The China trade war on Australia is not going at all well. Iron ore is trading on a vast geopolitical premium. Damaged commodity trade flows have been redirected to other nations with a minimum of fuss. Australia’s current account surplus has skyrocketed to records.
Based on outcomes so far, it’s the best thing to ever happen to Australia.
Now we can add one more feature of failure for China: coal:
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Top quality NSW coal – which has energy content above 6000 kilocalories per kilogram – was fetching $US122 per tonne in recent days, the highest levels since July 2018.
If prices hold, these are the best levels since 2010. As well, coal and LNG are blood brothers so gas export prices will be next to take off.
The drivers are twofold. China’s pig in the python stimulus has spiked its power demand, especially for coal-fired power:
Meanwhile, it’s cut off one of its key suppliers. See the recent declines in the red bars below:
It appears that when it comes to Australia, the famed four-dimensional chess players of Chinese planning have succumbed to something closer to foaming-at-the-mouth self-harm.