China's coal industry attracts U.S. investors

CHARLESTON, W.Va. -- As China's appetite for coal is booming, American investors and businesses are cashing in.

American pension and mutual fund money is being invested in the Chinese coal industry.

The biggest Chinese coal company is China Shenhua Energy Co. of Beijing, which produces about 170 million tons of coal a year from 21 mines and builds power plants. While about 80 percent of the company's stock is owned by Shenhua Group in Beijing, the rest of its shareholders reads like a who's who of U.S. investors: Fidelity Investments, OppenheimerFunds, Merrill Lynch, even the Teachers Retirement System of Texas.

Shenhua's Hong Kong-listed shares gained almost 65 percent from July through September. Shenhua has noted its record for worker safety is far above the average in China and it is exploring ways to make coal cleaner.

Along with investors, U.S. coal companies are excited over China because of rising prices and the opportunity to increase exports.

Massey Energy Co. of Richmond, Va., and International Coal Group of Scott Depot, W.Va., recently told investors they plan to increase metallurgical coal production due to rising world demand. And St. Louis-based Peabody spent $1.51 billion last year to buy its way back into Australia, a country it left several years ago, to export to China.

U.S. government data show exports from the U.S. were up 25 percent from 2002 through 2006, and an estimated 19 percent just through July.

Faced with increasing opposition from environmental groups, U.S. coal companies have begun pushing technology designed to reduce pollutants, including the greenhouse gas carbon dioxide.

Cal Kent, who follows the industry at Marshall University's Center for Business and Economic Research, sees the beginning stages of U.S. coal companies trying to turn into global companies.

"Where markets are growing, you want to be near them," Kent said. "It's generally good in a global market to be a global company."