Investors should be cautiously optimistic about coal stocks even as China lifts the ban on importing Australian coal. According to a Wall Street Journal report, China’s national planning agency has allowed a group of state-owned companies to resume repurchasing Australian-origin coal, indicating that the ban has been lifted.
While China is a crucial market, much has changed in the past couple of years. Notably, exports to China dipped significantly amidst the ban. During the same period, Australia diversified its markets well and reduced its dependency on China.
What is the Future of Australian Coal?
BHP Group once highlighted that Australia was the largest seaborne exporter and supplier of metallurgical coal to China. Thus, a steady bilateral trading relationship and the resumption of exports to China are positive developments.
However, it is unlikely to give a significant boost to the shares of the coal producers, which have rallied in the past on higher demand, primarily due to the Russia-Ukraine war.
Meanwhile, Ian Macfarlane, the chief executive of the Queensland Resources Council, highlighted that Australia increased its exports to other countries, and the coal sector has performed well. However, Macfarlane welcomed the move to end the ban, which could revive exports.
Overall, China reopening its doors for Australian coal is a positive step, but it may not be a significant growth catalyst for the shares of Australian coal companies. Meanwhile, investors can keep a close watch on Whitehaven Coal (AU:WHC) and Yancoal Australia (AU:YAL) stocks in the mining space.
WHC and YAL stocks have delivered massive returns in the past year (refer to the chart below) and carry a maximum Smart Score of “Perfect 10” on TipRanks. (Stay abreast of the best that TipRanks’ Smart Score has to offer.)
