Saturday, April 10, 2010

Macarthur Coal (ASE:MCC), Arch Coal (NYSE:ACI) Will Profit from Metallurgical Coal Demand from China

Macarthur Coal (ASE:MCC) and Arch Coal (NYSE:ACI) stand to benefit strongly from the demand from China for metallurgical coal, a high-quality coal which isn't readily available in China.

While resisting the changes in the duration of iron ore contracts from Vale (NYSE:VALE), BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RTP), where China wants a longer contract period than that changed from a yearly to a quarterly basis recently.

They have made a deal for long-term contracts for metallurgical coal with a few coal producers, which stands now at above $200 a ton.

It seems the Chinese will attempt to use those contracts and the move to invest in more domestic iron ore production to get the large iron ore producers to bring back longer contracts.

Most other countries have agreed to the shorter contracts, making this an interesting dilemna for all involved. Because China buys the most iron ore, they feel they should get a discounted price in comparison to other countries and companies.

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