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New UserChinese firms want to buy coal assets overseas, but on the cheap
02 Dec 2013
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, according to people familiar with the firms' strategies.
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.
The Chinese, however, 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.
"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 two years. So why buy
something today when it's going to be a lot cheaper in eight months' time," said
Sam Farrands, a Hong Kong-based partner at law firm Minter Ellison.
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 per cent or less by 2017 from 73 per cent this year.
The lower share, though, 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 cleaner energy policies announced this week, China will push the use
of better quality coal.
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, said Michael Elliott, global head of mining and metals
at Ernst & Young.
China's thermal coal imports are forecast to rise
17 per cent over five years to 281 million tonnes, and metallurgical coal
imports by 23 percent to 107 million tonnes in 2018, according to Australia's Bureau of Resources and Energy Economics.
Source: Reuters