Coal’s fire fading
This is an older exclusive article for FinFeed subscribers which is now opened up. If you'd like to see new exclusive articles every week, please subscribe to our newsletter.
Coal is no doubt doing it tough.
Topping off last week was Friday’s front page news that China has cracked down on Australian coal imports.
Dalian Port Group in China's north is believed to have completely banned imports from five harbours, while other Chinese ports have pushed shipments back by 45 days.
And now there’s confirmation that Australian coal imports to China, which were the country’s largest source of coal, will be capped at a total of 12 million tonnes across all sources for 2019.
Rumours are that the move is in retaliation to Australia banning Chinese telco Huawei from bidding for 5G telecommunications contract along with a breakdown in the nations’ relationship.
In response, Treasurer Josh Frydenberg and Reserve Bank Governor Phil Lowe each urged that we stay calm and “shouldn't jump to conclusions”.
Currency traders, for one, failed to heed the advice: the Aussie dropped a full cent against the USD on the news.
And it makes sense, as the pair were hardly reassuring. Lowe, in the same breath, warned of “very difficult” economic consequences if the coal restrictions signalled a broader “souring” of the Australia-China relationship.
Coal is Australia’s largest export earner, which means the ban is damaging enough in itself, but add to that speculation that iron ore could be next in line to face the wrath of the Chinese.
In other painful news for the industry, on Wednesday night in London, Australia’s largest coal producer, Glencore (LON:GLEN) vowed to cap coal production at 2019 levels.
Pressure from the anti-coal lobby forced the move despite Glencore spending two years adding critical mass to its Australian thermal coal business.
This all followed news earlier this month, that an Australian court has, for the first time, ruled against the development of a new coal mine due to concerns around greenhouse gas emissions and resulting climate change.
As discussed in Finfeed’s Green Keeper column as week ago NSW's Land and Environment Court denied Gloucester Resources Ltd's plans to develop the Rocky Hill Mine in the Hunter Valley.
All in all, it seems coal is in the pits.
As for coal stock investors, I’d be hoping for some kind of a bounce — a chance to sell and buy into an up and coming renewable or alternative energy stocks on the ASX...
When the experts at Next Investors have a stock pick, it may pay to listen.
The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.
They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.
Click the link below to see what they are currently investing in.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.