WHITEHAVEN EXPECTS FURTHER GROWTH IN COAL PRICES

Written on the 17 October 2016 by James Perkins

WHITEHAVEN EXPECTS FURTHER GROWTH IN COAL PRICES

THE unexpected recovery of coal prices will continue in December, says Whitehaven Coal (ASX: WHC).

Already, the price of Australian metallurgical coal has shot up to $102.88 per tonne in September, compared to $71.01 in April, according to Index Mundi.

In its September quarter results released today, Whitehaven says supply cuts in China alongside weather related production issues in a number of countries, infrastructure constraints in Australia and Columbia and supply cuts by both "swing seaborne metallurgical and thermal coal producers", have boosted prices.

"Whitehaven expects pricing for metallurgical coal products in the December quarter to be significantly higher than the September quarter," the company says.

The Sydney-based company achieved an average price of US$70/t in the September quarter from metallurgical coal, while the GlobalCOAL NEWC Index thermal coal price averaged US$67/t in the same period - 30 per cent higher than the June quarter.

Whitehaven's managed coal sales in the September quarter were 5.03Mt, up 12 per cent than the previous corresponding period (pcp). Metallurgical coal sales represented 16 per cent of the total sales, and low CV thermal coal sales comprised 10 per cent of the total. GlobalCoal NEWC index thermal coal sales made up the balance.

Whitehaven has already made its December quarter settlements for the three main metallurgical coal types:

  • Low volatile PCI coal settled at US$133/t, an increase of US$58/t, or 77% on September;
  • hard coking coal settled at US$200/t, up 116% on the prior quarter; and
  • semi soft coking coal settled at US$130/t up about 86% on the September quarter.


The company says semi-soft coking coal from Maules Creek, which makes up 20 per cent of sales from that mine, is attracting strong interest, and a number of long-term sales contracts have been executed linked to the semi-soft coking coal benchmark price. The company is pushing ahead with trial shipments to a number of steelmakers in Asia. Maules Creek has attracted an 8 per cent premium on the index coal price at time of sale for its metallurgical coal.

The September quarter marked the beginning of Maules Creek's second year of production. It produced 1.9Mt run of mine coal for the Quarter, 23 per cent higher than the pcp despite the impact of heavy rain. The mine produced 1.772Mt in the quarter, up from 1.479Mt pcp, while coal sales were 1.972Mt. Whitehaven aims to increase ROM at Maules Creek to 10.5Mtpa in the second half of 2017.

Whitehaven, which also has mines at Gunnedah and Narrabri, paid off $100 million in debt during the quarter, reducing its drawable line of credit to $1.1 million.

The company is trading up 3.48 per cent this morning, at $2.970 per share, having rebounded from a 52-week low of $0.355 in January this year.


Author: James Perkins Connect via: Twitter LinkedIn

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