Hot Investment Choice: Coal’s Return

coal commodity investment
When past defines your future - Coal is once again a hot investment choice

Image Courtesy – National Geographic


Coal was once condemned to oblivion but so much of that. It is currently among the hottest goods in the universe and it has not fulfilled its full potential yet.

Chinese imports have surged as compensation of the low domestic products which has, in turn, led to price hikes in Europe, almost the highest in 18 months, while Australia, on the other hand, is headed for her first annual benefit in six years.

Prices almost hit decade lows at the beginning of this year because utility demands looking to deal with pollution were decreasing by the day, not to mention the declaration by the International Energy Agency which put to an end to the use of the fuel in China. Erik Stavseth from Arctic Securities based in Oslo observed that coal had quite a rocky ride in the past four years, but it’s working its way back up.

Extreme weather is a factor that could give prices a boost if it hits China and other producers. For instance, La Nina pattern of weather caused heavy rains and floods in the Indonesian and Australian mines the last time it happened. Meteorologists predict it won’t necessarily have to get that serious but in case their predictions get “that serious” the prices will definitely shoot up further, as per the BMI Research by Fitch Group.La Nina can run for even two years; an occurrence caused when the equatorial surface of Pacific cools, hence making weather patterns all over the globe to shift.

The Meteorological Agency based in Japan recently reported of the setting in of La Nina, and that chances 70% high that it could run into winter, compared to the US Weather Service’s Center that says the event`s chances of occurrence are at an average of 40%, with Australia rating it at 50%.
The US together with Japan have not always agreed on the Pacific’s state as evidenced in 2014 when Japan declared that there was a beginning of an El Nino, but Australia and the US said otherwise.

Zinc has been the top performing commodity in the year, going up past 41℅ but coal has not been left too far behind. Delivery contracts in places like Amsterdam among others went up 30% this year as the Australian benchmark went up 40%.

Prices in Australia were double today’s prices as of February 2011 since the previous La Nina wreaked disaster to Australian transportation to South Africa.

Prices in Europe may jump as high as 27% for the consecutive double quarters in the case of an extreme La Nina according to an energy consultation firm analyst based in Nena.

In July, Citigroup said that prices in Asia might raise by up to 50% if the rain was heftier than predicted, further increasing market pressure on top of Chinese production deductions.

China’s imports went up to their highest since 2014 December as domestic production took a dive to cut out pollution, overcapacity, and unprofitable mines; while the world`s largest miner of coal, Coal India, experienced their smallest production for three years courtesy of heavy rain and protests.

Some scientists, however, do not believe that La Nina has a lot of impacts since even in its absence, coal has the ability to acquire more gains.

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