Many Factors Will Move The Price Of The Coal ETF Up

“Many analysts are saying that much higher demand for steel and expected demand increases for electricity are driving prices up for the metallurgical coal used in steel-making and the thermal coal used in generating power. The disastrous earthquakes in Haiti and Chile are also expected to boost the demand for structural steel. The recent announcement that India’s Essar Group is buying a West Virginia coal company will only add fuel to the rumor mill. The WV company, Trinity Coal, holds about 200 million tons of coal, half of which is the more expensive metallurgical variety and half of which is thermal coal. In a related coal-industry move, private equity firm Glencore International Group is exercising its option to acquire Colombia’s Prodeco (a thermal coal miner) from Swiss-based Xstrata Corporation for $2.25 billion,” Paul Ausick Reports From InvestorPlace.

Ausick goes on to say, “This combination of factors will move coal prices up. A less important though still significant factor is the near certainty that the US Congress will not adopt any kind of carbon cap-and-trade bill this year. Because any sort of pollution pricing will hit US coal most heavily, the coal industry has a powerful argument against cap-and-trade or a straight pollution tax. Even the President comes from a state with a large coal industry and he has signaled his belief in clean coal technology. As the leading global economies, including the US and Japan, recover from the recent recession, they will begin to compete with China, India, and other developing countries for a bigger share of the commodity pie. That leaves the coal industry in the position of considering more consolidation. Whether or not the Patriot/Massey deal is done, there are some other merger candidates that deserve their own rumors.”

“The Market Vectors Coal ETF (KOL) has moved up about 30% over the past 12 months, and tracks the share price increases in the coal sector very closely. A major holding of the ETF is Consol Energy (CNX), primarily a miner of thermal coal. In 2009, coal stocks got back about half the value they lost in the second half of 2008, but they could still double again to reach their 2008 highs. Demand for steel from Asian steel makers will drive the coal market. Barring a second economic collapse, coal stocks are poised to continue the steady climb we’ve seen in 2009,” Ausick Reports.

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Here are some details on the Market Vectors Coal ETF (KOL):

The investment (KOL) seeks replicate as closely as possible, before fees and expenses, the price and yield performance of the Stowe Coal index. The fund normally invests at least 80% of total assets in equity securities, which may include depositary receipts, of U.S. and foreign companies principally engaged in the coal industry. It normally invests at least 95% of total assets in securities that comprise the index. It is nondiversified.

TOP 10 HOLDINGS ( 61.51% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Alpha Natural Resources, inc. c (ANR) 4.62
Bucyrus International, Inc. (BUCY) 4.75
China Coal Energy Co. Ltd. N/A 7.65
China Shenhua Energy Company Limited N/A 7.58
CONSOL Energy Inc. Common Stock (CNX) 8.36
Joy Global Inc. (JOYG) 7.45
Massey Energy Company Common St (MEE) 4.23
Peabody Energy Corporation Comm (BTU) 7.92
Walter Energy, Inc. Common Stoc (WLT) 4.53
Yanzhou Coal Mining Company Limited N/A 4.42

Chart for Market Vectors Coal ETF (KOL)

 

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