Energy Investing: Supply and Demand of Coal - dummies

Energy Investing: Supply and Demand of Coal

By Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

When people think of energy investing, they usually first think of oil and the big dogs in the industry like ExxonMobil (NYSE: XOM) or BP Inc. (NYSE: BP). But what you may not know is that coal, though it may not be sexy, is one of the best energy investment vehicles in the world.

Total world coal production reached a record level of 7,678 million tonnes (Mt) in 2011, increasing by 6.6 percent over 2010. Since 1990, coal production has grown 64 percent from 4,677 Mt.

As you can see in this table, China is the number-one producer of coal in the world by a large margin. China produces more than three times its nearest competitor, the United States.

Top Coal-Producing Countries
Country Annual Production (Million Tonnes) Percent of World Total
China 3,576 45.9
United States 1,004 12.9
India 586 7.5
Australia 414 5.3
Indonesia 376 4.8
Russia 334 4.3
South Africa 253 3.3
Germany 189 2.4
Poland 139 1.8
Kazakhstan 117 1.5

China is also the world’s largest consumer of coal. You can see the top ten coal-consuming countries in this table.

Top Coal-Consuming Countries
Country Consumption (Million Tonnes)
China 3,753
United States 909
India 654.4
Russia 232.8
Germany 232.7
South Africa 182.7
Japan 174.9
Poland 152.9
South Korea 126.2
Australia 118.9

At current consumption rates, coal consumption is expected to rise about 50 percent through 2035 to more than 11,700 million tonnes. A true growth trend is happening in coal right now; it’s one of the most undervalued commodities in the world. But it won’t be that way for long. You could make a very solid case that coal will be one of the best-performing assets over the next ten years.