The VanEck Vectors Coal ETF (NYSEArca: KOL) is up more than 27% year-to-date and hit a 52-week high on Wednesday. An important fundamental catalyst has brought short-term relief to the previously beleaguered U.S. coal industry.
With U.S. demand for coal in question, producers may be forced to international markets, mainly emerging economies, such as China. Increased steel production could also help U.S. producers of metallurgical coal. Low natural gas prices have previously weighed on coal as U.S. utility providers have turned to cleaner natural gas to power homes and businesses.
“United States coal sales abroad over the first three quarters of the year surpassed exports for all of 2016, according to government figures,” reports the New York Times. “Energy experts project an increase of 46 percent for the full year, adding more than $1 billion to coal companies’ revenues.”
A centerpiece of President Trump’s campaign was reaching out to coal miners, a strategy that helped Trump win nearly all the major coal-producing states with the exception of Illinois. Of course, any politician must make good on promises made to voters or risk being defeated in the next election. The 2020 presidential election is a long way off, but Trump needs to get coal miners back to work. Whether he can is another story.
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Coal exports represent “crucial dollars for an industry trying to stabilize itself after nearly a decade of declining prices, expanding competition from natural gas and wind and solar energy, and bankruptcies. Domestic coal-fired power plants continue to close despite promises of regulatory relief by the Trump administration, making the exports all the more critical,” according to the New York Times.
KOL, which is nearly 10 years old, tracks the MVIS Global Coal Index. That index “is intended to track the overall performance of companies in the global coal industry which includes coal operation (production, mining, and cokeries),transportation of coal, production of coal mining equipment as well as from storage and trade,” according to VanEck.
The ETF holds 27 stocks and has nearly $96 million in assets under management. KOL could be worth considering as a trade over the short-term because the materials sector is historically a stronger performer in December and January.
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