Just look at iron ore, which doesn’t trade on the commodities markets. Iron ore prices are set strictly through a supplier-consumer relationship, the CEO pointed out, and those prices have climbed faster than most of the other tradable commodities.
“There certainly isn’t anything that we see in the commodities themselves or in the comparisons between commodities that suggests that the prices are being excessively hiked by speculators,” Sutherlin said. “It’s all a matter of supply not able to catch up with the continued growth and demand.”
That demand is increasingly coming from emerging markets. Twenty years ago, Joy Global’s business was largely focused on the Atlantic Basin, but now the center of gravity has shifted – and not just to China and India. Russia, Indonesia, Turkey, Dubai and Brazil all have a voracious appetite for commodities as they build out their infrastructures.
Coal especially seems to be one item some of these countries are focused on. Power plants in emerging markets – and in Europe – have created tremendous demand for a resource that’s largely shunned by the U.S. It might not be too long, Sutherlin said, before we’re forced off our high horse.
“The reality is that we do not have enough energy supply in any form – coal, natural gas, oil – to satisfy the growing demand for energy around the world,” he said. “So we can’t just arbitrarily dispense with any of it.”
That’s why coal’s here to stay for the time being. And it’s another reason Cramer’s recommending JOYG. Buy some now while the stock’s undervalued, he said, because “this company’s got great numbers for years and years.”
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