September 09, 2008 at 1:00 am by Tom Lydon
The coal-focused exchange traded fund (ETF) Market Vectors Coal (KOL) was one of the biggest losers last week, as it fell 17.2%. This week, it hasn’t gotten off to the strongest of starts, as it fell 5.9%.
On a global level, demand for coal has shown some signs of burnout, leaving U.S. producers in the dust, reports The Canadian Press. If steel prices fall off and producers cut their production, the run for coal companies could be coming to a close.
Factors contributing to the loss of interest in coal include ocean freight rates, the U.S. dollar and other industry slowdowns such as the steel industry, which uses coal to blast furnaces. As of Thursday, Goldman Sachs downgraded the entire U.S. coal industry, giving reasons such as a strengthening U.S. dollar and concerns about demand from China.
For now, international steel demand and production has been relatively strong, and China, a major importer, is actually facing a coal shortage. KOL is down 11.8% since its Jan. 15 inception.
Tags: Asia, China, Coal, Emerging Markets, Energy, KOL
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