IB Net Payout Yields Model

Coal Companies Wrongfully Smashed by China Imports Data

Coal companies were hit hard intraday becuase of supposed weak coal import data from China. Guess the data was negative or positive depending on how one viewed it. On one hand the imports were down 11% from September. On the other hand they were up 220% over last year. Apparently the market was looking for a number similar to Septembers. Regardless the YOY gains are enormous and the month to month numbers are bound to fluctuate. The trend still appears for bullish for longs.

Companies that we like such as Alpha Natural Resources (ANR) and the new IPO Cloud Peak Energy (CLD) were all hit hard today especially in comparison to the strong gains in the market. ANR was down 5% from its high around the opening bell.

  • U.S. coal mining shares fell on Monday after data showed China's coal imports dropped 11 percent in the last month, even though exporters expect a booming market in the Pacific region for the next few years.
  • Indeed, the latest official Chinese customs data showed coal imports rose 219.5 percent from a year earlier to 11.14 million tonnes in October.
  • But the October volume was 11.2 percent lower than in September, Reuters calculation showed. China's coal imports hit a record high of 16.07 million tonnes in June.
  • Just this month, Peabody Energy (BTU.N) Chief Executive Greg Boyce said he expects seaborne coal trade in the Pacific region to grow by more than 7 percent annually for several years, underpinned by robust demand from China and India.
  • China began importing huge volumes of coal due to the shutdown of many unsafe mines in the country.
The last point is crucial for the coal sector as oddly just this weekend China had a deadly explosion at a mine that has killed over 100 miners. This tragedy further highlights the safety issues at mines in China that should've sent US miners soaring. Focusing on October data seems very backwards looking.

  • The death toll from China’s worst coal-mine disaster in almost two years rose to 104 as authorities criticized safety lapses and dismissed senior management of the pit in the country’s northeast.

Stay long and strong as this was a massive buying opportunity. The trend didn't change because of this report and should've been further enhanced by the safety issues in China pushing them more towards imports.


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