The other “Trump trade”: Coal

The coal industry is seeing a revival of sorts – the Dow Jones Coal Index is up 44% of the year. This, after tumbling for many years in a row. But the rebound in the price of coal has less to do with Trump – and any anticipated loosening of environmental regulations – than one might think. The price of coal is paired with the price of gas, its alter ego. As the price of gas went up from $2 to $3+ per million BTU, coal recovery became more economically attractive. The majors in the industry just came out of bankruptcy, to be greeted by an up tick in pricing. Furthermore, there is the more lucrative part of the carbon business where it is an essential ingredient of steel. Australian mines suffered a natural disaster from the rains, creating a shortage in that industry, and a nice opportunity for US miners.

Dow Coal Index 1 year returnsImage

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