Why Coal ETFs are Not Burning Out

ETF Trends

Coal exchange traded funds are rallying as recent earnings reports for coal companies have posted better-than-expected earnings. The  Market Vectors Coal ETF (KOL) has staged a forecast, as the forecast for thermal coal in the U.S. was reported positive.

The recent report that U.S. thermal coal demand is going to pick up in the near future has sent coal-focused ETFs higher. The latest earnings reports from coal companies such as Peabody Energy (BTU) and Arch Coal (ACI) were positive and this helped the latest uptick for the coal-focused fund. [New benchmarks for Coal, Gaming ETFs]

KOl is not a pure play on U.S .coal producers, as 50% of assets are derived from China and Indonesia, reports Peter Epstein for The Motely Fool.  The  PowerShares Global Coal Portfolio (PKOL) focuses in on mid-cap and large-cap coal companies. The fund is well-diversified, with the U.S. as the top country represented, followed by China, Indonesia, Australia, and Canada, suggesting a decent mix between developed and emerging nations. [Alternative Energy ETFs Trounced in 2011]

KOL has lost about 31% in 2012, and PKOL has lost about 28% this year.

Currently, the rough trading in the oil industry and the depressed natural gas prices have been rough for the coal industry. Coal is often used as a power plant input, but mild weather across much of the nation has kept this in check for the better part of the year, reports Eric Dutram for Zacks. [ETF Chart of the Day: Coal]

Both coal-focused ETFs are trading at levels that many investors would be attracted to, however, the energy sector may not be done descending. Regardless, the coal industry is not in danger of collapse, so the funds may be worth a closer look.

Market Vectors Coal ETF

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coal-etf

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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