China has made its presence felt in the Australian coal market with state-owned Yanzhou Coal Mining making a $3.5 billion takeover bid for Felix Resources.
Both Felix and Yanzhou have announced trading halts as the companies await the outcome of the potential change of control transaction.
If approved, the deal would represent one of the biggest ever Chinese investments in the Australian coal industry, as well as demonstrate Chinese companies are still hungry for Australian resources after the failed Rio-Chinalco deal.
As a large coal exporter with significant domestic reserves, China has traditionally played a small role in Australia’s coal market. But that has recently begun to change.
Export figures for June show that Australia exported 26% of its steel-making hard coking coal to China, compared to 25% to both India and Japan.
Australia also exported 22% of its semi-soft and PCI coal, as well as 10% of its thermal coal, to China.
Macarthur Coal executive general manager corporate development Ian Mcaleese told MINING DAILY that the growth in coal exports to China has been growing steadily in recent months.
He said that there are two main reasons for the increase.
“One is that the Chinese Government closed down a number of their smaller coal mines, and it turns out that the smaller mines are the ones that tend to produce more metallurgical coal,” he said.
“The other element is that the recovery in steel production in China has now gone above the levels it was at in early 2008, which was the previous peak.
“So China has potentially gone from being self sufficient in metallurgical coal to now having to import coal to continue making steel at the pace that they are.”