Coal ETFs: Can They Hang Onto Gains?

January 20th at 6:00am by Tom Lydon

The Australian floods might be wreaking havoc on the country’s coal production, but that’s been a boon for coal exchange traded funds (ETFs). After several days of gains, the question now is whether those gains and high prices can continue.

Australia was recently struck by a massive flood and the crisis in Queensland will likely hurt the region’s ability to produce coke coal, reports Steven Hulton for Radio Australia. Total economic damage is estimated at $10 billion dollars and mining damages may be around $2 billion. Only 15% of state’s mines are operating at full capacity. [Can Australia ETFs Rise Above the Flood Waters?]

Market Vectors Coal (NYSEArca: KOL) and PowerShares Global Coal (NYSEArca: PKOL) may not be able to hang onto their gains indefinitely, but the floods have been beneficial in the short-term – in the last month, they’re both up about 8%.

Australia’s role in coal production is no small matter. The country produces 60% of the world’s supply of coke coal. The continent is the largest supplier of steelmaking coal and is second in exports of power station coal.

Since it could take six months to pump flood waters out of Queensland’s coal mines, the disruption could be felt for some time. [Coal ETFs Surge as Floods Threaten Production.]

Ben Sharples for The Daily Crux says analysts believe that the global price for coking coal could surge to $400 or $500 a ton based on Australia’s diminished production.

For more information on coal, visit our coal category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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