The Surprising Longevity of Coal

Coal is poised to likely remain a significant energy source for longer than most people expect. Its enduring appeal lies in its main attributes of being cheap, reliable, and easy to store for infinite periods, which are the same reasons why it likely will persist in the future. It can quickly fill the gaps when an energy crisis emerges, much as experienced in Europe in 2022 in response to Russia’s invasion of Ukraine. 

Additionally, increases in demand in countries like China and India are likely to offset declines in developed regions like the U.S. and the European Union (EU).

The Pareto Chart

The Pareto Chart lays bare a stark reality: a powerful minority holds sway over the majority. It's a chilling truth mirrored in the realm of coal demand, where behemoth nations like China and India loom large. What does their insatiable appetite for coal say about the future of global demand?

China – The Elephant in the Room

China accounts for 55% of global coal demand and 70% of its emissions. China has been permitting and building coal-fired power plants faster than any other country in history. In Q3 2023, China permitted more coal plants than in all of 2021. More than 95% of coal plant capacity that began construction in 2023 was in China.[1]

Researchers in China said that coal-fired capacity could rise by more than 200 gigawatts (GW) by the end of the decade. That is more than the entire power capacity in Canada.[2]

While paying lip service to emissions reduction goals, China has been reluctant to commit to a coal winddown target, only saying it plans to start phasing down coal between 2026 and 2030.[2]

India - Not Far Behind

India’s coal production rose to 893 million tons during the fiscal year ending 3/31/23, an increase of 15% from the previous year. Almost 75% of India’s power comes from coal-fired power plants.[3]

India will start operating new coal-fired power plants with a capacity of 13.9 GW in 2024, the highest annual increase in six years and four times its annual average over the past five years. It also plans to add at least 56.3 GW through March 2032.[4]

Most analysts see a continued ramp-up in Indian coal consumption. The most pessimistic estimates see an increase of 300 million tons in the next six years, with cautious to optimistic estimates ranging from 1.5 – 1.9 billion tons.[5]

Energy Security - The Prime Issue

In the high-stakes arena of energy security, both China and India utilize coal as a shield against uncertainty. They point to the unreliability of renewable energy, emphasizing the need for a dependable power source. Compounded by droughts crippling hydropower output, their reliance on coal intensifies. Yet, as they prioritize energy security, their climate aspirations take a backseat, illustrating a precarious balance between power needs and climate goals.[6]

Unlikely to See Peak Coal Anytime Soon

With demand expected to continue growing in China and India, peak coal demand is unlikely anytime soon. 

Leading to a Potential Investment Opportunity

Companies in the coal industry may be poised to benefit from the expected continued increase in coal demand.

How May Investors Gain Exposure to Companies in the Coal Industry?

The Range Coal Index ETF

The Range Coal Index ETF (COAL) seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Range Global Coal Index. The Index is designed to track the performance of companies that are involved in the coal industry.

[1] Dirty Secret, Doomberg, 2/16/24
[2] Howe, Colleen & Cao, Ellen, In China’s Coal Country, Full Steam Ahead With New Power Plants Despite Climate Pledges, Reuters, 11/30/23
[3] Ying-Shan, Lee, World’s Two Largest Coal Consumers Won’t Be Weaning Off the Fossil Fuel Anytime Soon, CNBC, 1/10/24
[4] Varadhan, Sudarshan, India To Increase Coal-Fired Capacity in 2024 By The Most In At Least Six Years, Reuters, 2/1/24
[5] Russell, Clyde, India’s Coal Sector Sees Huge Leaps In Output And Demand, Reuters, 2/28/24
[6] Varadhan, Sudarshan, India to Increase Coal-Fired Capacity in 2024 by Most in at Least Six Year, Reuters, 2/1/24; In China's Coal Country, Full Steam Ahead with New Power Plants Despite Climate Pledges, Reuters, 11/30/23; Ying-Shan, Lee, World’s Two Largest Coal Consumers Won’t Be Weaning Off the Fossil Fuel Anytime Soon, CNBC, 1/11/24

Risk Disclosures:

Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's full or summary prospectus, which may be obtained by visiting www.rangeetfs.com/coal. Read it carefully before investing or sending money.

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