Bulk Buys: Coal production could reach its highest level in 2022 and demand continues to rise

Coal mining is hardly popular but governments around the world, most of whom have promised to work to reduce the impacts of climate change, can’t get enough of it.

It may be getting harder to finance and gain approval for mining coal, the burning of which is responsible for over 40% of greenhouse gas emissions.

However, energy hungry economies continue to pursue consumption and production growth to chase economic expansion and keep the lights on.

The International Energy Agency, which has previously said in its net zero pathway no new oil and gas developments and coal mines or extensions should be developed in its net zero by 2050 pathway, believes 2022 could be the peak for coal production around the world.

Consumption is likely to hit an all time high in 2021 and rise to new all time highs in two years.

That is due to demand growth in China (less than 1% per year between 2022 and 2024) and India (4% a year to 2024), where two thirds of the world’s coal is consumed.

India’s hunger for coal will add 130Mt to global coal demand by 2024, projected to be around an 8.025Bt a year market between 2022 and 2024, the highest level ever.

“For most industrial purposes where coal is used, such as iron and steel production, there are not many technologies that can replace it in the short term,” the IEA said.

The IEA said the increase in consumption set the world further away from its net zero by 2050 pathway in 2021, a path it won’t reconnect with until after 2024.

“Furthermore, we do not expect (unabated) coal consumption and production to be on the Net Zero by 2050 pathway by 2024,” they said.

“Although global investment in renewable energy will be strong in the medium and long term, coal supplies are expected to expand until 2024.

“China and India especially plan to invest in their domestic mining capacity to raise the security of their energy supply, while Indonesia and Russia will invest in new export capacity to boost their economic growth in light of coal demand expectations.”

ASX coal stocks

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CODE	COMPANY	PRICE	1 MONTH RETURN %	6 MONTH RETURN %	1 WEEK RETURN %	1 YEAR RETURN %	MARKET CAP
PAK	Pacific American Hld	0.016	-11	-5	-11	-25	$ 7,646,038.43
BRL	Bathurst Res Ltd.	0.69	0	138	-9	73	$ 117,956,619.87
LNY	Laneway Res Ltd	0.0055	-8	22	-8	-21	$ 23,424,395.60
AKM	Aspire Mining Ltd	0.072	-11	-5	-4	-24	$ 36,549,862.92
CRN	Coronado Global Res	1.1625	1	44	-3	11	$ 1,936,304,058.15
NCZ	New Century Resource	1.93	-14	-37	-3	-51	$ 240,367,958.36
SMR	Stanmore Resources	1.005	-4	36	-3	26	$ 275,814,467.82
NAE	New Age Exploration	0.01	-9	-17	0	-9	$ 14,358,989.10
CKA	Cokal Ltd	0.14	-13	133	0	106	$ 131,191,523.82
GRX	Greenx Metals Ltd	0.215	0	-15	0	20	$ 45,991,035.48
AHQ	Allegiance Coal Ltd	0.505	-17	-23	0	102	$ 191,011,868.60
JAL	Jameson Resources	0.07	-19	-20	0	-36	$ 22,955,379.54
TER	Terracom Ltd	0.185	-3	68	0	9	$ 135,649,373.40
YAL	Yancoal Aust Ltd	2.52	-4	24	2	7	$ 3,287,894,198.13
MCM	Mc Mining Ltd	0.09	-3	-14	3	-53	$ 13,897,759.95
WHC	Whitehaven Coal	2.55	5	34	5	55	$ 2,540,304,810.72
NHC	New Hope Corporation	2.18	10	15	5	59	$ 1,747,949,872.20
TIG	Tigers Realm Coal	0.02	-17	122	5	82	$ 248,267,344.99
ATU	Atrum Coal Ltd	0.028	-20	-36	8	-90	$ 18,568,935.07
BCB	Bowen Coal Limited	0.175	3	171	13	281	$ 192,139,494.30

Coal still a significant earner for Australia

That will be music to the ears of Coalition Resources Minister Keith Pitt, a man who’s own modelling on coal’s survival into the late 21st century is far more optimistic than his own government’s.

Federal Government forecasters say Australia is on track to post a record export haul of $379 billion in 2021-22, with soaring prices for thermal and coking coal, as well as LNG, making up for a decline in the price of Australia’s most valuable commodity, iron ore.

That made Nationals cabinet minister Pitt, a reported hold out in his party’s negotiations with the Morrison Liberals over the net zero target adopted this year, giddy with excitement.

“The Queensland Government last week announced a $2.9 billion boost from coal royalties alone,” he said. “This is money that can build hospitals, buy medical equipment and fund more nurses as the state opens up from COVID.”

“Australia is set to benefit from a global shortage of energy, with record earnings from thermal and metallurgical coal and LNG.”

“Coal is the star performer. Australia’s high-quality coal is finding new markets across Asia, including India, with Australian producers enjoying record price increases across all grades of coal.”

Thermal coal exports are expected to rise from $16b in 2020–21 to $35b in 2021–22 but will retreat to $27 billion in 2022–23.

Coking coal exports, which brought in $23b in 2020–21, will exceed $50 billion in value in 2021–22.

Australian State and Federal Authorities are currently processing a number of mines and extensions after a series of regulatory wins for coal miners.

New Hope Corporation (ASX:NHC) has seen its share price rise by more than 10% over the past week after the Queensland Land Court recommended the granting of two mining leases for the New Acland coal mine near Toowoomba.

A stage 3 proposal has sat in limbo for years amid challenges from the Oakey Coal Action Alliance, a local group campaigning against noise and air quality pollution from the mine. The recommendation that the mining leases will be granted now opens the door for the Queensland Government to approve the mine.

Glencore, one of the few diversified global majors to remain interested in coal, has also submitted EPBC approval documents with the Federal Government for its Valeria mine near Emerald in Queensland.

The major new project would run for 35 years, producing 14-16Mtpa of metallurgical and thermal coal to a maximum run rate of 20Mtpa.

Mining leases for the $1.5 billion mine were granted in 2019.

South32 (ASX:S32) has also submitted EPBC Act approval applications for the extension of its Dendrobium coal mine in the Illawarra region of New South Wales, which was recently made a state significant project by the NSW Government despite the Independent Planning Commission recommending earlier this year it not go ahead.

Coal miners are desperate to get a bite of high prices being generated in the seaborne market caused by supply tightness and soaring demand in Asia this year.

Fastmarkets MB prices for Premium hard coking coal and hard coking coal from Queensland’s Dalrymple Bay Coal Terminal were fetching US$339.87/t and US$290.63/t on Monday, well over 3 times the price Australian miners were attracting late last year.

Newcastle index thermal coal was priced at US$157.50/t, 151% up year to date.

South32 & New Hope Corp share price today:

Iron ore back in business as steel production rises in China

Iron ore prices rose above US$120/t on Monday as optimism emerged in China on cuts to lending rates expected to signal a further easing of monetary policy.

It came off the back of concerns about a structural slowdown in China’s economy, which has threatened to combust in recent weeks amid a weakening property market.

While the longer-term loan rates have not changed, suggesting the Communist Party is not trying to support house purchases and builds, it is a positive signal for other areas of steel demand like the infrastructure and automotive sectors.

Steel prices are higher with mill profits rising, as rebar hit a 1.5 month high of US$763.40/t according to consultancy MySteel last week.

On a more bearish note port stocks of iron ore hit a 3.5 year high of 157Mt late last week even as iron ore prices improved, around 30% up on lows a few weeks ago of US$87/t.

ANZ senior commodity strategist Daniel Hines and CAIA commodity strategist Soni Kumari said China was showing ‘signs of normalisation’ after a volatile 2021 punctuated by artificial steel production curbs and a power crisis.

“Steel mill margins have rebounded, improving steel demand. Tight production hastened steel destocking. Iron ore inventories continue to build, now at 155Mt due to softer demand. We expect iron ore inventories to stay elevated in the short term,” they said.

“China’s steel exports fell to a low of 4.36mt in November due to tighter export restrictions and waning ex-China steel demand. Stabilising steel producers’ operating rates in the US and China suggest a demand recovery.

“Exports of iron ore from Australia and Brazil to China have increased in recent weeks, despite weaker demand. Lower prices of iron ore are encouraging more imports.”

Australian iron ore stocks have been charging this week as benchmark 62% fines hit US$123.51/t on Monday according to Fastmarkets and 65% premium fines rose to US$141.80/t. Discounted 58% fines, the sort of index Fortescue Metals Group (ASX:FMG) and Mineral Resources (ASX:MIN) largely trade around, are fetching US$97.03/t, easing pressure on marginal tonnes.

Juniors were the top performers in terms of percentage price increases over the week.

High grade magnetite explorers Magnetite Mines (ASX:MGT) and Hawsons Iron Ore (ASX:HIO) rose 32% and 21%, respectively.

JWD iron ore JV owners Cufe (ASX:CUF) and GWR Group (ASX:GWR) were up 17% and 14% respectively, while Grange Resources (ASX:GRR), which will issue a 10c a share dividend from its enormous $550 million cash pile next week was up 8% along with FMG and Brockman Mining (ASX:BCK).

ASX iron ore stocks

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CODE	COMPANY	PRICE	1 MONTH RETURN %	6 MONTH RETURN %	1 WEEK RETURN %	1 YEAR RETURN %	MARKET CAP
MGT	Magnetite Mines	0.029	26	-59	32	142	$ 85,070,165.79
HIO	Hawsons Iron Ltd	0.145	88	-8	21	195	$ 103,682,677.75
CUF	Cufe Ltd	0.035	13	-30	17	-15	$ 33,113,932.78
GWR	GWR Group Ltd	0.12	14	-57	14	-58	$ 36,334,373.16
GRR	Grange Resources.	0.7	48	54	8	174	$ 763,843,540.68
BCK	Brockman Mining Ltd	0.054	15	42	8	32	$ 501,078,535.07
GEN	Genmin	0.205	32	-5	8		$ 60,691,887.75
FMG	Fortescue Metals Grp	19.625	27	-12	6	-14	$ 59,916,657,304.28
CIA	Champion Iron Ltd	5.09	24	-21	5	3	$ 2,572,978,730.08
MAG	Magmatic Resrce Ltd	0.096	1	-29	4	-44	$ 24,939,706.20
FEX	Fenix Resources Ltd	0.24	4	-30	4	4	$ 120,531,340.80
FMS	Flinders Mines Ltd	0.55	-17	-40	4	-46	$ 89,489,745.81
TI1	Tombador Iron	0.031	0	-68	3	-45	$ 35,774,410.82
RIO	Rio Tinto Limited	100.55	11	-19	3	-14	$ 36,464,568,701.22
MIN	Mineral Resources.	49.81	20	-1	2	50	$ 9,298,984,389.64
BHP	BHP Group Limited	41.63	14	-11	1	-4	$ 121,255,332,293.40
MGX	Mount Gibson Iron	0.41	9	-55	1	-57	$ 478,174,373.04
MGU	Magnum Mining & Exp	0.083	-5	-51	1	48	$ 40,765,882.95
EQN	Equinoxresources	0.2	-2		0		$ 8,775,000.20
VMS	Venture Minerals	0.038	-22	-73	0	-28	$ 55,621,777.73
TLM	Talisman Mining	0.155	-14	-23	0	63	$ 29,099,622.04
SHH	Shree Minerals Ltd	0.009	-10	-28	0	-55	$ 9,569,132.03
PFE	Panteraminerals	0.195	-15		0		$ 7,507,500.00
IRD	Iron Road Ltd	0.205	0	-23	0	28	$ 163,079,153.33
CZR	CZR Resources Ltd	0.007	0	-36	0	-53	$ 26,147,424.58
ACS	Accent Resources NL	0.055	0	10	0	175	$ 25,631,500.57
SRK	Strike Resources	0.095	-10	-56	-3	-32	$ 26,190,000.00
RLC	Reedy Lagoon Corp.	0.03	-30	67	-3	100	$ 15,884,959.67
JNO	Juno	0.125	-4	-34	-4		$ 16,278,960.12
MIO	Macarthur Minerals	0.36	-12	-16	-4	-29	$ 52,166,983.32
AKO	Akora Resources	0.22	2	-8	-4	-40	$ 11,515,560.32
MDX	Mindax Limited	0.038	-19	-51	-5	1167	$ 76,197,431.00
RHI	Red Hill Iron	3.05	13	243	-6	1579	$ 194,675,854.45
PLG	Pearlgullironlimited	0.072	-28		-6		$ 3,933,672.82
HAW	Hawthorn Resources	0.09	-7	88	-7	-18	$ 28,015,311.49
DRE	Drednought Resources	0.036	-23	33	-8	64	$ 99,301,424.29
ADY	Admiralty Resources.	0.012	-14	-43	-8	-8	$ 15,642,949.84
HAV	Havilah Resources	0.16	-18	-30	-9	-6	$ 49,004,356.48
EFE	Eastern Iron	0.053	-28	308	-13	416	$ 51,431,742.01
LCY	Legacy Iron Ore	0.0225	-6	61	-17	-17	$ 147,308,985.89
SRN	Surefire Rescs NL	0.009	-25	-47	-18	-67	$ 11,043,104.09