I just looked back at the energy market and noticed that coal (what is coal that it is one of the most traded assets?) still remains an important piece in the global energy picture, even though it is increasingly overshadowed by developed countries.

What is coal? Simply put, it is a type of sediment formed from plant remnants after millions of years of transformation under heat and pressure. It may sound ancient, but today it still supplies about 1/4 of the world's basic energy and is the main source for power plants. Just in the U.S., the electricity sector consumed up to 92% of coal in 2021.

But here’s the interesting point: China produces over 3,700 million tons of coal annually — five times more than India, the second-largest producer. The reason is simple: the country has enormous energy needs to run industrial machinery. Indonesia, the U.S., and Australia are also key producers. The U.S., although producing less, has the largest coal reserves in the world (about 219 billion tons), mainly in the Appalachian region.

However, what is coal that makes countries compete over it? Because it is cheap, easy to mine, and easy to transport compared to other energy sources. Especially for emerging countries that need affordable energy to develop their industries.

I noticed that the price of Newcastle coal (the most common benchmark) surged by a record 240% to $441 per ton in nine months of 2022 due to the Russia-Ukraine conflict. But since early 2023, prices have fallen more than 50% due to declining demand in Europe (as renewable energy develops) and China (under pressure after the pandemic). Currently, the price level remains higher than the 2017-2021 period, but the trend is more stable.

There are three main factors affecting coal prices: first is geopolitics (conflicts can disrupt supply chains), second is environmental policies (countries commit to reducing emissions and shifting to clean energy), third is actual demand from developing countries.

In the long term, the clear trend: what is coal that it is still used when better alternatives exist? According to Wood Mackenzie, thermal coal traded will decrease by 60% by 2050. But in the short term (next 5-10 years), coal will still be the main fuel in Asia-Pacific, especially China, India, and Indonesia.

If you want to trade coal, there are a few ways: futures contracts on ICE (symbol NCF, 1,000 tons), CFDs via brokerage platforms, or stocks of mining companies like CNX (NYSE), or ETFs like VanEck Vectors Coal ETF.

But the key is to monitor information about China (PMI, construction index), geopolitics, and energy policies. Coal is a volatile commodity, easily affected by unpredictable news.

In summary, what is coal if not an "in transition" asset — still necessary now but gradually losing importance. If you trade, manage your risks carefully, don’t put all your money into one asset, and always stay updated on market information.