China Red Lines the Economy: Coal Reserves at Critical Levels

Friday, July 25, 2008 2:22
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A reoccurring theme over the last 18 months has been the shortage of coal.

The first big blowout came during the snowstorm in Febrary, 2 months after China began turning around boats to retrofit them to carry coal, and 6 months after Guangdong was suffering rolling blackouts.

since then, we have had the Guangdong governor issue a letter saying they were short 20%, , power generators were loosing money hand over first,  a couple of weeks ago you had everyone hitting energy usage records, and Chongging (a major benefactor of the 3 gorges dam) had to ration power

With that, here are some new articles that only reinforce the point that China has hit a wall from China Environmental LAw , Xinhua, and Caijing: their rail capacity is tapped, there are no more boats, the drought has continue, the Olympics are coming, and it is HOT.

For me, the situation is now reaching a stage where I am having daily conversations about the situation, and it is a situation that will only continue to get worse.  We are not in the heat of summer yet (only a few days at best), the Olympic will remove small coal plants up north from the grid, the Olympics will increase the load on the grid, and it is not like there is a lot of rail capacity that is going to suddenly make itself available.

My 2 cents – buy coal contracts, investing in commodity shipping companies, and pray that we make it through the big “O” without any major problems.

My plans – hold another What if, What Else, What are the Odds session ASAP, and pursue a few leads on companies I am profiling for my latest venture

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