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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Good News For Coal Exporters From The Unlikeliest Of Sources

The world saw a new number one supplier rise in a key commodity market this week.

And the identity will shock most investors.

The commodity is coal. Specifically, high-grade anthracite -- used in a both steelmaking and as thermal coal for power generation.

And the nation is North Korea. Which according to reports from Bloomberg this week has just become the world's top anthracite exporter.

The title of top exporter was previously held by Vietnam. At least up until the beginning of this year--when export patterns changed dramatically. Related: Schlumberger Vs. Halliburton: Which Is The Better Buy Right Now?

New data show that during January to May of 2015, coal exports from Vietnam into the key Chinese market dropped 91% year-on-year. With total shipments coming in at just 180,000 tonnes -- down from 2 million tonnes during the same period of 2014.

At the same time, North Korea's coal exports into China soared. Up 25%, to 7.5 million tonnes.

That's enough to make North Korea the new number one exporter of anthracite in the world. A trend that has some critical implications for global markets. Related: Here’s How To Play Low Oil Prices

Vietnam's coal supply is unlikely to return to the market anytime soon. With the country building a number of new power facilities that will take up the bulk of its domestic coal production -- and perhaps require additional imports.

That's seen Vietnam's coal shipments into China drop to nearly zero. Down from over 2 million tonnes monthly as recently as late 2012.

That's obviously a lot of supply lost from the market. A gap that North Korea has been stepping up to fill. Related: Bankruptcies Starting To Pile Up In Coal Industry

In fact, North Korea was the only country to increase coal exports to China so far this year. With the nation passing Mongolia and Russia to become the number three supplier to Chinese consumers, after Australia and Indonesia.

That's good news for Chinese buyers. But not so much for the rest of the world -- with most nations being prohibited from buying supplies from North Korea, due to sanctions.

We thus have a situation where supply may now get a lot tighter for coal buyers outside of China. Which could be a boost for producers who can sell into markets like South Korea, Japan, Taiwan, and India.

Here's to an unlikely supplier,

Dave Forest

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