Coal ETFs Surge as Floods Threaten Production | ETF Trends

Coal exchange traded funds (ETFs) are on the winning end as cold weather hammers the East coast and floods plague the land down under.

It’s a perfect storm…for Market Vectors Coal (NYSEArca: KOL) and PowerShares Global Coal (NYSEArca: PKOL), both of which are up more than 5% as a host of factors threaten the coal supply and send prices soaring.

  • U.S. coal prices were already on fire as a result of the cold weather gripping much of the United States, particularly on the East coast. KOL and PKOL are both up around 9% in the last month as Americans fire up their heaters.
  • Australia’s flooding has interrupted production big-time. Phoebe Sedgeman for Bloomberg reports that the floods will have a greater impact than those in 2008, which caused spot coking coal prices to jump to more than $300 a ton from $125 a ton. Queensland exports about half of the world’s coking coal for Asian steel mills, and coal contract prices are expected to creep up $300 a ton. [Coal ETFs Burn Up Performance Chart.]
  • Further contributing to price spikes is the fact that steelmakers around the world are now on the hunt for high-grade coal, Mineweb reports. The pressure is on to get in while coal is still affordable. The end result might be higher steel prices, too, which could benefit Market Vectors Steel ETF (NYSEArca: SLX). [Australia Flooding Sinks Some ETFs; Lifts Others.]

Tisha Guerrero 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.