While commodity prices have fallen significantly in recent months, the reported Yanzhou Coal-Gloucester Coal deal talks are a reminder that on a longer-term perspective, China remains hungry to secure upstream resources, Kim Eng Securities says in a report.

“We anticipate more M&A deals with Chinese buyers in other areas such as palm oil, Indonesian coal, timber and rubber, which might provide some support to the share prices of upstream companies.”

The house adds, any deal could reap Noble Group, 64.5%-owner of Gloucester, a one-off gain in excess of US$500 million, based on reports of a US$2 billion deal price, which will allow the group to reinvest in other projects.

Kim Eng views this as plausible as Noble’s track record indicates it will not shy away from divesting assets if it feels the “price is right.” It adds, existing off-take agreements will allow Noble to continue marketing GCL’s coal, which is its core business.