Below is an article that illustrates my point about chinese buying strategies and their immense patience when sourcing distressed assets.
There are hundreds of these articles around.
When they buy enough to secure a set percentage of supply, they will squeeze the majors to sell on the chinese terms.
Nothing to stop a chinese owned mine in Australia from using significant percentages of chinese imported labor and ship coal offshore. Chinese govt. can subsidise mines and just wait it out as more Australian mines go under due to cost pressure and the acquisition cycle can continue.
There is also scouting for other distressed base and precious metal mines in Australia and Canada.
unemployment will rise.
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Chinese firms scouting for coal assets but in no hurry to buy
According to people familiar with the firms’ strategies, Chinese companies are on the hunt to buy overseas coal mines as Beijing’s switch to cleaner fuels stokes demand for higher quality coal produced in countries such as Australia.
A renewed appetite for acquisitions by the world’s biggest coal consumer will be a big boost for miners who are trying to dispose of assets worth billions of dollars to boost shareholder returns.
These include Rio Tinto, which has put Australian and Mozambique coal operations on the block, and Linc Energy , which is selling its New Emerald Coal business.
However, the Chinese are not rushing to buy.
They see asset values coming under further pressure as coal prices remain depressed amid a supply glut that has already driven prices down about a third since 2011.
Sam Farrands a Hong Kong based partner at law firm Minter Ellison said that “We have clients who are interested in taking stakes in coal assets. But the view is the market’s not going to get any better for 2 years.”
Farrands said that “So why buy something today when it’s going to be a lot cheaper in eight months’ time?”
Plans to curb air pollution have raised the prospect of a long-term decline in China’s need for thermal coal, with Beijing aiming to reduce coal’s share of the energy mix to 65% or less by 2017 from 73% this year.
Though, the lower share will be within an expanding base, and it will take a long time to wean China away from coal, as it is the cheapest source of fuel for power.
As part of new cleaner-energy policies, China will push the use of better-quality coal.
Mr Michael Elliott, global head of mining and metals at consultants EY, said that this will lead to a split in coal markets, with high-energy coal set to attract a greater premium, which could favour better-quality Australian coal.
According to Australia’s Bureau of Resources and Energy Economics, China’s thermal coal imports are forecast to rise 17% over 5 years to 281 million tonnes, and metallurgical coal imports by 23% to 107 million tonnes in 2018.
Mr Ken Su, China metals and mining leader at consultants PwC in Beijing, said that “I don’t think [coal use] is going to fall off a cliff. It’s not possible yet.”
Legal and financial advisers in China and Australia said that Chinese firms hunting for buys include state-owned enterprises, miners, power firms and traders, targeting thermal coal for power stations and coking coal for steel mills.
Source - www.scmp.com
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Below is an article that illustrates my point about chinese...
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