Koppers (KOP) manufactures chemicals and carbon byproducts like pitch, refined tar and chemicals used in aluminum, steel, resin and plastics production. It also makes treated wood products for railroad ties. The $36 shares are down 20% since December over fears of slowing demand for specialized chemical products. Koppers' treated wood products are also mistakenly associated with the slumping construction industry. Shares are trading at 11.5 times 2008 earnings, below other specialty chemical companies (18.3) and railroads and railroad suppliers (15.2 times).
Yet Barron's says carbon chemicals, particularly pitch, should see phenomenal demand as global aluminum production doubles over the next ten years. Koppers' railroad ties are seeing strong demand as U.S. railroads make billion-dollar infrastructure investments and improvements to convey rising foreign imports. China supplies 30% of the U.S. carbon pitch market, but that's shrinking amid higher Asian demand and rising costs. Lower supply will give Koppers price leverage over customers. Investors take note!