Arch Coal Inc (ACI), Kinder Morgan Energy Partners LP (KMP): One Industry Seriously at Risk If This Country’s Growth Falters

In addition to building coal export terminals, Kinder Morgan Energy Partners LP (NYSE:KMP) recently announced that it will purchase its own coal reserves, which it will lease to producers and collect royalties. It’s a move that could backfire if Chinese demand slows down.

Other companies that could be pinched if China begins to wean itself off coal are global mining giants BHP Billiton Limited (ADR) (NYSE:BHP) and Rio Tinto plc (ADR) (NYSE:RIO). Both have coal operations in Australia that are strategically positioned to benefit from Chinese demand growth. BHP Billiton Limited (ADR) (NYSE:BHP) is being particularly cautious on coal, as it’s not investing in any new coal projects while cutting about $800 million in overall costs in its coal business. Meanwhile, Rio Tinto plc (ADR) (NYSE:RIO) is looking to divest upwards of $3 billion in coal assets in a move to rid itself of some of its smaller and less-profitable assets.

China’s appetite for coal really is the cornerstone of the industry right now. However, hopes within the country are that it will be the largest producer of renewable energy one day. Not only that, but it has massive untapped shale oil and gas reserves, which could help it balance its energy demands. That’s why coal investors need to watch to see if demand growth slows, because it could be the canary in the coal mine to warn investors that coal’s biggest customer is about to slow its spending, which could really affect producer profits.

The article 1 Industry Seriously at Risk If This Country’s Growth Falters originally appeared on Fool.com is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of BHP Billiton. The Motley Fool has no position in any of the stocks mentioned.

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