China's CIC to Boost Investment in Coal Sector

by: Kelvin Schulle

The Coal industry has been basically ignored by investors until recently when Goldman Sachs upgraded a few premium names in the sector. Alpha Natural Resources (ANR), Arch Coal (ACI) and Consol Energy (NYSE:CNX) are among the top three in that list. In particular, the firm expects metallurgical coal prices to remain strong through 2012 as they believe "demand will largely keep pace with capacity additions, leaving spare capacity tight." It is worth noting that Alpha Natural (ANR) is the top metallurgical coal exporter to Asia among US coal companies.

Over the weekend, China Investment Corp. (CIC) backed by Noble Group Ltd. (OTCPK:NOBGF), announced it will put more investment into the coal sector according to CEO Leiman. Bloomberg also reported that the group sees rising demand from Asia and is ready to acquire more mines and build more ports. Leiman didn't mention where he plans to acquire mines, however based on history CIC is likely involved in the next move for acquisition, and names mentioned by Goldman Sachs are likely targets if CIC and Noble Group look beyond Australia given that the Chinese government has blocked deals there in the past (Rio Tinto (RTP)).

Disclosure: long GS ANR ACI BHP