Coal Supply Shock Makes This Stock An Immediate BUY

Not only that, a brand new phenomenon could keep coal prices high for many years to come.

If you’d bought into this coal stock when I first recommended it in October 07, you’d be feeling pretty happy with your investment.

It’s gained nicely since then... today it’s hit an all time high.

But over the next few months I believe these gains will be left for dust!

The world’s coal supply has reached crunch time. Demand is higher than ever.

While severe US floods have halt mining... bottlenecks in Australian ports delay shipments all over the world... and now another phenomenon is about to send coal prices sky high.

There’s one unique stock that’s set to benefit from all this both in the next few months, and the following years. First, here’s the background...

"Brutal for world coal supply"

Severe floods have decimated some of the best arable land in the US. It's prevented coal being moved to export terminals.

The knock-on effect is brutal for world coal supply...

Infrastructure problems in the US compound the infrastructure problems in Australia. Coal exports from the vital Aussie port in Newcastle fell 13.9% over the past week as severe weather restricted vessel movement.

Today 40 ships wait idle just to be loaded!

This meant exports at the New South Wales port — the world's largest coal export terminal — dipped to 1.238 million tonnes for the week to 16 June from 1.437 million for the week to 9 June.

In a tight market such supply disruptions are key... but this is a relatively short-term factor.

I’m more interested in the long-term case for coal — and as you’re about to see, it’s very bullish indeed...

A new coal phenomenon

Crude oil prices are near historical highs, so power generation from coal is more economically attractive — despite its dirty reputation.

Globally, there is no choice other than building more coal generation plants because of the shortage of skills in the nuclear sector. It’s going to take years and years to train people and get these plants up and running... but this is not the whole story about the renaissance of coal.

There is one other bull factor for coal that is not often talked about — but I believe its influence on the coal markets will increase and increase.

Using coal to grow food

Yes folks, we’re talking fertilizer.

It was revealed this morning that a pair of Indian businessmen was considering building a $2.2 billion fertiliser plant in south-west Western Australia.

The proposed plant would process between 2.2m and 4m tonnes of coal each year into fertiliser.

The entire fertilizer industry uses less than 2% of world energy consumption, with the main product being ammonia.

Around 97% of nitrogen fertilizers are derived from synthetically produced ammonia. This is achieved by combining nitrogen with hydrogen under high temperatures and pressures. The source of nitrogen is the air, the hydrogen being derived from a variety of raw materials - crude oil, coal and natural gas hydrocarbons.

For economic and environmental reasons, natural gas has been the feedstock of choice. However, demand for gas is increasing and this makes coal much more attractive as a substrate.

Why coal prices will remain high

Coal reserves are sufficient for well over 200 years at current production levels, and their location is geographically diverse. Note that 60% of China's nitrogen fertilizer production is currently based on coal.

Trouble is... global food production HAS to increase. Populations are soaring to such an extent that even the most lifeless land will have to be used to grow food.

World population growth since 1950 exceeds that during the preceding 4 million years. Also, the world economy has expanded six-fold since 1950. And more wealth means more demand.

None of these trends are going away. Each year there are another 75m mouths to feed — and they don’t just need food to keep them sustained, they need energy to produce the food.

Coal is back to stay.

And in the meantime, bottlenecks at ports in China and Australia look set to continue. This will keep the market tight and coal prices high.

My Smart Commodities UK readers are well placed to profit from this critical situation. If you’d like details on the one stock I recommend you buy for a chance to profit from this coal phenomenon, find out about a subscription here.

Regards,

Garry White
Editor
Smart Commodities UK

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