Metallurgical coal mania is sweeping the globe, and Asia's astonishing demand for steelmaking ingredients has so altered the structure of coal markets that even far-away Appalachian coals are being loaded into bulk carriers at Eastern U.S. ports and shipped directly to China.

Recognizing the enormous opportunity to profit by responding decisively to this demand, Massey Energy (NYSE: MEE) is offering $960 million in cash and stock to acquire privately held Cumberland Resources and its high-quality trove of 416 million tons of coal in reserves. Of those reserves, about half are considered marketable as coking coal, which these days is fetching spot prices north of $200 per ton and likely to move higher still.

Delving into Massey's rationale
Key to understanding Massey's value proposition is the targeted redirection of Cumberland's product sales from steam coal markets into coking coal. You see, despite the renowned quality that makes them suitable for use as coking coal, Appalachian coals historically have been sold heavily into thermal coal markets (albeit at a premium to thermal coal from other regions). Only the highest-grade products were typically reserved for steelmakers. Price and geography played key roles in this dynamic.

With domestic thermal coal stockpiles still elevated (although stabilizing), nimble operators like Massey are adapting to maximize realized prices by aggressively diverting sales to hungry coking coal markets.

Massey estimates that 4.8 million of the 7.8 million tons that Cumberland produced in 2009 was of met coal quality, but only 800,000 tons was sold into that higher price market. That is about to change, as Massey anticipates raising met coal output from Cumberland's operations to 5 million tons annually without the need for additional development capital.

Prior to this deal, Massey had announced a rapid expansion of its own met coal production to target 10 million-12 million tons in 2010. Fast-tracking development of the Rowland project is expected to add a further 2 million annual tons to the mix. All told, Massey's met coal annual production capacity appears poised to rapidly approach the 20 million-ton mark.

Appalachian coking coal gets salty
Although encouraging updates from the likes of Nucor (NYSE: NUE) suggest some stabilization of demand from the domestic steel sector, capitalizing effectively on the permanent new structure of these markets requires access to convenient shipping ports and a sales-brokering presence within key markets abroad.

CONSOL Energy (NYSE: CNX), which this week gassed up headlines with a $3.48 billion deal, leveraged its wholly owned port facility in Baltimore to ship nearly 500,000 tons of coking coal directly to China during January. CONSOL hired an external coal marketing firm to help seal the deals, and contends that the move will have "meaningful implications for CONSOL's earnings in 2010 and beyond." Not to be left out, Patriot Coal (NYSE: PCX) this week announced its own arrangements to ship 1.5 million tons of met coal directly to Pacific Rim destinations through early 2011.

Massey Energy appears poised to achieve even greater penetration into Asian markets, and recently shipped 80,000 tons to China in advance of some 2 million tons destined for India during 2010. Sporting coal preparation plants serviced by railroad operators CSX and Norfolk Southern, Massey retains solid potential to accrue additional arrangements to ship Cumberland coal into the Pacific basin this year and beyond.

That such a lengthy seaborne journey for Appalachian coal has become an economical endeavor stands as an unmistakable testament to the improving profitability outlook for met coal producers everywhere. Far from a momentary surge, we are witnessing what Peabody Energy (NYSE: BTU) and others have recognized as a permanent restructuring of global coal markets resulting from the emergence of those emerging markets.

Although I have identified export-ready producers in the Pacific basin, like Peabody and Teck Resources (NYSE: TCK), as particularly well positioned for this new market structure, the current price differential between met coal and Appalachian thermal coal renders the added transport costs for miners like Massey and CONSOL entirely manageable. Meanwhile, rivals like Alpha Natural Resources (NYSE: ANR) have indicated their intention to fill the void left in the Atlantic basin by the diversion of global trade routes toward India and China.

Whichever stock a Fool chooses to ride these historic shipments to Asia, it's clear that met coal producers are standing in a business-cycle sweet spot that must not be overlooked by discerning investors. Met coal investors: your ship has come in.

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