Steel, Not Energy, Is Key to Coal’s Future Growth

The future of coal in the United States is a polarizing topic, yet recent analysis suggests that its role, particularly in metallurgical applications, is far from over. While thermal coal is on a trajectory toward decline in the U.S. due to shifts in energy policy and market dynamics, the outlook for metallurgical coal—an essential component in steel production—remains notable. Let’s delve into the driving factors behind this transition and their implications for investors in the commodities and resource sector.

An Overlooked Opportunity: Metallurgical Coal

This year, statistical insights from market-research firm Straits Research projected that the global market for metallurgical coal, also known as met coal or coking coal, would grow from $15 billion in 2024 to $18.4 billion by 2032, achieving a compound annual growth rate of 2.6%. According to Omar Sheikh, CEO of New York Energy LLC, the construction and manufacturing sectors’ dependence on steel ensures that metallurgical coal will remain a critical resource for the next two decades, despite the broader decline of thermal coal.

As Toyin Are, founder of Apex Commodity Markets, articulated, the impetus for increased steel demand lies within the policies encouraging domestic manufacturing, such as President Donald Trump’s “onshoring” agenda. This call for revival in U.S. manufacturing is generating a new demand for steel, predominantly produced using blast furnaces driven by met coal.

Government Policy and Coal Market Sentiment

The transformative efforts embedded in the Trump administration’s energy policy—highlighted by the executive order dated April 8—aim to bolster domestic coal production, framing it as essential for both economic and national security. Tim Rotolo, CEO at Range Fund Holdings, underscores that this pro-coal sentiment has positively influenced investor confidence, leading to increased valuations for coal producers and a potential stabilization of demand for both power generation and steelmaking.

To capitalize on this resurgence, Rotolo launched the Range Global Coal Index ETF, allowing investors access to both metallurgical and thermal coal producers. Despite the ETF facing a year-to-date decline of 19.5% as of May 9, 2025, recent inflows hint at a growing investor appetite for coal stocks, strengthened by policy-driven momentum.

Global Dynamics Influencing Coal Demand

On a macroeconomic scale, Global Coal use surged to 8.77 billion metric tons in 2024, according to the International Energy Agency (IEA), primarily propelled by emerging economies such as India and Southeast Asia. In stark contrast, thermal coal is being progressively phased out in Western nations, propelled by the ascendancy of cheaper renewable energy sources and natural gas. This dynamic places metallurgical coal in a more favorable position for long-term growth, with advocates like Rotolo asserting its essential ties to global steel production.

Even leading coal producers, like Peabody Energy Corp., recognize the potential of met coal. Following their acquisition of metallurgical coal assets last year, Peabody continues to project growth based on the demand generated through infrastructure advancements worldwide.

The Challenges Ahead

However, challenges still loom over the coal market. Despite the favorable policy direction, analysts like Frank Holmes from U.S. Global Investors caution that the long-term outlook for the coal industry remains precarious, largely due to the global commitment to transition toward cleaner energy sources—a trend bolstered by commitments such as the Paris Agreement.

The upcoming retirement of significant coal-generating capacity in the U.S.—with 12.3 gigawatts slated for decommissioning this year—exemplifies the challenge that thermal coal faces. Consequently, even with a boost from federal support, experts agree that the demise of thermal coal appears inevitable.

Metallurgical Coal’s Resilience: An Investment Perspective

While thermal coal finds itself in a quagmire, the perspectives on metallurgical coal are decidedly more optimistic. Analysts project that met coal could experience steady growth during future economic cycles. Additionally, geopolitical conditions, such as the rebuilding of regions affected by conflict, may offer further upside potential for met coal demand.

In conclusion, for serious commodity investors, a strategic focus on metallurgical coal appears to present a compelling opportunity. As we move forward in an evolving energy landscape, the importance of steel in infrastructural development underscores the continued relevance of met coal. By keenly observing market signals and policy changes, investors can position themselves effectively to benefit from this overlooked facet of the coal industry.