Some may say investment in coal is a bet against the environment. Others will say that an investment is an investment regardless of any particular point of view. One would be unwise not to look at coal in China and understand whether there is opportunity or not. From this perspective, coking coal in China could hold potential as the world economy begins to exit its current downturn.
Puda Coal Inc., a Chinese provider of coking coal, primarily used in the manufacture of steel products, has recently received provincial approval to consolidate and maximize manufacturing capabilities. Currently, the company has a washing capacity of 3.5 million metric tons of coal (at an increased price of $103 MT) and operates in a provincial region where a near majority of coking coal is found.
From a general perspective, the company appears to have a strategy for the long term. It is engaged in a program of acquisition, in the Liulin region, which will enable longer term growth and stability. It is also engaged in programs which enable it to claim the “cleaner coal” label for marketing potential. From this perspective, the label of “cleaner coal” goes quite a long way with regards to sales in a country that is not known for its cleaner burning coal activities.
As one might expect, steel manufacturing with current economic conditions is not as bountiful as might be expected. This, however, is where the opportunity lies. The company has been experiencing the down side of the current world economy, but has also been positioning itself for an eventual upturn. If most commentators are to be believed, China will be the country to lead the global economy as it exits this dilemma. As such, steel and the required coal to manufacture it will be the leading indicator in a Chinese economy that cares little for environmental issues. Puda Coal is an investment for investment in China, and one that appears to be a solid investment as the global economy begins to move once again.
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