The S&P/ASX 200 Index (ASX: XJO) coal shares have seen plenty of gains over the past year. But, there's a chance that things could get even better based on news coming out of China.
As a reminder, some of the strongest performers over the past 12 months within the ASX 200 have been the share prices of New Hope Corporation Ltd (ASX: NHC) and Whitehaven Coal Ltd (ASX: WHC).
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What could power ASX 200 coal shares higher?
According to reporting by Reuters, China Energy Investment Corp has placed an order to import Australian coal. China had supposedly put an unofficial ban on Australian coal imports since 2020.
China is reportedly trying to meet higher demand for power consumption after COVID-related restrictions have been eased. Coal is one of the energy sources that are in demand.
Reuters reported that Australia was China's second-largest coal supplier before that unofficial ban, with a quarter of Australian exports going to the Asian superpower in 2019. But, there may not be an immediate shift, as power plant inventories in the country are now reportedly high. Reuters quoted a Chinese utilities official who said:
Australian thermal coal is of better quality and is expensive. Chinese utilities may hence be less keen to buy.
Will it definitely help?
No one can know for sure how impacts to the global supply, demand and trade of coal will affect things.
While the entry of Australian coal into China is expected to challenge the market share of Russia in the country, one trader that Reuters quoted suggested that it could push down on prices:
Entry of Australian coal into Chinese markets could ease coking coal prices, which are currently on the higher side.
Coal prices are currently much higher than they were a year ago. But Europe is seeing such warm temperatures that it's currently breaking records. For example, Bilbao in Spain reached 25C just over a week ago, which was more than 10C higher than average. Does warmer weather mean less coal demand over the rest of the European winter? Time will tell.
Big dividends expected
With the profits that New Hope and Whitehaven are producing, Commsec numbers suggest they will pay their shareholders significant dividends.
New Hope could pay a grossed-up dividend yield of around 40% in FY23.
Whitehaven could pay a grossed-up dividend yield of around 16% in FY23.
However, both businesses are expected to start reducing their dividends from FY24 onwards.
