Coal prices in China, the world’s largest producer and consumer of coal, are resuming their climb as coal-fired plants renew their depleted reserves. The anticipated higher summer demand may push coal usage upward and exchange traded funds (ETFs) may move right along with it.
In anticipation of the peak summer demand, users have begun to build up stockpiles, sending coal prices higher in some parts of the world, reports Baizhen Chua for BusinessWeek. [3 Reasons to Have Coal ETFs on Your Radar.]
A six-month-long drought in southwest China cut hydropower generation and upped demand for coal-fired plants, prompting China to start building up reserves again. One X factor, though, could be China’s cooling demand for steel, which has analysts wondering if it’s a sign of a slowing market or just a temporary step back. [4 Factors Driving Coal and Steel ETFs.]
Between March 19 and April 30, inventories at Qinhuangdao, the country’s largest port for coal, plunged 44%. The eastern province of Shandong has also ordered plants to increase stockpiles to 30 days of consumption from 15 days before summer.
The Union of Concerned Scientists say 11 “coal states” in the U.S. are spending billions a year to import coal from other states or abroad, reports Sarah Gardner for Marketplace. Georgia, North Carolina and Texas are the biggest spenders, and some Midwestern states are also spending to bring in coal. [Time to Look at Utility ETFs?]
Some utilities are starting to invest some of that money on energy efficiency and renewables instead – some states are also demanding a deadline for some utilities to start converting a percentage of energy production to renewables.
For more information on coal, visit our coal category.
- Market Vectors Coal ETF (NYSEArca: KOL)
- PowerShares Global Coal Portfolio (NASDAQ: PKOL)
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.