How to Benefit from Coal/Power Crisis?

Reading Time: 3 minutes

“Every Crisis is an opportunity”

During crisis there are strong chances of encashing a good opportunity. Sometimes it may come at the expense of competitors not doing good due to the crisis. Coal shortage is no exception ! So let us understand who will win in this chaos !

First let us understand why the #coalshortage happened in China ?

Impact

Let us understand it from opportunistic point of view like an Alligator looking for big prey ! The prey here lies in a power intensive industry – Ferro Alloy ! Typically the power required to make the products are very high:

So when power cost soared very high in China then these manufacturers have to shut shops due to power unavailability and unviability both !

The drastic impact can be seen in September !

Chinese Output drop month on Month From  {August to September}

Overall: -24%

Ferro chrome : -24%

Silico manganese: – 29%

Ferro manganese : -20%

Ferro silicon: – 17%

Tremors across the Globe

Prices have almost doubled during last quarter !

Maithan Alloy: A Mispriced Bet

The reason for such a great margin profile lies in the power cost:

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Conclusion

Maithan alloy lies in the sweat spot also due to it being the largest listed player in this segment. It is a trading bet on this #coalshortage nevertheless it uses coal/coke as a key input so is exposed to coal prices,hence Rising coal prices can be the joker in the pack, so investor should be wary !

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Amitabh Vatsya

Amitabh Vatsya

Amitabh Vatsya is an active Investment Vlogger (http://youtube.com/c/Sadhansimplified) | Loves to share his ideas at http://wealthsutra.wordpress.com | Follow him @amitabhvatsya
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