Rounding out the week where we began it. On the subject of changes happening in the critical Chinese coal market.
A very interesting news item surfaced on that front last week. With Chinese interests moving to take control of a key piece of global infrastructure in the coal trade.
That's Australia's Newcastle port. One of the largest export points for thermal coal in the world.
Local authorities confirmed that Chinese interests will buy a 98 year lease on the Newcastle port for $1.6 billion. With the group being led by Hong Kong-based infrastructure specialists China Merchants Group.
This is a major development in the coal space. Last year, Newcastle shipped over 140 million tonnes of coal--making it one of the most critical spots involved in worldwide exports.
Even more interesting than the size of the deal is the timing. With the buy coming just as rumours have been surfacing about changes afoot for China's coal import rules.
Sources suggest that a ban on low-quality coal shipments into China is all but assured. Which would mean a significant shift in buying patterns here.
Most importantly, much of the supply China currently receives from Indonesia will no longer pass muster. Meaning Chinese buyers will need to look elsewhere for imports.
Australia is an obvious choice. A port like Newcastle ships mainly higher-quality coal--of the kind that will now be required for Chinese buyers.
Could the port purchase be a sign that China's merchants are preparing for this shift? After all, if Australia is about to become a go-to coal supplier, it only makes sense to own the import conduit.
If so, this is one more signal that the coal market in places like Australia may have a lot more potential than most observers recognize.
Here's to controlling supply,
By Dave Forest