Amid a slowdown in Chinese demand and other overseas problems, the coal industry is losing energy, with the sector-specific exchange traded fund touching a one-year low.
The Market Vectors-Coal ETF (NYSEArca: KOL) fell 1.9% Thursday and hit $17.22 per share, a 52-week low. Year-to-date, the ETF has decreased 9.2%.
China, which accounted for about half of global coal consumption to fuel its rapidly expanding economy, is taking in less coal. According to Carbon Track Initiative, China’s future coal demand could be lower than anticipated, and the Institute of Economics and Financial Analysis expects Chinese coal demand to top out by 2016 before the country shifts over to alternative energy sources in an attempt to diminish pollution levels, reports Saul Griffith for ValueWalk.
With the lower demand and a supply glut, coal prices have been steadily diminishing since early 2011.
“In particular it shows that high cost new mines are not economic at today’s prices and are unlikely to generate returns for investors in the future,” CTI said in a note. “Companies most exposed to low coal demand are those developing new projects, focused on the export market.”
For example, metallurgical coal, or coking coal used for smelting iron ore, has dropped to a six-year low, reports Tim Loh for Bloomberg.
Goldman Sachs analyst Neil Mehta believes that coal prices can continue to fall over the fourth quarter, reports Ben Levisohn for Barron’s. Consequently, the analyst downgraded his outlook on coal miners, including Consol Energy (NYSE: CNX), SunCoke (NYSE: SXC), Peabody (NYSE: BTU) and Alpha Natural Resources (NYSE: ANR).