How to Invest in Coal

Coal is formed when layers of plant matter are tightly packed into rock deposits and over millions of years the intense pressure and temperature forms the rock that we know today. Coal is arguably the most important rock on earth, responsible for jump-starting the industrial age in the 1800\'s and currently powering close to half of the world\'s electricity. Coal is generally mined either through underground shafts or through open pits. Some of the world\'s largest coal deposits are in the Eastern and Midwestern U.S. while parts of China and Russia also have a great deal of reserves as well.

Coal is primarily used for electricity generation as close to 40% of total energy production comes from the fuel source. In recent years, coal\'s importance in fuel production has shifted away from developed markets and towards emerging nations such as China where the cheap fuel is becoming increasingly important. Beyond electricity production, coal has seen increased usage in \'gasification\' programs in which coal is turned into a liquid fuel as well as in steel production where extremely hot temperatures are required to generate the most pure steel.

Investors looking to invest directly in coal have a number of options. There are (somewhat) liquid futures contracts available for Central Appalachian coal as well as similar contracts for European coal products. While investors cannot obtain physical exposure to coal, they can invest in stocks and ETFs of companies that mine the important rock allowing for equity exposure in the segment.

Ways To Invest In Coal

Coal In The News