Sasha Cekerevac, contributor to Penny Stock Detectives, believes that one surprising sector with profit potential for the long-term investor is that of metallurgical (coking) coal mining companies. He looked into this in his recent Penny Stock Detectives article, This Could Be the Surprise Sector of 2012.
There are two types of coal produced: one is metallurgical coal, otherwise known as coking; and the other is thermal coal used by electric utilities for electricity generation. Cekerevac argues that these mining companies involved in both forms of coal extraction have been hit by the latest round of market consolidation, which provides an opportunity for the astute investor.
“The decade-low price of natural gas has pushed thermal coal to the sidelines as a source,” comments Cekerevac, “because of the higher cost relative to gas, driving down prices. This makes perfect sense, but there’s more to this story.”
A long-term investor can get an advantage in a market when they’re willing to step in as a contrarian, especially when a market consolidation occurs, according to the analyst. While thermal coal in the U.S. has decreased significantly in price, the worldwide demand for coking coal appears ready to pick up significantly, notes Cekerevac.
Coking coal is one of the main ingredients for steel production, reports Cekerevac. According to his Penny Stock Detectives article, China is forecast to grow its steel production by 10% this year alone, as it started 10 new blast furnaces since the fall of 2011, producing a record amount of steel in March. According to the Australia Bureau of Resources and Energy Economics, Chinese demand for coking coal will rise 37% this year alone. Cekerevac also says that India is planning a $1.0-trillion, five-year infrastructure development plan that will expand and improve its railways, roads and other large projects. It, too, is expanding its steel production capabilities and thus will demand even larger amounts of coking coal.
Not all coal mining companies
are the same, says Cekerevac. Some only produce thermal coal, which is still under pricing pressure, while mining companies produce a mix of thermal and coking coal. According to the editor, of the mining companies that produce a significant amount of coking coal, one that keeps coming up in his research as having potential to benefit from higher coking coal prices is Alpha Natural Resources. Alpha Natural is the largest supplier of coking coal in the U.S. and is also a major supplier of thermal coal.
While there is significant pressure in the coal industry as the market consolidation continues, for the long-term investor, Cekerevac believes this sector might be of interest.
To see the full article and to learn more about Penny Stock Detectives, visit www.pennystockdetectives.com.
The editors of Penny Stock Detectives believe low-priced stocks, when researched properly, present investors with great opportunities to accumulate wealth and to increase the value of their investment portfolios. You can learn more about Penny Stock Detectives at www.pennystockdetectives.com.
Sasha Cekerevac, BA, and Danny Esposito, B. Comm., lead editorial stock analysts at Penny Stock Detectives, in conjunction with stock market guru George Leong, B. Comm., have just updated their breakthrough video, If You Missed Apple, Shame on Us; If You Miss This… which highlights a company these stock analysts believe looks very similar to Apple Inc. in its early days. To see the video, visit: http://www.pennystockdetectives.com/video/pt/index.php?sb=PRESS.