Australian Floods Present Profit Opportunity with Coal
An area of Australia the size of France and Germany combined now sits
under water.
200,000 people have been affected.
And 75% of Queensland's coal mines have been forced to shut down.
In a matter of days coal mines have already lost at least $1 billion in
coal export revenue.
Australia exports 80% of its coal, and much of it goes to China. That
amounted to well over 100 million tons in 2010. And 30% of China's coal
imports are coking coal used for steelmaking.
Spot coking coal prices have risen around 10 percent to around $250 a ton
in a month. And coking coal prices are expected to move above $300 per
ton as many Queensland coal mines could be shut down for two to three
months, or longer.
Coal consumers are scrambling, and a few companies are poised to profit
from this.
One coal company in China has just finished an expansion phase that will
more than triple its annual coking coal production capacity. Earnings
were expected to grow 55% in 2011. But that was before coal prices
started what could be a 35% move higher.
With a forward 2011 Price-to-Earnings ratio of 8, and the potential for
an earnings blowout on higher selling prices, this $14 coal stock could
easily rally 50% in the next few months.
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