Coal ETFs at a Crossroad After Performing Well

“Natural gas prices are higher than a year ago, making coal more competitive in the power sector. China’s trimming its own production, boosting prices for metallurgical coal used in steelmaking. And America’s output is up 15 percent from 2016, suggesting this bruised and battered industry may be on the mend,” according to Bloomberg.

Cheap natural gas has previously weighed on coal demand as electric utilities have switched to that cleaner-burning fuel over coal. The ongoing shale oil boom has pressured natural gas prices and made natgas a cheap alternative to coal. Additionally, new environmental regulations have forced coal-fired power plants to close, and many are being replaced with natural gas.

KOL was boosted in significant fashion last year on expectations that President Donald Trump would create more coal-related jobs, but investors should approach that thesis with caution.

“While the industry itself may see an uptick, with more mine openings and perhaps continued higher prices, Trump’s promise of more jobs will prove difficult — if not impossible — to fulfill. That’s because the double whammy of cheap natural gas (a much cleaner energy source) and technological advancements in the coal mining industry simply don’t support meaningful industry job growth,” according to ETF Daily News.

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