Global Seaborne Coal Market: China Imports: 2008 2%, 2010 15% possibly up to 20%.
Right now, we believe that metallurgical coal, which is the type of coal used in steel making, is the area where investors ought to be focusing their time. Companies in my universe with significant exposure to the metallurgical coal side of things should benefit more than those with exposure to thermal coal, which is used in electricity generation. A couple of examples would include companies like Alpha Natural Resources (ANR) and Massey Energy (MEE).
TWST: Please elaborate on why you prefer metallurgical coal to thermal coal.
Mr. Sussman: Right now, we think that global metallurgical is going to be in short supply for the foreseeable future. China has had the biggest impact in terms of patterns of change recently. In 2008 China accounted for just about 2% of the global seaborne coal market in terms of imports. This year, they are on pace to be somewhere in the 15%-plus, maybe 20% range of total seaborne imports. At the same time, there are only four main countries that export this product on the seaborne market. The biggest two, Australia, by far the largest, and the U.S. at number two, believe it or not, account for almost 75% of the exports. So the bottom line is that we don't see infrastructure, particularly in Australia, being able to keep up with the demand that we're seeing from countries like China. They are importing metallurgical coal and as a result, we are seeing Asian countries go directly to the U.S. to import this product, which frankly, logistically is not the easiest thing to do.
rich
