The effects of pollution can no longer be ignored and China is taking up the fight. China focused its attention on coal mines and lead smelters in hopes of reducing pollution, and the result was a boon to both coal and lead related exchange traded funds (ETFs).
China, one of the world’s biggest polluters, is becoming more environmentally conscientious. As a result, the government has started to crackdown on illegal coal mines, lead smelters and other highly pollutant facilities, writes Tony Daltorio for Investment U. The government crackdown may not concern a foreign investor until one stops to think about the economic implications.
Simple economic supply and demand shows that China has reduced supply of both coal and lead by clamping down on pollution while demand remains unchanged, which could result in higher prices for both products. Now, China has to import coal and at a higher price for steel production and power plants.
China is also the world’s largest producer and consumer of lead. Global inventories of lead is already relatively low and China’s recent increased demand of lead resulted in lead prices that are higher than they’ve been for a year.
If China continues on its newfound environmentally friendly path, the country will probably have to import more when seasonal consumption trends kick in, which would further drive up prices.
- Market Vectors Coal (NYSEArca: KOL)