An Energy Commodity Enjoying Double-Digit Demand Growth

The best investors in natural resources consistently make money buying unloved sectors. And few industries are more unloved these days than thermal coal.

With prices in global coal markets have taken another notable dive over the last two months (see chart below from Platts Coal Watch), investor interest has dried up. But on the consumer side, news yesterday suggests demand in one major center is surging–which may spell an opportunity in the making.

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The place is India. Where reports show that coal imports have once again been on a tear.

Platts reports that data from the Indian Ports Association show coal imports into 12 major government-run ports jumped 19% for the ten months from April 2014 to January 2015. Hitting 70.77 million tonnes–up over 11 million tonnes from the 59.64 million tonnes India brought in during the same period in 2013/14.

The increase was entirely due to thermal coal shipments. With coking coal shipments actually down by over a million tonnes during the period.

That means, all told, Indian buyers scooped up 12 million tonnes more thermal coal than last year. Proving that demand growth is still exceptionally strong in this part of the world.

This could signal a potential light at the end of the tunnel for the right coal exporters. Especially given that India’s attempts at securing overseas coal supplies have been hitting the rails of late.

Like the country’s biggest coal miner, Coal India. With reports this week suggesting that the big firm will abandon coal development projects in Mozambique–due to poor coal quality, making these mines untenable.

Mozambique had previously been one of India’s go-to hopefuls for securing nearby coal supply. Meaning that buyers here will now be looking for alternatives.

That could be an opportunity for firms that can develop coal supplies around the India Ocean sphere. In would-be producing spots like Madagascar and Kenya, for example. Watch for final import figures from India for the fiscal year (ending March 31), as well as any new projects being started up in this primed part of the world.

Here’s to picking the bottom,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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