KOL’s leverage to the rebound in steel stocks comes by way of the ETF’s exposure to producers of metallurgical coal, the grade of coal used to produce steel. U.S. metallurgical coal producers found among KOL’s 36 holdings include Consol Energy (NYSE: CNX), Arch Coal (NYSE: ACI), Alpha Natural Resources (NYSE: ANR) and Walter Energy (NYSE: WLT). [Steel Stokes Coal ETF Rebound]
Still, a Russia-driven rally for KOL and its constituents could be short-lived. Analysts and fund managers quoted by Reuters note that the expansion of U.S. natural gas supplies has been a blow to coal stocks and that scenario is unlikely to abate anytime soon. Electric utilities have warmed to natural gas because of the commodity’s low prices and because it burns cleaner than coal.
The drop in coal stocks has been so precipitous in recent years that just three – Alpha Natural, Consol and Peabody Energy (NYSE: BTU) – remain in the S&P 500, according to Reuters. Those stocks combine for 12.6% of KOL’s weight, according to Market Vectors data.
Market Vectors-Coal ETF
ETF Trends editorial team contributed to this post.