Coal prices and the commodity’s related exchange traded funds (ETFs) are feeling the heat of high supply and a potential hit to demand. But don’t count out the black stuff just yet, because there are encouraging signs to be found.

The basic principles of supply and demand have lead demand for coal to decline while supply has remained relatively stable.  As a result, the price of South African coal has slid the most in 11 weeks.  In fact, at current rates, 58.5 million tons of coal will ship from South Africa as compared to a capacity of 76 million tons and 61.79 million tons in 2008, states Alistar Holloway of Bloomberg.

China is expected to issue a set of regulations for its domestic thermal coal market. It’s hoped that this would pave a path to resolve the deadlock in prices of coal in the nation, which could potentially put a damper on the nation’s demand for imported coal.  China already produces enough coal to meet its own demand,  but it imports coal when foreign prices are lower than domestic prices, states Eadie Chen and Fayen Wong of Reuters.

Alpha Natural Resources said that while inventories of thermal coal are historically high, this situation could flip-flop in the next year where demand could exceed supply, reports Liezel Hill for Mining Weekly. Alpha Natural is the United States’ third-largest coal producer.

Coal ETFs are up a whopping 150% off the market’s March 9 lows. If you’re considering this area as an investment, be sure to mind the trend lines and let them tell you where the trend is going. Then act accordingly.

  • Market Vectors Coal (NYSEArca: KOL): up 97.7% year-to-date

  • PowerShares Global Coal Portfolio (NASDAQ: PKOL): up 92.4% year-to-date

For more stories on coal, visit our coal category.

Kevin Grewal 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.