GreenHaven Plans First Futures-Based Coal ETF

Includes: KOL, PKOL
by: Tom Lydon

GreenHaven is planning its second commodities related exchange traded fund, this time providing retail investors with an easy way to access coal price movements.

According to a Securities and Exchange Commission filing, the GreenHaven Coal Index Fund will try to reflect the performance of the Tradition Coal index, which follows the settlement prices of a continuous three months strip based on the second-to-expire, third-to-expire and fourth-to-expire CME Central Appalachian coal futures contracts.

The Fund will hold CAPP coal futures traded on the CME, Intercontinental Exchange or other U.S. foreign exchanges to achieve its stated strategy. Additionally, the fund may use forward contracts, cleared swap contracts and over-the-counter swaps.

Global coal prices are currently trading down about 20% to 30% year-over-year, The Economic Times reports.

"Major reasons for this decline include China's economic slowdown and high coal inventory levels, increased production and exports from Indonesia and Australia, and increased exports by US coal producers due to cheap natural gas displacing coal used in US power generation," according to a Fitch report.

Fitch Ratings expects high-cost producers in Australia and the U.S to cut production if the current low prices remain going into 2013.

"Prices could stay at the current low levels or move lower as long as the US is adjusting to cheap natural gas," Citigroup said in an industry report.

Currently, coal-related ETFs are based on companies involved in coal production, including the Market Vectors Coal ETF (NYSEARCA:KOL) and the PowerShares Global Coal Portfolio (NASDAQ:PKOL).

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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