Investing in coal stocks

A fossil fuel critical to energy production — what to know before investing.

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The coal industry powers the world. But there are some risks when investing in coal stocks — including the rise of natural gas, government policies and fluctuating demand.

What is coal?

Coal is a rock that’s predominantly made of carbon. Its combustible properties make it useful to burn for fuel, and coal accounts for almost 40% of the world’s electricity generation.

Ten countries produce 90% of the world’s coal, with China, India and the United States leading the pack. Despite a growing climate change movement and calls for green energy, the coal demand is forecasted to remain stable into 2024.

Coal stocks are stocks in any companies that mine and process coal for electricity plants and steel production.

Why invest in coal stocks?

China consumed over 50% of the world’s coal production in 2018, according to the BP Statistical Review of World Energy. While the global coal demand should remain stable through 2024, China’s coal demand is predicted to peak in 2025.

High demand for this fossil fuel is likely to bump coal stock prices in the foreseeable future. So although coal won’t be the dominant energy source that it once was during the Industrial Revolution, it’s not going anywhere yet.

Risks of investing in coal stocks

Coal stocks face three primary obstacles:

  1. Government policies. When coal is burned for energy, it produces greenhouse gas emissions. Governments are adopting stronger climate policies to reduce air pollution by slowly phasing out coal power generation.
  2. Competition. Renewable energy, including wind, solar power and natural gas, are slowly edging coal out of the market. For example, coal generation is forecasted to drop by more than 5% every year through 2024 in Europe and the United States.
  3. Developments in China. Being a coal consumer giant, China strongly influences coal demand. China anticipates consumption to peak in 2025, while the International Energy Agency thinks demand could plateau as soon as 2022. Either way, coal demand will steadily fall as China weans off of coal and implements its cleaner energy strategy.

Coal stocks

Many coal stocks trade on the New York Stock Exchange. But certain stocks, including China Shenhua Energy Co. Ltd., are only available over-the-counter or from an international exchange.

What ETFs track the coal category?

One exchange-traded fund in the coal industry is the VanEck Vectors Coal ETF (KOL). This ETF tracks the overall performance of companies involved in coal operations.

Compare trading platforms

You’ll need a brokerage account to purchase coal stocks in Australia. Take a look at a few popular brokers to find one that fits your investing goals.

Name Product Standard brokerage fee Inactivity fee Markets International
eToro Share Trading (US stocks)
US$0
US$10 per month if there’s been no login for 12 months
US shares, ETFs
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
Superhero share trading
$5
No
ASX shares, ETFs
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
ThinkMarkets Share Trading
$8
No
ASX shares, ETFs
No
Limited offer: Get 5 free ASX trades when you open a new account with ThinkMarkets before June 30, 2021 (T&Cs apply).
Buy and sell CHESS sponsored ASX shares with $0 brokerage on your first 5 trades. Only $8 flat fee brokerage thereafter, plus enjoy free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
⭐ Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until July 31, 2021 when you join Bell Direct.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
IG Share Trading
Finder Award
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Saxo Capital Markets (Classic account)
$6.99
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Yes
Acess 19,000+ stocks on 37 exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Stockbroking
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

Coal stocks could be a solid short-term investing opportunity. Demand should steadily increase in the upcoming years, but keep your eye on renewable energy and natural gas that’s slowly inching toward a bigger piece of the energy pie.

To invest in coal, compare trading platforms to open a brokerage account.

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