Brad Potter, Head of Australian Equities at Nikko AM Australia recently visited China, primarily to find out what has been driving recent increases in iron ore and coal prices and whether they can be sustained. It appears that supply side reforms are taking place in the materials sector and there is a greater focus on environmental issues. Brad also gained insights into China’s property market where supportive policies from local governments have driven sales, however the fall in inventories is far from even across provinces. In this report, Brad discusses these insights, and explains why he thinks that it is a large policy error that has resulted in severe shortages in both thermal and coking coal - rather than any increase in underlying demand. (VIEW LINK)
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