The overall outlook for coal has strengthened thanks to some stabilization seen in the global economy. The commodity and its producers are projecting a better 2010, which may help coal exchange traded funds (ETFs) continue to outperform.

There are several factors that are supporting a stronger outlook for coal next year. Zack’s Investment research for Daily Markets reports that they see the following trends:

• Reductions in capital expenditures by both coal and natural gas producers
• A weaker U.S. dollar may help coal consumption as well
• Increased steel and electricity consumption in 2010 should all be positive catalysts for the coal industry next year

In the near future, the larger coal players with healthy balance sheets can dominate the markets in the form of acquisitions. Matthew L. Wald for The New York Times reports that two of the largest coal-burning utilities are withdrawing from a project working on carbon capture and storage and are pursuing their own work in the field.

FutureGen was seeking to build a $2.4 billion plant in Mattoon, Ill., that would convert coal to a fuel gas, capture the carbon dioxide and then burn the gas in a turbine to make electricity. The project had weak support and financing was difficult from the start.

• Market Vectors Coal ETF (KOL): up 58% year-to-date

• PowerShares Global Coal (PKOL): up 59.5% year-to-date

For more stories on coal, visit our coal category.

Tags: Coal, Commodity ETFs, KOL, PKOL, Sector ETFs