This Key Event Is Really Happening

At least, it appears. The much-touted Chinese coal import ban.

News last week out of China suggests this elusive regulation is close to becoming reality. With the government perhaps having already enacted the legislation.

What we know is that the Chinese parliament has approved a new set of environmental laws. The first such rule change in over two decades in the country.

That's been officially announced. What we don't know yet is the exact content of the new rules. But sources told market analysts Platts that new rules on coal shipments into China are a "centerpiece" of the environmental reforms.

That could be one of the biggest developments for the international coal market in years. Perhaps creating a permanent shift in global trading patterns--and setting up some significant opportunities.

Here's how. According to Platts' sources in China, the government will now prohibit imports of lower-quality coal. Specifically, supplies with a calorific value of less than 3,900 kcal/kg.

That affects imports from exactly one place on the planet: Indonesia. Which is currently a major supplier of low-calorie coal to buyers globally-including China.

That means Chinese consumers may now no longer be able to source Indonesian imports. Which endangers a great deal of supply. In 2013, China imported nearly 60 million tonnes of low-quality coal.

If the new rules go ahead as reported, that coal will now have to come from somewhere else. Likely Australia--which is the closest supplier to China of higher-quality coal that would pass the import ban.

Miners here could thus see an upsurge in demand. Even coal producers in the U.S. could benefit. At least those that have capacity to ship significant supply to Asian markets.

We'll see if the reports from China turn out to be true. If so, watch for a reorganization of coal markets soon.

Here's to keeping it clean,

By Dave Forest