I could not find a suitable small or mid-cap U.S. listed Chinese company to invest in to take advantage of China's increased natural gas/LNG usage, (yet). I decided to go after the infrastructure buildout's increased demand for coal and iron ore.
agmetalminer.com
Looks like they will need a bit of steel though! Maybe coking coal and iron ore are the way to go? Looks like more nukes will create even more steel/iron demand.
bloomberg.com
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From UBS 3/18/10 Australian coal sector overview
Australian coal sector overview
We like coal
All seaborne coal prices – and equities tied to this trade – are supported by many
medium-term drivers: China and India seek more imports and now compete with
recovering traditional players; producers’ infrastructure constraints have reemerged;
while monsoonal rains plague the output of key exporters. The case for
sustainable price support is compelling: we like the coal equities.
High, stable price outlook
For JFY10, we forecast US$200/t fob for hard coking coal; $160/t fob LV-PCI;
$125/t fob SSCC; US$95/t fob thermal. While forecasts ease in following years, as
supply expands further to meet demand growth, they remain close to record-high
levels, with most producers likely to continue reporting large trade margins.
Port capacity constraints set to ease
Australia exported 279Mt of coal in 2009 versus a reported capacity of 366Mt.
Given current rail and port development plans, we expect the system’s overall
capacity to lift substantially over the medium term to beyond 500Mtpa by 2015
(+12%pa).
Top picks: CEY, CNA, MCC
Coal equities that we believe benefit most from our forecast changes in seaborne
trade and infrastructure include Centennial Coal Company Limited and Coal &
Allied Industries (thermal plays; inexpensive metrics); Macarthur Coal is our preferred stock for exposure to the met-coal market.
We are positive on coal
The dominant demand-side drivers for seaborne met- and thermal coal trades in
2010 continue to be China and India. Strong new demand growth from these
quarters is now supported by a steady recovery in more traditional coalconsuming
countries/regions of Japan, Korea and Europe – as rising economic
activity and steel production rates prompt greater coal trade.
We view seaborne coal’s supply as constrained near term. Infrastructure
constraints are re-emerging in Australia (less on ports, more on rail) and South
Africa (Eskom’s uncertain power industry management; RB port expansion).
Indonesia is struggling to meet planned production rates because of monsoonal
rains. In China, reduced output in critical coal-producing provinces (mainly
Shanxi), is seeing steel mills and power utilities there turning more to seaborne
for supply. Also, the global financial crisis effectively balked capex programmes
aimed at expanding mine supply.
Market’s price expectations edge higher
The various met-coal product prices are being guided by BHP Mitsubishi
Alliance’s (BMA) recent, controversial first quarterly contract price on 5 March
2010: US$200/t fob for hard coking coal, JFY10Q1 (we forecast US$200/t fob
HCC for JFY10 annual). Deals to be done for JFY10 include LV-PCI (UBS
estimate JFY10 US$160/t fob) and semi-soft coking coal (US$125/t fob; see our
research note “Restocking + Reflation”, 2 February 2010). Also note that new
met-coal price indices now exist (Platts & Energy Publishing): so do not get too
familiar with quarterly price contracts.
Xstrata is leading negotiations for thermal coal JFY10 contract prices, closely
guided by Newcastle’s prevailing spot price. Other important guides for our
shorter-term forecasts: Xstrata’s January 2010 CY10 deal with Japan’s utilities
at US$85/t fob; China’s domestic annual contract price deals (+5% year-onyear);
China’s purchases of Colombian coal and seaborne’s spot prices (NEWC
US$96/t fob; RB US$83.5/t fob). We forecast US$95/t fob for JFY10; US$110/t
fob for JFY11 – reflecting strong buying by China and India; and growing crosssubstitution
between semi-soft and thermal markets, as met-coal’s trade tightens.
Infrastructure remains the key to capitalise on higher prices
Australia exported 279Mt of coal from the east coast in 2009, despite theoretical
capacity of 366Mt. Based on current reported plan from the ports, rail track
owners and rail operators, we expect overall capacity to expand significantly over the next few years.
We expect Australia’s port capacity to reach 538Mt by 2015, which equates to
12% pa growth, although utilisation will likely be lower than this due to delays in rail and mine growth.
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I'm hoping to buy a bit of Macarthur Coal.
adrbnymellon.com
macarthurcoal.com.au
Time to take a good look at the iron ore companies! |
