It's abundant, it's cheap, and it's found just about
It accounts for about 40% of the planet's electricity usage -- more
than natural gas, nuclear, wind, solar and geothermal combined.
It's the world's most preferred fuel for electricity generation,
and people hate it... Even children don't like it. They're told if
they misbehave, they could find a "lump of this" on Christmas
If you haven't figured it out yet, I'm talking about coal. But
before you tell me how the black rocks are the biggest threat to
the planet since the last great meteor strike, hear me out.
There's no denying that coal gives off unwelcome pollutants. But
plant efficiencies and technological advances have dramatically
blunted the environmental impact -- and clean coal development
continues to progress.
Still, many investors have been sold on the theory that coal is
yesterday's energy source, not that of tomorrow. We're constantly
told that fossil fuels are quickly becoming obsolete, and the
future belongs to cleaner alternatives such as wind and solar
Don't believe it.
Don't get me wrong, I wholeheartedly support the pursuit of
renewable energy sources (particularly those that are economically
viable without taxpayer subsidies). But coal is still the king of
the energy hill -- and it won't be knocked off for a long, long
Will coal eventually give way to other fuel sources? Probably. But
it won't happen in the next quarter-century. In fact, the Energy
Information Administration (
) is expecting global coal consumption to actually rise by 50% --
from less than seven billion tons in 2010, to 10 billion tons in
But before I get into the investment opportunity, let me briefly
address the environmental aspect -- nobody likes the image of a
factory belching pollutants into the sky.
I know coal isn't going to win any green awards. But much of the
bad reputation is undeserved. The industry has actually made great
strides in response to stringent air quality standards imposed by
the U.S. Environmental Protection Agency (EPA) and other regulatory
Since 1980, U.S. coal consumption has risen by almost 80%, yet
sulfur emissions have been slashed by 40%. The development of
selective catalytic reduction (
) systems has eliminated 90% of nitrogen oxides (NOx). And there
are all sorts of scrubbers to trap particulates and trace elements.
These and other innovations have greatly reduced coal's effect on
climate change. And that's important, because the global
would quickly shut down without coal.
Now, I've said before that affordable natural gas is displacing
some coal-fired generating capacity. That's true in the United
States, but that's not the case overseas. On a global basis, coal
has been the fastest-growing fuel since 2000.
In China alone, coal is credited with providing power access to 450
million people in the past 15 years, according to the World Coal
And consumption is projected to rise, not fall. Thanks to surging
demand from Asia (which accounts for two-thirds of global usage),
coal will meet 44% of the world's electricity needs by 2030, up
from 40% today. And it's a thicker slice of a pie that grows bigger
Europe is also becoming more reliant on coal in response to high
natural gas prices and a backlash in some quarters against nuclear
power. In India, imports of thermal coal soared more than 30% last
year. And China is planning to build 600 megawatts of coal-fired
power generation over the next 25 years. This increase represents
more than the current coal generating capacity in the United
States, Europe and Japan, combined.
Even 100 megawatts of additional capacity would require an
additional 330 million metric tons of coal. China already burns far
more than it can produce. In fact, the country had to import 182
million tons last year to cover the
And power generation is only half of the big picture...
Coal has several other important uses, most notably steel
production. The world's mills produced 1.4 billion metric tons of
steel in 2010. That production used up 720 million tons of
metallurgical coking coal, which is used to make steel.
This means 50 pounds of this key raw ingredient are needed to make
every 100 pounds of steel. And you can't build much without steel.
The World Steel Association is forecasting 5% production growth in
2012, which would
an extra 50 million tons of coal usage.
Add it all up, and you can see why the world is headed for a coal
super-cycle over the next two decades. Global consumption reached a
record 7.5 billion tons last year. And this number is headed
higher. In fact, the IEA says the increase in coal consumption in
the next 25 years will be more than double that of crude oil.
Action to Take -->
This rise in demand will unlock numerous opportunities, from
companies such as
Fuel Tech (Nasdaq:
that help cut plant emissions to
South Africa's Sasol (NYSE:
, a pioneer in the coal-to-liquid (
) fuel space.
So keep your eyes on what's going on in the coal sector. By the
looks of it, the black rocks won't be going anywhere for some time
-- Nathan Slaughter
P.S. -- Although he is an expert in the area, oil and gas is far
from the only arena Nathan is profiting from. Scarcity & Real
Wealth aims to profit from the rarest and most valuable assets on
the planet -- precious metals, agricultural commodities, energy,
and other natural resources. These critical inputs are in short
supply, yet worldwide demand is on the rise, making these assets
some of the best investments on Earth. You can learn about one
important supply/demand imbalance Nathan has found that will be
making headlines next year by visiting this link (and without
having to watch a lengthy video).
Nathan Slaughter does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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