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Bulk Buys: Coking coal rallies as iron ore feathers Australia’s nest
Mining
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- Coking coal prices surge as China looks to tackle safety at deadly Shanxi coal mines
- China threatens iron ore price crackdown, in perpetually ineffective jawbone
- Perth and Canberra continue to get fat on iron ore outperformance
Coking coal spent well over 200 days between the middle of last year and early this year at a discount to thermal coal.
Which is strange, since not only does steelmaking coal tend to draw a premium, but it is also viewed as having a better long term outlook.
Aussie producers also have more exposure to the lucrative Chinese market, and the interaction between Chinese and Australian supply — at least since an unofficial and politically motivated embargo ended earlier this year — is more important than in its calorie burning counterpart.
While the market looked derelict last year amid sliding demand for steel and a god-awful Chinese property sector, it has rebounded with force in 2023 despite the latter still being a factor.
Tight supply out of Queensland has been an issue. Over in China, coal production has increased 3.1% over the first 10 months of 2023 to 3.83Bt, but output fell in October and will face further pressure amid a dreadful safety run in the coal rich Shanxi Province.
Reuters reported 100 people had died in coal mining accidents — according to official numbers from Beijing, which is going to station a security committee crew to provide oversight of an industry which has seen deaths increase 53% this year alone.
Coking coal prices surged 2% to US$326.30/t overnight despite a similarly sized fall in the normally closely linked iron ore.
Front month thermal coal futures, by comparison, were down 40c to US$127.50/t.
New Hope Group (ASX:NHC) noted in its results last month that physical demand for Newcastle grade thermal coal was weak outside of contracts, with its order book full to January next year.
Goldman Sachs’ Paul Young and Caleb Heiner said the investment bank saw a 40Mt surplus in the coal market this year, with 6000kcal high CV coal to trade at between US$110-140/t this half with Chinese and Indian domestic production high and Indonesian and Aussie exports increasing.
ASX coal stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.008 | 0% | 45% | 14% | 14% | $ 14,351,191.28 |
| CKA | Cokal Ltd | 0.11 | 10% | 10% | -15% | -37% | $ 103,579,102.08 |
| BCB | Bowen Coal Limited | 0.1 | 0% | -7% | -53% | -60% | $ 304,573,295.29 |
| SVG | Savannah Goldfields | 0.061 | 15% | 5% | -59% | -69% | $ 11,024,212.49 |
| GRX | Greenx Metals Ltd | 0.905 | -7% | -4% | 18% | 151% | $ 254,065,981.11 |
| AKM | Aspire Mining Ltd | 0.078 | 3% | 1% | 37% | -3% | $ 40,610,958.80 |
| AVM | Advance Metals Ltd | 0.003 | -25% | 0% | -63% | -70% | $ 2,377,897.42 |
| YAL | Yancoal Aust Ltd | 4.97 | 2% | -1% | 0% | -6% | $ 6,602,197,185.00 |
| NHC | New Hope Corporation | 5.32 | 2% | -12% | 7% | -1% | $ 4,547,904,796.32 |
| TIG | Tigers Realm Coal | 0.005 | -9% | 0% | -38% | -62% | $ 65,333,511.84 |
| SMR | Stanmore Resources | 3.86 | -2% | -4% | 47% | 58% | $ 3,443,316,041.88 |
| WHC | Whitehaven Coal | 7.32 | 6% | -5% | 16% | -19% | $ 6,115,551,731.04 |
| BRL | Bathurst Res Ltd. | 0.97 | -1% | -1% | 3% | 25% | $ 187,532,584.40 |
| CRN | Coronado Global Res | 1.665 | 3% | -6% | 26% | -15% | $ 2,724,237,311.25 |
| JAL | Jameson Resources | 0.045 | 13% | 10% | -40% | -63% | $ 15,660,444.00 |
| TER | Terracom Ltd | 0.305 | -2% | -28% | -40% | -60% | $ 248,299,532.85 |
| ATU | Atrum Coal Ltd | 0.005 | 0% | 0% | 0% | -17% | $ 6,958,495.86 |
| MCM | Mc Mining Ltd | 0.155 | 0% | 19% | -9% | -24% | $ 63,223,065.32 |
| DBI | Dalrymple Bay | 2.73 | -1% | 0% | 5% | 11% | $ 1,348,471,734.24 |
| AQC | Auspaccoal Ltd | 0.125 | -11% | -17% | -14% | -44% | $ 63,843,240.16 |
Can China finally make headway in its near eternal iron ore pricing investigation?
It’s a good week, obviously, to be BHP (ASX:BHP).
The met coal mines it’s decided to keep within its portfolio are just the sort that capture those super high prices being pulled for premium hard coking coal.
The iron ore price as well is keeping it well in multi-billion dollar profit territory.
It produces a tonne of iron ore in the Pilbara currently for well under US$20/t at the minegate.
Off the ship, prices remain around US$130/t. That has seen China’s bumbling price police return to the fray, with the National Development and Reform Commission carrying out portside inspections to crack down on hoarding and speculation by iron ore traders.
The Thomson and Thompson act is scary but thus far ineffective. It’s not even the first time this year the NDRC has tried it on, with iron ore prices running way beyond expectations. The formation of a powerful central iron ore buyer, the China Mineral Resources Group, has also done little to tip pricing power the way of the consumer.
And Chinese steelmakers are reportedly expecting prices to remain above US$110/t in the year to come.
In the short term, so called ‘jawboning’ will have an impact.
“The National Development and Reform Commission said it had met with major port operators to discuss iron ore inventory and storage matters, amid reports of hoarding,” ANZ’s Madeline Dunk said in a note yesterday.
“Nevertheless, traders remain convinced that China’s CNY1trn debt issuance announced last month will provide more housing and lift steel demand.”
Iron ore to feather Australia’s nest … again
At the same time, some fresh numbers from Commbank’s own mining guru Vivek Dhar show how this will all benefit Australia.
Good thing Anthony Albanese’s Government has significantly less frosty relations with his Chinese counterparts, because our tax receipts are going to be really peacocking this year at this rate.
Dhar’s on record as saying prices closer to US$110/t would be more reasonable than what we’re seeing now. Traders had plenty of motivation to pile into iron ore on recent news 50 property developers would be white-listed to receive financial support.
But the fact they need that support gives a sense of the depressed state of China’s property sector. Its corporate sector is still seeing profits fall as well.
Yet even if prices drop back to US$110/t, that’s a windfall for the Aussie and WA Governments, whose treasuries typically set price forecasts in their budgets low enough to avoid being caught with their pants down.
WA’s 2023-24 budget, for instance, had envisaged iron ore tumbling to US$66/t by now. Every US dollar price increase over the 2023-24 average of US$74/t is worth almost $90m to the state.
“While we think iron ore prices closer to $US110/t are more reasonable, higher realised prices will mean increased income for the Commonwealth and Western Australian governments,” Dhar said.
“If spot prices are maintained at current levels until the end of 2023‑24, realised iron ore prices would be ~US$42/t above the Commonwealth Budget forecast.
“This implies an additional $A2.1bn in tax receipts this financial year based on Budget sensitivities (~0.3% of total estimated revenue in 2023‑24). A similar calculation for the WA budget shows an additional $A4.8bn in royalty income this financial year (~11% of total estimated revenue in 2023‑24).”
Good if you can get it.
ASX iron ore stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.008 | 0% | 0% | -20% | -68% | $ 3,785,018.26 |
| ADY | Admiralty Resources. | 0.007 | 17% | 17% | 17% | -13% | $ 9,125,054.07 |
| AKO | Akora Resources | 0.14 | -15% | -13% | -24% | -18% | $ 13,297,593.96 |
| BCK | Brockman Mining Ltd | 0.029 | 0% | 0% | -9% | 26% | $ 269,126,731.80 |
| BHP | BHP Group Limited | 46.43 | -1% | 3% | 9% | 5% | $ 235,797,774,891.24 |
| CIA | Champion Iron Ltd | 7.7 | -2% | 11% | 28% | 27% | $ 3,957,170,370.68 |
| CZR | CZR Resources Ltd | 0.24 | 2% | 55% | 41% | -12% | $ 55,397,641.81 |
| DRE | Dreadnought Resources Ltd | 0.033 | 0% | 6% | -41% | -65% | $ 110,622,249.60 |
| EFE | Eastern Resources | 0.01 | 0% | 25% | 0% | -76% | $ 12,419,464.61 |
| CUF | Cufe Ltd | 0.015 | 36% | 25% | 25% | 0% | $ 16,045,573.11 |
| FEX | Fenix Resources Ltd | 0.255 | 0% | 9% | 9% | 6% | $ 183,952,908.80 |
| FMG | Fortescue Ltd | 24.88 | -2% | 12% | 27% | 31% | $ 75,465,430,140.18 |
| RHK | Red Hawk Mining Ltd | 0.645 | 30% | 8% | 43% | 38% | $ 108,063,089.28 |
| GEN | Genmin | 0.18 | 0% | 0% | 20% | -20% | $ 81,275,982.12 |
| GRR | Grange Resources. | 0.44 | -11% | 1% | -18% | -42% | $ 491,868,946.65 |
| GWR | GWR Group Ltd | 0.075 | -1% | 1% | 14% | 12% | $ 26,018,549.06 |
| HAV | Havilah Resources | 0.28 | 2% | 22% | 8% | -15% | $ 82,326,194.60 |
| HAW | Hawthorn Resources | 0.095 | 2% | 0% | 19% | -30% | $ 31,156,452.01 |
| HIO | Hawsons Iron Ltd | 0.044 | -4% | -21% | 26% | -63% | $ 40,439,126.60 |
| IRD | Iron Road Ltd | 0.073 | 1% | 4% | -13% | -42% | $ 63,975,675.82 |
| JNO | Juno | 0.092 | 8% | 12% | 30% | 1% | $ 13,073,642.60 |
| LCY | Legacy Iron Ore | 0.017 | 6% | 0% | 6% | -15% | $ 102,509,219.18 |
| MAG | Magmatic Resrce Ltd | 0.071 | 1% | 13% | -43% | -26% | $ 21,704,188.66 |
| MDX | Mindax Limited | 0.048 | -9% | -6% | -49% | -19% | $ 103,300,718.39 |
| MGT | Magnetite Mines | 0.295 | -34% | -7% | -34% | -63% | $ 31,005,984.87 |
| MGU | Magnum Mining & Exp | 0.027 | -4% | 13% | -4% | 17% | $ 21,704,257.88 |
| MGX | Mount Gibson Iron | 0.53 | -5% | 6% | 36% | 25% | $ 637,570,149.83 |
| MIN | Mineral Resources. | 61.58 | -4% | 2% | -12% | -25% | $ 12,169,873,785.80 |
| MIO | Macarthur Minerals | 0.145 | 16% | -9% | -12% | 16% | $ 23,275,488.32 |
| PFE | Panteraminerals | 0.06 | -6% | -6% | -17% | -52% | $ 6,424,352.94 |
| PLG | Pearlgullironlimited | 0.032 | 3% | 23% | 7% | 83% | $ 6,545,337.28 |
| RHI | Red Hill Minerals | 4.85 | 9% | 15% | 3% | 14% | $ 293,955,502.00 |
| RIO | Rio Tinto Limited | 124.88 | 0% | 6% | 16% | 18% | $ 46,472,557,830.66 |
| RLC | Reedy Lagoon Corp. | 0.007 | 17% | 75% | 20% | -40% | $ 4,316,785.12 |
| CTN | Catalina Resources | 0.004 | 14% | 0% | 33% | -56% | $ 3,715,460.68 |
| SRK | Strike Resources | 0.055 | 0% | 8% | -19% | -44% | $ 14,755,000.00 |
| SRN | Surefire Rescs NL | 0.009 | 0% | -40% | -49% | -25% | $ 17,449,154.37 |
| TI1 | Tombador Iron | 0.014 | 0% | 0% | -32% | -39% | $ 30,218,753.22 |
| TLM | Talisman Mining | 0.19 | 3% | 36% | 3% | 36% | $ 35,780,866.31 |
| VMS | Venture Minerals | 0.011 | 10% | 10% | -35% | -59% | $ 19,500,130.35 |
| EQN | Equinoxresources | 0.37 | 48% | 106% | 164% | 185% | $ 23,875,000.75 |
| AMD | Arrow Minerals | 0.0015 | 0% | -25% | -63% | -67% | $ 4,535,647.64 |
