. Coal is primarily used for generating electricity.
Though there is much opposition to the coal industry, along with other fossil fuels, the demand for coal is predicted to remain stable until at least 2022.
In addition, according to the EIA, it was found that in 2017, there was a 6.4% increase in United States coal production year over year, to 774.6 million short tons. The number of coal mine employees increased by 2.4%, totaling more than 53,000 workers, and the average sales price of bituminous coal was $55.60 per short ton. This price was a 14.9% increase from 2016.
In the United States, President Donald Trump has pledged to put coal miners back to work, and 2,000 coal mining jobs were added since the beginning of the President’s term. However, coal-mining jobs have been on the decline for decades. When President Ronald Reagan was in office, there were more than 150,000 coal-mining jobs.
Though there is a lot of positive news surrounding coal, it is also facing a backlash because it’s expensive and not as sustainable as alternative sources of energy. The United States Energy Information Administration predicts that coal output has fallen in 2018 since the country is not using it as much as it once was. Predictions also state that coal output will decrease in 2019 as the export opportunity declines and natural gas production rises.
Still, President Trump is fighting to keep the coal industry alive in the United States. He has relaxed restrictions on the coal-mining industry, for instance, so they are freer to produce. Since China is producing much of the world’s goods, it still needs a lot of coal for those purposes.
Now that you’ve weighed all the facts and want to add coal to your energy investing plan, you have a few ways to go about it.
How to Invest in Coal
To boost your energy investing portfolio and invest in coal, your first option is to pursue shares in coal mining stocks from companies like Cloud Peak Energy Inc., BHP Billiton Limited, Rio Tinto plc, South32 Limited, CNX Resources, China Shenhua Energy Company Ltd., and China Coal Energy Company Ltd.
Cloud Peak, for instance, controls or owns 1.1 billion tons of proven or probable reserves, and is mainly focused on the United States Powder River. Its current projects are in Montana and Wyoming.
South32 Limited, which used to be called BHP Coal Holdings, supplies coal to the metallurgical and thermal coal industries. They operate out of South Africa, South America, and Australia, and its current market cap is $13.858 billion.
China Shenhua Energy Company Ltd. is the largest state-owned coal mining enterprise in mainland China as well as the biggest coal mining enterprise on the planet. Its parent organization is Shenhua Group, and its stock symbol is CUAEF.
Other well-known coal stocks include Natural Resource Partners LP, which owns interests in coal, aggregates and industrial materials and is located in Texas, and Warrior Met Coal Inc., which produces and exports metallurgical coal. It’s headquartered in Alabama. There’s also Hellador Energy Co., which engages in business through Sunrise Coal, LLC, its subsidiary, and Peabody Energy Corp., a coal mining company.
For more information on investing in coal stocks, you can check out U.S. News & World Report.
If you don’t want to buy shares in stock companies, you can pursue coal EFTs, which is another way to start energy investing in coal. An EFT, or an exchange-traded fund, is an investment fund that you trade on various stock exchanges. The coal EFTs will invest in company stocks that receive a significant portion of their earnings from coal production and exploration.
One coal EFT you can invest in is VanEck Vectors Coal ETF, which invests a majority of assets into businesses that are generating at least 50% of their earnings from coal mining and production, coal transporting and storing, and trading coal as well as producing equipment for coal mining. Its symbol is KOL.
Another way you can invest in coal is through a contract for difference (CFD) derivative instrument. Investors in coal CFDs predict the price of coal mining company shares, and the CFD is valued by looking at the difference between the trade’s current price and the prices of the shares when it was purchased. People like to invest in CFDs so that they can get into energy investing, but don’t necessarily want to invest in shares of a company. Brokers will be able to give interested traders access to coal CFDs.
Whether you are investing in coal through shares, CFDs, or ETFs, you can establish yourself in the coal industry and kickstart your energy investing initiative.
What Does Energy Advantage Investor Say About Coal?
Energy Advantage Investor, run by one of the most sought-after energy consultants, Dr. Kent Moors, says that coal can be an important part of any energy investing portfolio.
There is good news: Coal is on the rise in China, President Trump is attempting to protect the coal mining industry, and the United States’s consumption of coal won’t slow down until at least 2022.
But the overall trend is sustainable energy, and coal may be on its way out. There are other energy sources that are cheaper than coal and easier to produce. For instance, according to the Electrek Green Energy Brief, solar power is now 50% cheaper than coal.
Coal was a reliable investment for many decades, and it’s still lucrative for the time being. If you are considering adding coal energy investing to your portfolio, you may want to look into clean coal technologies since they work to clean up the pollution caused by the dirtiest fossil fuel.
At the end of the day, it’s important to diversify your investments and not to put all your money into coal EFTs, shares, and CFDs. You should include all types of energy in your energy investing portfolio: solar, natural gas, hydropower, wind, coal, and others.
If you would like more reliable information on what types of energy investing to pursue and when you should invest, make sure you subscribe to the Energy Advantage Investor newsletter. You’ll learn to strike when the iron is hot with any type of energy, when to pull out of risky investments, and how to double, triple or even quadruple profits from your energy investing portfolio. Visit the EAI website today to learn more.