Today I thought we’d take a look at an issue Robert Hsu has been pushing pretty hard for about a week: Coal. The latest twist to the story is the huge traffic jam that everyone has been talking about, the massive tie-up of (mostly) coal trucks trying to get into Beijing from Inner Mongolia, which provides a very nice image to convey lots of issues, especially demand for coal, and inadequate rail and highway infrastructure.
So that’s the image Hsu uses to describe China’s coal demand:
“Imagine, for a moment, what it would be like to own a business that comes complete with a 10-day 60-mile traffic jam to get to your store!
“The profits would be enormous, to say the least.
“In fact, even Apple’s Steve Jobs would be jealous, as the line for new Apple product launches wraps only around the block and lasts but just one day.”
So that’s the basic premise — that this huge coal demand is going to make us rich.
“Robert Hsu reveals the China coal producer that’s at the heart of this traffic jam, why third-quarter profits will shoot through the roof and how last week’s 45% gains are just the beginning”
OK … and if you’re paying attention to the Chinese coal industry these days, you’ve probably noticed that the government has been cracking down not just on stimulus spending for infrastructure, but also on small, dirty and inefficient coal producers, and they’re doing this by essentially choosing a few top coal companies that will buy out the little guys and consolidate the industry. Most of these consolidators are state controlled, of course (or completely state owned), but not all of them. Like a few other analysts I’ve seen mention this lately, Hsu is pushing one of the private consolidators …
“The billions the country is throwing into infrastructure are creating an epic demand for electricity—not only pushing up coal prices but also increasing coal imports again this year.
“This puts our top-rated coal consolidator in the catbird seat.
“The Chinese government has enacted a policy that favors larger coal miners and mandates that small mines be sold to larger operators to increase production.
“Our company’s position as the only non-state-owned consolidator in the region gives it rights to buy 22 regional coal mines at dirt-cheap prices by March 31.
“The end ...