Must-know: Why coal ranks differ from each other

Must-know: Why coal ranks differ from each other

By

May. 3 2021, Updated 11:13 a.m. ET

How coal ranks are different

Coal’s carbon component is what makes up its energy. Naturally, lignite has the lowest energy content or heating value according to weight. Lignite, sometimes called brown coal, has a chocolate-like color. It’s mainly used to power electricity.

Article continues below advertisement
Must-know: Why coal ranks differ from each other

On the right side of the chart above, we have higher-ranked coal with higher energy and lower moisture content. It’s used for industrial and steel production purposes. This coal is darker and shinier.

Article continues below advertisement

Coal used for electricity purposes is often called steam or thermal coal. Coal used to make steel is called metallurgical (or met) or coking coal. Cloud Peak Energy (CLD) only produces thermal coal. Walter Energy (WLT) calls itself a pure-play met coal producer. Other producers like Arch Coal (ACI) and Alpha Natural Resources (ANR) produce met and thermal coal. The VanEck Vectors Coal ETF (KOL) invests in met and thermal coal producers. American coal producers account for 36% of the exchange-traded fund’s (or ETF) holdings.

Coal ranks reflect the coal’s maturity. Each rank gets converted into a higher rank as pressure, heat, and time alter its chemical and physical properties. The process is very slow. It spans millions of years. Just to give you a rough estimate, American coal deposits are ~300 million years old!

Before we start analyzing different coal producing regions’ economies, it’s important to know about the impurities trapped in the coal. The impurities impact the environment. The Environmental Protection Agency’s (or EPA) EPA’s war against coal is mainly due to how coal negatively impacts the environment. Learning about the impurities will help you understand the regions and producers that can fight the new regulations.

Advertisement

More From Market Realist

  • Thai Airways plane
    Consumer
    Thai Airways (TAWNF) Is Risky, Best to Avoid the Penny Stock
  • A "now hiring" sign outside a Popeyes restaurant, one sign that employers are having trouble finding employees willing to work for current wages.
    Consumer
    Why Employers Are Struggling To Fill Jobs Despite High Unemployment
  • Beyond Meat patties in a grocery cart
    Consumer
    Buying the Dip on Beyond Meat (BYND) Stock Is a Risky Move
  • People looking at data on a laptop
    Consumer
    Is Driven Brands (DRVN) a Good Stock to Buy? A Look at the Year Ahead
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.