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.