China Is Changing Its Coal Use, and It Affects the Whole World

an understatement. So one of the things we have definitely learned over the past year or so is that when one part of the global supply chain I guess flaps its wings or experiences a disruption or whatever, it tends to ripple through a bunch of other things. And I think that's arguably what we've seen with energy prices and

with the big surge in prices over the past few months. Yeah, I think like commodities, and of course commodities are very sort of heart you can't deal them from global industrial processes and supply change in general. Like it feels like what we talk commodities, that it's like a there is a very high level of demand the GDP around the world, growing very fast, particularly as economies returned to trend or

in some cases maybe even overshoot the previous trend. And then there is also the sort of idiosyncratic factors that pop up that are not really macro. Maybe it's related to weather, maybe it's related to environmental changes that inhibit production. Maybe it's sort of something else, and it's like that policy. So it's like that combination of very tight, very strong demand and then any ripple or any speed bump anywhere, or any change on the supply side really gets magnified. Yeah.

So this was something that Jeff Curry at Coleman Sacks brought up on one of our episodes last year when we were discussing high energy prices and the commodities rally. He I think he said that actually, what was happening in European gas actually began with a coal shortage in China. So there wasn't enough coal in China and they had to find a substitute energy source, and what they found was oil and gas, and that eventually fed through into

European prices. So I guess what I'm saying is, if you think of China cole as ground zero for higher energy prices that rippled throughout the world, it seems like we should dig into that. Yes, I'm very curious what's going on with China and energy because there's lots of different things happening at once. There's the Olympics coming up, there's domestic policy changes, which we've talked about quite a bit.

There's long term goals on changing the energy mix. I don't feel like I have much insight into it other than that is extremely important beyond China's borders. So yes, we need to dig it further. Okay, Well, I am pleased to say that we are going to do exactly that. We have Alex Turnbull of fund manager based in Singapore and some when he has done quite a bit of research into China's coal market. So Alex, welcome to the show,

Thank you very much. So I guess my first question, just to lay the groundwork for this discussion, one of the unusual things about the China coal market, as I understand it, is that China does actually have a decent amount of coal within its borders, but it also imports a lot of its coal supplies. So I guess my question is why does that happen? Why do they do that?

Why not just dig up what they have already? Sure, with any commodity which is reasonably lower dollar value per ton, it's best to think of it as not a price where if you want to buy ann ounce of gold from someone it's sufficiently high value, they can mail it to you or exported quite easily. With things that are relatively low value, per toime, transport costs are incredibly important

and locational constraints are very important. So it's a little bit like gas pipelines where just because someone wants to buy gas somewhere, it doesn't mean you can actually deliver it to them, will deliver it to them an economical price. So with Cole, it's really these locational dynamics that make it quite a quirky market in some respects. Just like nine seconds into this discussion, I'm already finding that to

be like very useful. So I want to step back and asking even zoom zoom out even further before we get into the details. But it's in your research, like outside of China specifically, why is this a question or why is this a topic that interests you? And why should say anyone outside of China care that much? Sure, so, my background is in distressed debt historically and convertible bonds and the call sector repeatedly blew up over the course of the financial crisis. A few names got into trouble.

There was a large protracted downturn in sixteen, and over that period SEV simultaneously worked on Peabody Energy, which went bankrupt, and also Mongolian mining, which also went bankrupt around the same time, had to be restructured. And so by seeing how those two businesses were actually quite tightly coupled in weird ways via the Chinese coal market and the quirks within the Chinese coal market and regulatory actions there. At a time, this is essentially the biggest energy market in

the world. It's almost a quarter of the world's carbon emissions, just col and China, and it's recentably poorly covered and understood. So and the course of tweeting about this in I think it was mid I got a reply back from a friend who's a professor at the Istraelia National University, who said, what's all this about? And then we spoke about it for an hour or so. He said, why

don't we do a paper about this? And I thought, well, we can probably get the data, or at least we can try, and so hence we went through this exercise of modeling the entire Chinese logistics, power and steel market, transport and the minds and the imports in a big simulation. So maybe we should get into what has actually been

happening with the coal market in China. And you know, I'm looking at a chart of prices, and there was that spike late last year, sort of at the beginning of the fourth quarter, I guess, and it started coming down since then. So what exactly happened? I guess? What was the shock to China's coal system that set that price action in motion? This price volatility. Sure, so the thermal cole you had a similar problem to a lot

of other commodities, and demand collapsed. There was supply continued, and while coal did not try at negative prices like oil, it was pretty good regiously oversupplied. At the same time, there were weather dynamics. So in the Chinese power market, the second biggest source of power is hydro electric power. So if you get a lot of rain or a very wet summer and spring in China, you then suddenly have a lot of cheap hydro power, which then displaces cold.

So by Q four they were just about giving it away, But then there was a cold winter and then over the course of say March to May, one key coal mining province massively underproduced to the tune of output was down at the same time demand was recovering. Like in a lot of other places in the world, you had a real upswing in power to man and then by September there were in this I think in Guangdong on the data we have, they had less than six or

seven days of coal inventory to burn. So if there was a typhoon that came through Hong Kong and the port's got shut for a couple of days, that would have been lights out in Guangdong, and prices of course would flying at that point. Then the government stepped in tell everyone to turn the minds back on it into Mongalia and now looks quite well supplied again. But it's

been quite a roll of chinastry. I would say, in general, what is the mix look like in terms of how much coal it powers the Chinese economy, how much is domestic versus imported? And then also like what is the goal, because China aspires to like many other countries, reduced its use of call for environmental reasons and so forth, like

what are the what are the ambitions? So China is the world's biggest call consumer, by quite a large margin, consumes about three and a half billion tons per year a thermal call to billion tons goes into power, the rest goes into a bunch of industries cement and so forth.

And I am poor in general for thermal hell some o between two d and three hundred tons of year, but that can be quite volatile, and most of that is important into southern provinces like Wigan, Guandong, and Guanti, which don't have their own coal mines, and which are actually quite a long way from where China's coal mines are in the interior of the country in Shashi and in the Mongolia, and so China's currently trying to a

achieve two major objectives. One is to have a stable energy supply and some semblance of order, but then its power market, which is entirely understandable, and also reduce its carbon emissions, which is also very understandable. But the question is given most of its coal actually goes into either directly or indirectly into the written do heavy industry, which is very heavily driven by real estate demand. Can they manage a real estate slow down or a change in

growth model? So, if you think about it, their carbon objectives, the energy security objectives, and their financial rebalance and objectives are all these incredibly tightly coupled systems, and that they're kind of the same system in many regards when you do the carbon account. That's really interesting. So one thing I was wondering just on the policy front. So we did see China shut down quite a few minds, and

specifically the older, dirtier minds. I guess how easy are those to turn back on or how flexible is new supply in terms of bringing additional capacity on stream. So what when they initially had a big clean out of the sector in sixteen, they did shut down a lot of smaller private miners which had a reputation for not being very compliant with safety standards, are being well capitalized.

Then coal price has got a bit high in eighteen nineteen, then increased their capex for coal mining, and they told the largest players to build bigger, more efficient, more mechanized minds. And so when things slowed down in Q two of twenty one, that happened quite abruptly. I was quite surprised to market participants. No one could really explain why it

was happening as demand was going up. So it subsequently emerged later, but then it was actually very easy to turnental back on because they were very centralized set in enterprises. So as soon as I put the memo out for everyone to my law, get that on trains and get it out, you saw daily call output explode. It actually had quite a lot of control when pushed hand to

shop on that market. I'm saying, can you go back and maybe talk a little bit further about the way these various policy priorities dovetail with each other, And we actually just did an episode on the real estate sector and the attempt to transition some of the quality of GDP growth in China away from real estate speculation and

real estate development, and then the broader decarbonization. Can you talk a little bit about further about the common thread there and how coal itself sort of fits into all

of it. So most of China's energy demand, at least electrical power demand, actually comes from heavy industry, and the biggest heavy industries are in order appairance ferrost metals, which is basically steel, nonferrest metal, so things like copper and zinc and tum and then kind of chemicals and the cident when you do the flow of materials, so you track where does all the steel go, actually very heavily goes into construction. Where the emissions from steel come from.

It's all electrical power and cold for I'm smelting steel.

You see that. Essentially, the Chinese real estate sector accounts for in the order of China's total emissions depends on whose account and you're looking at, but it's it's enormous so and then heavy industry and that's just residential and that's commercial in the rest of it, and so heavy industry accounts for sixty seven seven I think at the last stata of China's powder man so and then Chinese domestic construction in general is what drives China's emissions more

than anything else. Essentially, if you are if you want to reduce your carbon emissions and improve your energy security by importing less coal, you can build those apartments. You can build a lot of renewables to replace the coal, or a bit of both. But these things that these two functions are very tightly integrated. You know. It's always been an observation when people do modeling that if China were to get through at construction rate more in line

with level lawns. It would be very easy for China to achieve quiet remarkable carbon targets, but it's proven very hard for China to change its growth model and move from a essentially a construction paradigm in real estate and

certainly residential real estate. So I mean, assuming that China is at some point able to make some progress in changing the mix of its growth, and we do see house prices start to come down what we've already seen, Chinese house prices start to come down, and maybe housing inventory starts to be cut and we don't get as much construction of new homes. Assuming all of that happens, what happens in the energy space in terms of funding

and capital. Is capital going to be an issue for Chinese energy or does all of that come from the state. It's it's very heavily state timed, so they essentially have access to if government policy is that they are to build some things and there will be capital available for them to build certain things, is the best way to think about it. It's not like in the house signs off on every single lot among the capex flans, But

is unit see a vision. Let's go back to like the the effect outside of China's borders and the other things. You know, we've seen these sort of knock on effects. We've seen surging energy prices in Europe. It's been a very stressful winter, massive surgeon electricity bills. Not only does that hit the household sector there, it's also hit some industrial sectors. Fertilizer companies shutting down or temporarily because it just doesn't make sense. They can't be running economically at

these levels. We started this discussion talking about the ripple effects, and so what are the ripple effects from China and how do they relate to what we're seeing elsewhere in the world. Sure, so that the challenge for China is that if China has a shortage and energy, a province in in a Mongolia has an anti corruption campaign, mond in protles done happen with some hauled up in production.

The problem is is that if China needs to import a large amount of cold very quickly at short notice, it's very hard for China now too source that kind of volume of coal that it needs in the international market. The reason it is that China consumes three billion tons a year, so the thermal between ower, cement and heating and then the US consumed six over there, so it's like five times the size of the United States and about the Indias about the same the slightly smaller than

the US. So it's sort of swamps any viable supply that might get from elsewhere if they had a significant shortage in China. And so then where you saw in China was that as coal prices rose, they were switching

from cola burning coal to get electricity to gas. So someone the China started buying a lot of cargoes of lergy and you saw that in the shipping down to just exploit over the summer and over said from my onboards, when the when the when the eventure started to get low and so, and that of course taught in the gas markets at a time when Europe is normally building inventories into winter, and led to partners one of the contributing factors to very tight gas markets over this winter.

So the problem is China is essentially it's like having an adult on a trampline with small children. It just is so bit now it can kind of launch other markets without even trying to. So what happens when China actually builds out its energy independence or security because this is something that we've seen explicitly as a policy goal. They want to reduce imports, they want to rely more

on mining within their borders. What happens to that ripple effect if they manage to succeed in doing that, does that ripple effects start to come down or is it just so big that it's really difficult to reduce it. I think the challenge with coal is the China burns about six million tons a day, six and a half million tons of day during winter. Coal has got about the same density is water, So you know I would give it met out. The water is a ton, and so you think of what that means and ship volumes

if you want to store that much coal. You know, you can literally see this from space quite happily, and many commodity traders do. And so the problem is that China is now trying to enforce inventory levels on coal mines and power plants. And that can work up to a certain point, but realistically it will have to either gradually become slightly less energy intensively significant less energy intensive

through changing growth model. All have to move to sources of power which where it's a bit easy to manage, or lot of energy that's build a lot more renwobles and having a lot more hotter power and hot re storage, or a lot of nuclear. And from the latest energy plan, it looks like that people in a lot of nuclear and that will be actually in those coastal provinces which have been you know, international coal imported provinces um bigen gloxy.

So I think over time they will they will essentially easit call market, so that is certainly their intent and become more self sufficient. But I don't think it's I think trying to manage these inventories they're trying to say very heavily fossil arranted when they accidentally consuming this much

is very challenging. You know. I'm thinking one of the storylines out of Europe and again were trying need to talk about it more, especially because it has long term ramifications for the energy transition, is like there's perception that Europe has tried to transition to renewable maybe too fast. In the case of Germany is still shutting down nuclear, not maintaining like a robust baseload even as it transitions.

Does China's attempt to transition long term off call and you mentioned that it's going to be investing more in nuclear. Is that going to allow it to like achieve those goals, to achieve the decarbonization goals while also not running into short term volatility, not running into a mismatch. And is nuclear an important part of making a transition sustainable? I

think you can. It's very important for those southern provinces where you don't have great solid resources or that particularly good win resources, so you're out too on that account limited toro and you want to reduce your calling bots is not really a process of elimination. That's that's probably the way they'll go, and that's certainly what's coming out of their energy plants. I think you're there's a it's certain what the problem with the power price piration is

not day to day, it's this seasonal storage. So it's how do you store up the energy you need for winter in the in summer, And normally you do that through hydro power or through just storyline running your gas storadopting ninety percent and then running it down as they do normally in Europe around February and March. But if you have trying to lift in all the spot eldry cargoes for their own reasons, and then Vladomia Putin has

other plans, then that kind of runs into trouble. So it's not the variability of renewables tends to be like you're not sure that it's going to be on or off an you've given one hour period, but over the possible week, it's reasonably predictable, especially if it's a blind of solid and went. But where you can't really hedge is how do you how do you build up massive storage over the summer and then keep it for winds

like a squirrel? Basically, So can I ask a really basic question on the renewable energy front, which is there was always suspicion about how serious China actually is when it comes to decarbonization, as in, is it actually going to meet the quite lofty goals that it's set out for itself. And so I guess my question is one how serious are they on the green energy front and decarbonization and to why decarbonization at all? Why is it

important to them? Is it genuinely a climate concern or is it more about efficiency and building out that self sufficiency When it comes to energy security, well, I think historically the power regulations until quite recently do not We're not particularly come here, and I would cite the incentives.

Do you tell these to take renewable power? Like in twenty sixty that the level of curtailment essentially when farms have produced power and not be able to sell the market was very high and there are a lot of market design issues. I think what they've done recently is they fixed a lot some of a lot of these issues.

There are there are still some, but more importantly, they seem to have been looking to fix coal prices significantly higher, so that renewables it can be very competitive, you know, without any subsidies whatsoever, and will be actually the preferred source of power dispatch. So I think the next couple of years are going to be will quiet will surprise people how much they will built in terms of renewables,

because the market incentive is now very strong. Um, if you think simplistically, if there seems to be fixing coal contracts around seven hundred remitives, so it's under the ten U s dollars plus minus, there's about the third of a ton of coal that goes to make a you know, maybe what are a power There are lots and lots of renewable projects which will make money world below thirty dollars in China, and that will that's see ess secual. If you're a coal plan, you can't uncover with fuel

costs for that kind of competition. So I think they have started to get the market design right in all fairness.

In terms of their motivations, I think a lot of this is driven by guessing more tough look on their foreign policy and security environment, and there are realistic considerations that if you need to import a couple hundred million tons of your coastal provinces and you can't building vatteries more than thirty days there, and you have a marine conflict in your local neighborhood and you can't get a merchant marine through, then your power grid goes down in

less than a month. That's obviously something they can't really tolerate given some of their ambitions in the region. So I think there is a strong security angle too, some of their new religion around decompanization. So who loses big picture as the decourbanization effort continue and make serious progress and greater production of renewables and or nuclear domestically, who

ultimately loses out from their ship. Sure, I mean right now, there's part of the reason the coal markets so strong is to do a lot of supply interruptions in Indonesia and China also had to buy a lot of coal influence very quickly at the end of last year. Longer term, it's very bad for the major coal explorers which are to China, which are Indonesia, principally Australia, which does not as China has banned from exporting coal to them due to diplomatic fracas and so forth. There will be major

loses from the shrunken thermal coal market. It's simpl and shipping. But for met coal, which goes into steel, which is a different sort of thing, it's really will be the big loser there. But also Russia in the US, and I mean the only reason the met coal market is very strong right now is because China's buying most of

its met cold from Mongolia in Antane. But due to closing the border to to COVID Piven and substantially closed, that's led to this explosion of call exports from Russia and Canada and the US to China to replace the fact that they kicked out Australia the close the border with Mongola, and they happened to buy a very expensive call from a very long way. Why now, you mentioned incentives and the idea that energy producers are very much

incentivized to shift to renewables in the current market. But one thing we saw last year when coal prices were actually spiking was China liberalized its market, and I think it said it would allow prices to rise something like in order to incentivize more power production, and I think it was something like ten before. So I'm wondering how

significant is that shift. Is that a permanent liberalization of the market in order to encourage more energy production or is it more of a one time thing to try to balance out the market immediately. Well, what happened was in September that the coal price got so high. I think if at one point got to the futures and Juno got to like two thousand women be a time.

Plus the power plants, which were obliged to produce but could not get prices above a certain level and cover their fuel costs just said it was I need to do some plan maintenance or oh no, someone turned off the machines, and so you have these rolling blackouts because there until these were just electing to not produce at the loss. And so they've made all these adjustments to maximum coal price and then fuel costs passed through to enable the market to kind of functioning it and that

seems to be working okay for now. It's there's a reasonably why band. So it's funny to saturday the side and under normal circumstances that should be automatical to ensure that people are risen price signals. But yeah, there was just absolutely patterns attempted to October. I mentioned this at the beginning of just out of curiosity, has the really has is short term policy been affected by the upcoming Olympics.

I know there's always talk about you know, blue skies or the goal of having a good air air quality ahead of big events. Is that affecting current market conditions at all? So there's two ways to night steel. One is with a blast fus we use a lot of cooking call and and firm and use the more called the beat and the otherwise an electrical funence. We you just use cooking call and electricit. Electrical fences are generally smaller, noisy ends, night less emissions and so for example, the

floor the Olympics. Let me telling everyone to stop stuck up their thermal calls. They can produce electric power around the electric car bonuses and absolutely everyone to take maintenance, stays off, not use glass, oxygen furnuss to get to have blue skies and so forth. I think there's going to be extended time off the factories around which is the problems that surrounds Beijing, to ensure that they have

the desired scenery and background. It's not not the first time they've done I saw them do them two night, that they'll do it again this time. It's it's it's somewhat principal. So we started this conversation talking about the supply chain of energy and the idea that one disruption in China can have a knock on effect to European prices. So I'm wondering, we've already seen Chinese or we've already

seen prices for China coles start to come down. And you talk about some projects to build up capacity, specifically that Big Mind in Mongolia and a lot of of the renewable project. At what point does capacity get built out enough that it starts to ripple back through the europe Pan market and prices start to come down there. Well,

it's it's interesting. I mean just recently, and I think we're speaking towards the end of January middle light January, China's already turned around and said they will start selling ellen cargo's back into the market, and that's already taking down European gas prices and the relevant ellenjy spot and slop markets quite sharply over the last couple of days. We will probably continue to do so. So that's already happening.

Like sable and thermal markets are still reasonably tight. Do you do disruptions in Indonesia, which is ironically due to intensified rainfall from since the climate change driven So I think we will start to see things normalizing as we get towards the end of the year. China will have very high in ventures that will not the aggressive buyers of sake and call and Indonesia. I assume slightly more normal weather patterns as a landin you awakends and then

they'll be up to produced more. So there's this sort of driver of the energy, this sort of this energy super spike does seem to be settling down quite sharply. Is this the is the super spike that we've seen this year in Europe? Was this sort of you know, as you said, was it kind of a one off fluke or is this something that due to structural factors that will take a while to ameliorate, could see um a recurring winter phenomenon going forward. I think this was

this is a one off. I doubt China will have issues that's call market quite as acute as they had last year because it was tied up with anti corruption campaigns, inspections, and a bunch of things which are not market driven outside but to impact market. So I don't think that will occur again. They do appear to be happening more cocular policies around what adventures people should hold, so we

don't get situations where things get that despered again. Um. And then they have partially liberalized their power markets that should give a long term signal. So I think Shina is less likely to be a ground zero for large shocks that propagate out through energy markets. On the other hand, it's so big that even minor shocks in China can feel very big elsewhere, especially if markets are generally tied otherwise. So one thing or let me just think how to

phrase this. So I saw you tweeting late last year, and this was still when coal prices were spiking quite a bit, and you are basically saying everyone is about to get shocked because prices are going to start coming down very soon. What was it that you were seeing in the market that perhaps others weren't seeing at that time? Because you did turn out to be right, and of course we have seen coal prices ease since then. There's

a lot of very niche data you can get. This is from the Chinese railways and so forth, so you can get data on how much coal has been loaded in these large railheads near Minds in Mongolia and in Shantasy in Shantasy, and then you can sort of get the the number of trains loaded and can start to see the like a tidalway. You can sort of start to see the you know, the word of sucking back from the beach before it kind of gets blows it out away. But that's what you can say, and you

can you can get out of daily frequency. So once that supply response really started to happen with the Minds and then they started to essentially started all the rail cars out from Chinese ports, northern ports up to the mines. You knew something was coming. And even normally when the Chinese government puts out another points bullets and to make something happen, it's normally pretty safe. Bet of all happen.

Let's just short. But the size of the response I think was quash shopping to a table obviously, like higher commodity prices, higher energy prices, inflation, higher transport costs, inflation more broadly around the world, Like, it does feel like there's a lot of temporary or transitory factors driving it. I know we're not like supposed to use that word anymore, and I know that that there's more to life than

like what's happening in the Chinese coal market. But when you think about, like how you know the idiosyncratic factors happening in the Chinese coal market, the way that and I loved your analogy of a large adult jumping on a trampoline with a bunch of little kids, uh, the way that filtered into European prices, the way that European energy prices have filtered into fertilizer prices, the way fertilizer prices feud food prices, and so forth, it's hard like

not to sort of feel like, yeah, there really are a lot of transitory factors. I don't know whether like inflation totally normal, but a bunch of weird stuff has gone on. I think so. But I think one thing that's also interesting with cal and China in particular, when they the prices got off to two thousand women be

a time for thermal which is just absolutely bananas. But then it was quite shocking the people as China came out and said no, i'll we want a long term time to contract price of you know, seven d women be a time which people are shocked by because because you know, pre COVID was five And I think, what what China is doing there, which is quite shrewd, is it?

In all the craziness and inflationary impulsible these disruptions, China is using this opportunity to force a re pricing of fossil energy and China through to industry and then has big impacts because when you smelled a ton of aluminium um, you need about eleven megaworks do that, and so that's eleven times having a fifty womanty. You know, it's like pushing on the price of element in the new order

of fifty bucks. They're sort of pushing through these kind of policy driven re pricings because I do want um space, colbon transition and change incentives around um consumption of very energy intensive products to a certain extent. On the other hand, they've got it, They've got the social stability and maintaining sort of you know, employment, all the other objectives they have. But there is a sign that they're kind of willing to take a bit more pain than they were last

time on some of these cost changes. So there are some fundamental changes here, and you know, there's sort of China putting a bit of a floor under the price of coal and therefore the under the price of other commodity production that are not just going to revert to pre COVID level sort of a de facto or implicit like carbon tex the way economists in Europe and the US proposed. And you are saying that comfort like you talk to companies like Shahua, which is like Shina's biggest

color mine. I asked the intent and you guys can try to under renewables or something that I've never paid myself sidies on time. The term business and you know, thank you, And now that they're just announced, they're going to be revealable. So essentially the policy signals and they sort of will of the party state is to get things done in this area. Now, whether they can tolerate slow down in real estate and other considerations to be seen.

But in other ways, this is there are signs of them being more serious than they've been quite some time. All right, Alex, that was a fantastic discussion and a really good round up of what's going on in the space and drawing the connections between China and Europe. So thank you so much for coming on all thoughts. Thank you so much, guys, really inga that was great. Thanks for so Joe. I obviously thought that was a very

interesting conversation. One of the things that struck me was I think energy might be one of the few places

where there's actually policy agreement between China and Europe. So Europe wants energy prices to come down, China wants to build out its energy efficiency and self sufficiency, and sort of going back to that trampoline analogy, you know, the kids want the adult to get their own trampoline, I guess, and the adult wants their own trampoline too, So you know, if both of those parties are aligned, it seems like

at some point that could happen. One thing that I've always liked about Alex's work and research and just following his stuff and talking to him over many years is the granular level of detail that he knows about all these different industrial process whether it's like how much it costs to make steel and the various the electricity budget for steel or aluminum. And obviously he talked about how he was able to sort of anticipate the move in

by looking at railroadings. There's a deep granularity. I guess, like if you know you're talking about if you're going to be working in the business of buying of distressed assets of industrial or commodity related companies, you really have to know, like nuts and bolts, what the value uh and what the potential recovery you know, I guess I would like to understand recovery values of these assets. You really have to know like the various input costs of

what you can get out of them. Yeah, it definitely seems like that's the case. The other thing that I was thinking about is, I guess all eyes on Mongolia and China relations for the foreseeable future, because it also seems like that's a dynamic where it does have the potential to impact the energy space quite significantly. Absolutely, But and I'm really glad like the point that he made

at the end. It's like, Okay, so coal prices went nuts, and obviously China needed to make changes to address that.

But the idea that like they really don't want to or at least at the moment, they don't want to go back to the pre crisis cheap prices, and that this is an opportunity for transition, and so setting this floor is really interesting and I definitely think listeners, hopefully if they haven't, need to go back and listen to the episode that we just recorded with Travis Lundie, because I hadn't thought about that really at all, although of course it makes sense that it's part and parcel of

the same thing, Like there's if you want to have a more sustainable energy budget, part of it might involve changing, um, the pace of real estate development. Yeah, it's interesting how those two seem to fit together. And you're right, I haven't thought about that before. In any case, lots going on in China and the Chinese economy. Should we leave it there? Let's leave it there? All right? This has been another episode of the Odd Loots Podcast. I'm Tracy Alloway.

You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't Though. You can follow me on Twitter at the Stalwart. Follow our guest Alex Turnball. He's at Alex B. H. Turnbull. Follow our producer Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levie at Francesca Today. And check out all of our podcasts in Bloomberg under the handle at podcasts. Thanks for listening.