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KOL’s Collapse Turns Nasty


In the go-go days of the commodities/emerging markets trade, it was not an exaggeration to call the Market Vectors Coal ETF (KOL) a darling among equity-based commodities ETFs. Seemingly insatiable demand for coal from China, India and other developing nations sent coal stocks soaring and assets pouring into KOL.

Those days are long gone and what may be far off in the future is a rebound for KOL because the ETF seems to be getting worse on a daily basis. In a year in which the SPDR S&P 500 (SPY) is up nearly 11%, KOL has plunged 25%, but that statistic only tells part of the story. Over the past two years, SPY is up almost 28%, but KOL has tumbled 57%. [Ups and Downs for ETFs in 2012]

Again, it is hard to envision things getting noticeably better for KOL anytime soon. For example, Peabody Energy (BTU), the ETF’s fifth-largest holding with a weight of almost 6%, has closed lower for nine consecutive days. Consol Energy (CNX), KOL’s largest holding at weight of 10.3%, has closed to the downside in six of the last seven trading sessions.

It is not just the miners that are struggling. The same can be said of the equipment producers. In the past month, Joy Global (JOY) is down nearly 10%. That stock, which is almost 7.2% of KOL’s weight, has dropped in 10 of the previous 15 session.

KOL’s woes have continued even amid some bright spots about demand. India, the fourth-biggest coal importer in the world, saw thermal coal demand jump 48% in April, according to Reuters.

Chinese demand for coal is expected to double by 2030, according to Creamer’s Mining Weekly. Statistics like that may provide something to look forward for KOL investors in the future, but right now, the ETF is languishing as coal prices slide. Australian coal prices, the global benchmark are off 8% year-to-date and have lost $130 per ton in two years.

Peabody even expects that although natural gas prices remain depressed, U.S. utilities will boost coal consumption. Yet, despite all those compelling factoids, picking a bottom in KOL is becoming more difficult.

Market Vectors Coal ETF

ETF Trends editorial team contributed to this report.

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.