Buy coal when sentiment down, page-13

Mining news article.
Hope no issue reproducing.....some great commentary and future projections. Great article Mr Bromby. Thankyou for the upbeat analysis.
Could RES have fluked the perfect time to be coming into production????



Coal is king (again)
BUT China’s outlook may cloud other mining sectors. The Outcrop, by Robin Bromby.

05 July 2018

• Robin Bromby

China's slowing economy will have "negative implications for most commodity prices".
So says Capital Economics. Certainly what seems to be credit squeeze going on in China has already put the reins on property developers.
As Capital points put, it is not just the prospect of trade wars that is hitting metal prices; after all, the Shanghai property index has collapsed of late and that sector faces little challenge from tariffs. It does, however, get bruised when there is a general slowdown.
Bloomberg reports this week that China is zooming to a record year of corporate-bond defaults, with the 2018 total already more than three-quarters of the previous high even before an expected economic slowdown bites.
Chinese companies have reneged on about 16.5 billion yuan ($3.4 billion) of public bond payments so far this year: that's nearly as much in six months as the total in 2016 of 20.7 billion yuan, according to data compiled by Bloomberg. The reports adds that rating agencies  have been downgrading firms by an unprecedented margin.

The Chinese currency has dropped by about 5% in the past two weeks.
Overnight trading in base metals was again the generator of grim news to wake up to this morning. China is by far the largest buyer of industrial metals; this suggests miners here, who have so long assumed China will buy everything, may need a Plan B.
Meanwhile, coal is king again. This week we have seen Australian thermal coal prices hit their highest level since 2012 (and 25% up on this time last year) at US$120/t. Meanwhile, coking coal is trading around $250/t, up 31% since a year ago.
If this sort of price action were taking place in any other mineral sector, then the 10-bagger crowd would be over-excited and combing through all the listed coal players looking for an entry point. The evidence suggests that they are not getting the message: that is, that anyone developing a mine in the next few years is going to be looking at good prices because there will be shortages.
What appears to have happened is that the market expects a supply problem: after all, the financial sector has come over all sanctimonious about coal and closed their chequebooks when it comes to new projects. (And when you get Liberal politicans thinking aloud about "life after coal", then it is time to worry whether the National Energy Guarantee might be better named the National Energy Suicide Note).
The Minerals Council's prediction about thermal coal -- that demand from Asia could increase from 740Mt now to 1.14 billion tonnes in the next 12 years -- tells you all you need to know.
One figure being bruited about is that there are 467 coal-fired plants presently under construction around the world and another 930 planned. Various other counts have been proferred by the anti—coal side of the argument. Of course, projects can get cancelled and others develop.
But there is certainly evidence that, while the developed countries turn their backs on coal (even though it was the energy source that made possible the industrial revolution and the very existence of "developed countries") those who cannot afford to be quite so smug are still hungering for coal-fired electricity as a means of growth.
Chinese companies are to build a 6000 megawatt coal-fired station in Egypt (it will be the largest such plant in the world, eclipsing a 5500MW operation in Taiwan). Kenya, which has a 1050MW under way to be supplied with South African coal, is looking to build a second (960MW) near to a recently discovered coalfield. Kosovo is eyeing a 500MW one to solve its power shortages (the World Bank is examining its conscience to  decide whether to provide finance) and Mozambique is embracing coal-fired generation, too.
Japan's government is promoting the country's efficient new coal-fired generation technology, with Tokyo Electric and Chubu Electric launching a joint venture in Singapore to build power plants in Cambodia, the Philippines and other Southeast Asian nations.
The latest price surge for thermal coal has been driven by strong demand from China. It seems the much-bruited switch to gas-fired generation has not yet filled the gap. Australian exporters have benefitted, although not to the extent that the Indonesians have.
As the news stated this week, coal is set to become Australia's largest export item again.
Last year coal earned this country A$56.5 billion. The anti-coal crusaders should realise that a life after coal also means a life without prosperity.
Meanwhile, just watch the earnings of the coal sector.