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Coal is getting more expensive. Why and can you make money on this?

Coal is getting more expensive. Why and can you make money on this?

In one of the previous articles, we wrote about the fact that oil has shown serious growth in recent years. Today we can state that this trend has continued and today the price of Brent is traded at the level of 83-84 dollars per barrel. Well, everything is clear with oil, and gas has grown significantly lately, but what about other energy carriers?

 

Having asked this question, we began to look for other minerals that may rise in price or have already done so in order to squeeze the maximum profit out of the coming energy crisis. So, pretty quickly, we found that there was an increased interest in coal. What is the reason for this, as well as how to use it - we analyze in this article.

 

What are the reasons for the rise in coal prices?

 

In addition to the large-scale energy crisis, which is the main reason for the growth of oil, gas and other minerals, as well as coal itself, there are other reasons for the increase in the cost of traditional fuel.

 

The first and most obvious of them is the relative cheapness of coal against the background of a jump in gas and oil prices. Yes, of course, coal is a rather "dirty" fuel, especially when compared to natural gas, but when it comes to big money, few people pay attention to it. European markets are already experiencing a serious shortage of this resource and many energy companies are entering into contracts with coal suppliers.

 

The second, more local, cause is windless weather in the European subcontinent, which has led to a decrease in electricity generation by one of the main sources of green kilowatts.

 

Also, do not forget about the environmental initiatives of China, which led to a sharp reduction in coal supplies to the domestic market. In addition, China has seriously increased the price of coal for domestic consumers by tightening quarantine measures that complicate the import of traditional fuel to the Asian state.

 

Moreover, in Asia there is an increase in demand for coal due to the many low-tech industries in India and China, which suffer from a lack of their own resources and are ready to pay any money just not to stop the production of goods.

 

Is it worth investing in the industry?

 

Well, the rise in the price of coal is obvious, the reasons are clear, but only one question remains, is it worth investing in the industry? Buy coal futures? Or is it too late? According to experts, the price of coal is now inflated and is unlikely to become a new minimum, however, this trend will continue until the end of winter.

 

Buying futures is quite risky, because the price can both grow and remain at the same level, which will only lead to a loss of possible profits. Therefore, much more attractive in this situation are investments in the coal industry, and not in the raw materials themself.

 

Nevertheless, we should also not expect high growth from Russian companies. The government will artificially create restrictions on the import of the resource in order to maintain a high price for oil and gas and prevent coal from dumping the cost of energy. However, Russian companies, even despite this, will show a slight increase of up to 10 percent.

 

As for foreign enterprises, then everything depends directly on the state in which they are located. Investments in Australian coal mining companies look the most attractive, because Australia is one of the largest exporters of coal, and also has a stable economic and political system.

12.10.2021
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