When it comes to investing in coal, exchange traded fund investors are accustomed to equity-based plays, namely the Market Vectors-Coal ETF (NYSEArca: KOL).
A new ETF is looking to change the conventional thinking regarding coal ETFs. The GreenHaven Coal Fund (NYSEArca: TONS) is designed to offer investors with exposure to daily changes in the price of coal futures contracts.TONS is the first single-commodity exchange traded product dedicated to coal.
“The Fund’s investment strategy is to provide investors with exposure to the daily change in the price of coal futures contracts in a cost-effective manner, and to permit participants in the coal or other industries to hedge the risk of losses in their coal-related transactions. The Fund will seek to achieve its investment objective by purchasing Rotterdam coal futures contracts that are traded via the CME Group, Inc. trading platforms to the greatest extent possible, without being leveraged or exceeding relevant position limits. The Fund’s portfolio will be traded with a view to reflecting the performance of coal futures contracts, whether coal futures are rising, falling or flat over any particular period,” according to a statement issued by Greenhaven.
Although coal is the source of a third of the world’s electric power, demand has been waning. Coal prices are falling as an overabundance of supply outstrips a dearth in demand. Last week, China revealed an unexpected 20% drop in imports due to lower volumes of coal, oil and other commodities, reports John W. Schoen for CNBC.