FREE Guide - 5 Chart Patterns You Need to Know!

History of Coal and Coal Futures

What is Coal?

Coal is perhaps the most essential rock on earth owing to the fact that it generates almost half of the world’s electricity.

Coal is formed over millions of years by numerous biological and geological processes acting together.

In peat bogs and swamps, intense pressure, high temperatures and tectonic movements act on rock deposits containing layers of vegetation, slowly turning it into peat and then eventually into coal.

It is thanks to this million-year process that coal is such an efficient fuel source. Since the vegetation trapped inside rock deposits is unable to decay normally over the years, it ends up storing all its energy in the deposit—causing coal to be a powerful source of energy.

Coal is obtained from the ground through underground shaft mining or by open pit mining at the ground level. Usually, the lesser the moisture in the coal, the greater the energy it can produce. Low rank, moist coal makes up around 47% of the market, with hard coal comprising the rest. Both can be used to produce power, but hard coal is preferred when making high-quality steel since it emits extremely hot temperatures that are most effective for removing impurities from the metal.

History of Coal

Coal has a long history as an energy source. The Ancient Greeks, Romans and the Chinese all mined and burnt coal for energy.

However, it was many centuries later— in 1748— that coal was first commercially mined in Virginia in the United States.

With the advent of the steam engine in the 1700s, coal began to be used on a wide scale as a fuel—since it was cheaper than wood and there were vast natural supplies.

Coal has been instrumental in ushering many key historical breakthroughs, but its greatest contribution was bringing about the industrial revolution. In the 1800s, coal began fueling factories—making large scale industrial production— and hence economic growth— possible worldwide. By the dawn of the twentieth century, coal had replaced wood as the main energy source around the world.

Today, coal provides for nearly 30% of the world’s energy needs and is responsible for generating around 40% of the world’s electricity and 70% of the world’s steel.

Coal’s biggest use is in supplying cheap electricity to homes and industrial plants. When coal is used for generating electricity, it is pulverized and then burned in a boiler furnace. The heat from the coal turns the boiler’s water to steam and this steam in turn spins the turbines of generators that create electricity.

Coal’s second most important role is in steel production. Metallurgical coal (coking coal) is used in smelting iron ore at blast furnaces since it produces extremely high temperatures that drive away impurities from the metal and turn it into high-grade steel.

Small amounts of coal are also used in making cement and heating commercial and military facilities.

Where is Coal found and refined?

According to the World Coal Association, global coal reserves will last for another 112 years at the current consumption capacity.

While the United States has the world’s largest reserves of coal in the world, China has been the world’s leading producer of coal since early 1980s. It currently produces nearly half of the world’s coal. In 2012, total world production of coal was 7830 Mt, with China leading the production with 3540 Mt, followed by USA at 935 Mt and India at 595 Mt. Almost 70% of the coal produced in the U.S. in 2012 originated in five states: Wyoming, West Virginia, Kentucky, Pennsylvania, and Illinois.

The world’s leading exporters are Indonesia, Russia, Australia and USA. In 2012, the U.S. exported a record high of 125.7 million short tons, mostly to European and Asian countries. 

How is Coal Used (United States)?

 Coal’s two biggest uses are in the electricity and steel sectors.

 Over the past 60 years, coal has been the single largest source for electricity generation in the U.S. In fact, coal-generated electricity forms nearly 40% of total electricity production in the country. In 2012 alone, nearly 80% (close to 800 million short tons) of the coal mined in the U.S. was used to generate electricity by US power plants.

Coal is also used extensively in producing high-grade steel in the US, with around 13% of the total coal production currently used by the industry.

However, in recent years, with increasing regulations and environmental concerns regarding carbon dioxide emissions, coal’s use in fuel production in the U.S. has declined. The demand for electricity has also fallen since 2007 and existing electricity producers, specially in the eastern U.S., are beginning to gravitate towards lower-priced natural gas.

However, the decline in U.S. consumption of coal is being made up by emerging nations such as China, which have significantly upped their consumption thanks to the fact that coal is a cheap fuel source that is useful in powering China’s bustling factories.

Asia is now the biggest coal market and presently accounts for 67% of the global coal consumption, with China and India emerging as the world’s largest importers of coal.


Get This FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!