• S&P Global has revised down its met coal forecasts for both the March quarter and full year
  • Indian steel demand has been unable to lift prices for Aussie producers, with thermal coal sinking even further
  • Iron ore focus turns to M&A with Pilbara assets pulling big bucks

It’s been a difficult start to 2025 for met coal producers, with analysts dropping their price forecasts for the steelmaking commodity as demand from China continues to wane.

India, which has become a key customer for Australian coal, has also failed to provide the sort of steam miners were hoping to see.

“Unless heavy rain in northern Queensland disrupts coking coal export operations during the current rainy season, we do not see any reason for prices to strengthen in the near term,” S&P Global’s Paul Bartholomew and Sylvia Cao said in a recent note.

“Australia’s Bureau of Meteorology said Jan. 16 that the probability of above- average rainfall between February and April ranged between 60% and 80%. Post-Lunar New Year restocking in China is unlikely to provide much price upside.

“A short-lived uptick in PLV HCC FOB Australia prices occurred in late December, ahead of India’s introduction of import quotas for low-ash metallurgical coke, before prices softened again. PLV HCC CFR China prices have been closely aligned with FOB Australia prices since early January, but domestic coking coal prices in China remain more competitively priced than imported cargoes at a time of thin steel margins.”

While Indian steelmaking lifted 5.6% YoY to 135.93Mt in 2024, compared to a 3.6% drop in Japan (77.1Mt) and 1.7% fall in China (1.005Bt), Bartholomew and Cao say demand in recent months has largely been down to restocking, rather than the expansionary buying that accompanies a boom.

“India remains the largest importer of Australian coking coal, but demand has been primarily driven by routine restocking activities. In the first 10 months of 2024, India’s coking coal imports totalled 48.74 MMt, marking a 4% year over year increase, as reported by S&P Global Market Intelligence Global Trade Analytics Suite (GTAS),” they said.

“Of this volume, imports from Australia amounted to 22.12 MMt, an 8% year over year decline. Conversely, imports from Russia — primarily pulverized coal injection (PCI) — increased 8% during the same period.”

That’s seen S&P trim forecast PLV HCC FOB prices for the March quarter from US$233/t to US$213/t, with its full year average forecast trimmed from US$232/t to US$227/t.

Coking coal futures were priced at around US$187/t on Monday.

 

Mixed reporting season for coal miners

With prices now well off the boom time highs seen post the Ukraine invasion – thermal looks even more challenged at US$102/t – there has been a mixed response to half year financials.

Tuesday saw Kiwi coal producer Bathurst Resources (ASX:BRL) finish the day even, with after tax profit for the first half crimped slightly from NZ$9.1m in H1 FY24 to NZ$8.3m in H1 FY25 and relatively stable EBITDA of NZ$27.5m (H1 FY24: NZ$28.2m).

It came after Whitehaven Coal (ASX:WHC), Yancoal Australia (ASX:YAL) and Stanmore Coal (ASX:SMR) all received a positive reception from investors for lifting payouts, with Whitehaven reviving its share buyback and Yancoal announcing a $687m dividend at its full year results.

At the same time, New Hope Corp (ASX:NHC) has slid close to 19% YTD with its heightened exposure to the thermal coal market while Coronado Global Resources (ASX:CRN) closed Tuesday near a five year low.

CRN, owner of the Curragh mine in Queensland and Buchanan in the USA, spent last year taking around US$100m of costs out of its business as it swung from a US$156.1m 2023 profit to US$108.9m loss, despite reporting its third best revenue performance in history, selling US$2.5bn worth of coal.

Infrastructure operator Dalrymple Bay Infrastructure (ASX:DBI) lifted net profit after tax 10.7% to $81.8m in its full year result, while upping EBITDA 7.1% to $279.8m.

On the global scene, Glencore, the world’s biggest coal exporter, flagged the potential of shutting some coal mines to manage prices with the thermal price in the doldrums.

 

ASX coal stocks

CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % YTD % MARKET CAP
NAE New Age Exploration 0.005 0% 67% 25% 25% 43% $ 10,781,994.55
CKA Cokal Ltd 0.06 0% 2% -23% -43% 0% $ 62,579,040.84
BCB Bowen Coal Limited 0.007 17% 0% -53% -88% -13% $ 75,429,481.26
SVG Savannah Goldfields 0.019 -14% 28% -10% -28% 3% $ 10,144,546.30
AKM Aspire Mining Ltd 0.22 -1% -8% -20% 16% -14% $ 109,141,951.78
AVM Advance Metals Ltd 0.048 -8% 20% 92% 30% 41% $ 9,953,074.38
YAL Yancoal Aust Ltd 6.09 6% -3% 9% 4% -6% $ 7,922,636,622.00
NHC New Hope Corporation 4.09 -8% -17% -14% -9% -18% $ 3,499,688,820.96
TIG Tigers Realm Coal 0.004 33% 33% 33% -27% 33% $ 39,200,107.10
SMR Stanmore Resources 2.58 0% -10% -18% -26% -14% $ 2,379,673,913.76
WHC Whitehaven Coal 5.83 4% -7% -18% -16% -6% $ 4,760,258,460.96
BRL Bathurst Res Ltd. 0.74 -1% -2% 4% -11% -1% $ 142,951,252.32
CRN Coronado Global Res 0.565 -14% -15% -56% -58% -26% $ 955,578,626.10
JAL Jameson Resources 0.038 0% 9% -27% 27% -5% $ 23,207,866.24
TER Terracom Ltd 0.125 -24% -32% -32% -53% -31% $ 104,125,610.55
ATU Atrum Coal Ltd 0.00434 0% 0% 0% 0% 0% $ 17,795,849.96
MCM Mc Mining Ltd 0.1 0% -17% 170% -29% -13% $ 47,611,535.10
DBI Dalrymple Bay 3.77 3% 1% 23% 35% 5% $ 1,854,148,634.58
AQC Auspaccoal Ltd 0.07 -11% -9% -54% -8% -30% $ 48,332,263.78
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Iron ore M&A picks up

There are plenty of writers, even those ensconced in the business media, calling the death of iron ore, noting the shifting portfolios of the majors and their hunger for copper.

BHP’s (ASX:BHP) latest half year results were a case in point. While iron ore remains its biggest earner at 56% of EBITDA, copper now accounts for 39% of earnings, up from 25% 12 months earlier.

Coal makes up just 5%, reflecting the reduced significance of the steel market to its business (albeit, still the demand source most important for its profits).

For those exposed solely to iron ore, lower prices have made this year’s earnings season has been a tough one. Fortescue (ASX:FMG) saw its interim profit fall 53% YoY to US$1.55bn, its weakest since 2019, though capex sieving through its still embryonic green energy business is playing a role.

Small player Fenix Resources (ASX:FEX) revealed a 92% drop in net profit for the half year to ~$1.8m, while Mount Gibson Iron (ASX:MGX) increased the scale of its share buyback yet reported a near $72m net loss fuelled by impairments related to iron ore prices and the creeping mortality of its Koolan Island mine in the Kimberley.

But corporate activity continues, with buyers happy to position themselves for a longer future in the iron ore game.

For some the aim is scale and others just rationalisation.

FMG kicked off this year’s consolidation rush, paying ~$250 million for Red Hawk Mining (ASX:RHK) and its Blacksmith project, a deal that effectively pulled two deposits either side of a tenement boundary into one and will deliver higher grade ore to its 75Mtpa Solomon Hub and rail network, just 30km away.

The biggest deal will see Mitsui pay entities associated with the descendants of prospecting pioneer Peter Wright US$5.3bn ($8.4bn) including stamp duty for a 40% stake in Rhodes Ridge, the high grade 6.8Bt deposit Rio Tinto (ASX:RIO) intends to make the centrepiece of its world-leading Pilbara iron ore network.

The development of the mine before the end of the decade is the focal point of plans to revive the quality mix of Rio’s shipments, with stricter emissions standards in China and elsewhere likely to lead mill owners to prioritise ores closer to the 62% Fe fines benchmark or above.

Rio will own 50% of the mine with Mitsui holding 40% and the Wrights 10%. At an initial nameplate of 40Mtpa, the Japanese trading giant estimates it will rake in US$659m in cash flow a year, rising to as much as US$1.65bn should the operation later expand to 100Mtpa.

But it’s also at the smaller end of town where juniors are looking to add scale that will help weather periods of lower prices.

Juniors get in on the action

Fenix has previously taken its haulage provider in house and ran an extensive hedging program to reduce costs and protect its downside, and bought up idle assets from MGX in a bid to lift its Mid West run rate from a paltry 1.5Mtpa to 4Mtpa later this year.

Its latest gambit is a move into the Pilbara, where it will acquire Mark Creasy’s CZR Resources (ASX:CZR), in a move that will make the billionaire prospector an up to 12% holder of John Welborn’s Fenix.

The deal will hand the Robe Mesa project near Rio’s Robe River hub over to Fenix as a potential second development, with CZR holders to get 0.85 FEX shares for every CZR share they hold, rising to 0.98:1 should holders with 75% of its stock accept the off-market takeover offer by March 21.

The 26c equivalent bid for the junior, over 52% of which is held by the Creasy Group, is pitched as a 27% premium to its 10-day VWAP of 20.5c and comes after a surprise run in the company’s stock on Monday.

Valuing CZR at around $61.4m, it’s been engineered after CZR failed to garner Foreign Investment Review Board approval for a more lucrative $102m cash offer from Chinese-backed Miracle Iron, which previously paid $20.5m for the nearby Paulsens East project owned by Strike Resources (ASX:SRK).

CZR notified Miracle Iron of its intention to pull out of that deal after the passing of a deadline on February 24. The latest sunset date for the sale, first announced on January 11, 2024, had been extended last month to this Friday, February 28.

Iron ore prices have also fallen substantially since the start of 2024, dropping from over US$140/t to US$107.15/t on Tuesday.

Should the 75% threshold by met, the Fenix bid will lift to the equivalent of 30c per share, valuing CZR on today’s prices at $70.8m.

ASX iron ore stocks

CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % YTD % MARKET CAP
ACS Accent Resources NL 0.006 0% 0% 0% -40% 0% $ 2,838,763.70
ADY Admiralty Resources. 0.006 20% 0% -33% -14% 0% $ 15,776,876.39
AKO Akora Resources 0.14 8% 22% 46% -12% 40% $ 18,438,672.74
BCK Brockman Mining Ltd 0.016 7% -6% -6% -33% 0% $ 148,483,714.10
BHP BHP Group Limited 40.31 -1% 3% -1% -10% 2% $ 207,015,168,470.40
CIA Champion Iron Ltd 5.72 -6% 1% -3% -27% -1% $ 3,052,498,395.89
CZR CZR Resources Ltd 0.26 37% 44% 8% -9% 24% $ 56,816,315.28
DRE Dreadnought Resources Ltd 0.016 33% 45% -11% -20% 33% $ 66,547,200.00
EFE Eastern Resources 0.027 4% 0% -33% -66% -4% $ 3,656,608.46
CUF Cufe Ltd 0.008 -11% -20% -11% -43% -20% $ 10,693,398.92
FEX Fenix Resources Ltd 0.29 -2% 5% -5% 14% 9% $ 226,049,082.87
FMG Fortescue Ltd 17.98 -7% -4% 0% -36% -1% $ 56,960,850,983.00
RHK Red Hawk Mining Ltd 1.2 0% 46% 50% 86% 42% $ 253,991,450.40
GEN Genmin 0.028 -13% -14% -72% -83% -30% $ 24,816,010.86
GRR Grange Resources. 0.245 0% 17% -11% -42% 11% $ 266,187,900.54
HAV Havilah Resources 0.195 -9% -7% 11% 34% -13% $ 67,851,259.20
HAW Hawthorn Resources 0.044 0% 5% -28% -47% 7% $ 14,740,686.97
HIO Hawsons Iron Ltd 0.015 0% -6% -35% -58% -17% $ 15,247,520.52
IRD Iron Road Ltd 0.055 4% 8% -27% -8% -7% $ 44,102,602.95
JNO Juno 0.027 -4% 8% -13% -64% 8% $ 5,649,400.32
LCY Legacy Iron Ore 0.009 -10% 0% -33% -42% -10% $ 87,858,383.26
MAG Magmatic Resrce Ltd 0.045 -8% -15% -24% 41% 50% $ 20,018,434.27
MDX Mindax Limited 0.04 0% 0% -27% 0% 0% $ 81,951,351.20
MGT Magnetite Mines 0.099 0% -10% -60% -63% -18% $ 12,225,474.45
MGU Magnum Mining & Exp 0.006 -14% -54% -45% -71% -33% $ 4,856,168.42
MGX Mount Gibson Iron 0.31 0% -5% -2% -37% 5% $ 384,609,493.44
MIN Mineral Resources. 25.69 -21% -27% -43% -59% -25% $ 5,294,211,191.76
MIO Macarthur Minerals 0.034 -8% -31% -51% -71% -26% $ 7,387,623.87
PFE Pantera Lithium 0.018 -10% -5% -10% -61% 0% $ 8,528,106.38
PLG Pearlgullironlimited 0.01 -17% -17% -9% -70% -38% $ 2,045,417.90
RHI Red Hill Minerals 3.5 -8% -14% -3% -8% -15% $ 224,446,687.50
RIO Rio Tinto Limited 119.06 -2% 1% 8% -4% 1% $ 44,471,702,437.20
RLC Reedy Lagoon Corp. 0.003 0% 50% 0% -25% 50% $ 2,330,120.03
CTN Catalina Resources 0.003 0% -14% 20% -40% -25% $ 4,606,916.62
SRK Strike Resources 0.027 4% -10% -21% -33% 0% $ 8,796,250.00
SRN Surefire Rescs NL 0.0035 17% -13% -42% -70% 0% $ 7,248,923.44
TI1 Tombador Iron 0.35 0% 0% 0% 0% 0% $ 30,213,639.40
TLM Talisman Mining 0.18 -8% -12% -10% 0% -12% $ 33,897,662.82
EQN Equinoxresources 0.13 4% 13% -52% -54% 24% $ 16,100,500.39
AMD Arrow Minerals 0.035 -5% -35% -30% -56% -13% $ 29,547,345.20
CTM Centaurus Metals Ltd 0.375 -4% -11% 3% 39% 6% $ 188,746,460.94
LM1 Leeuwin Metals Ltd 0.13 0% 8% 65% 48% -7% $ 7,522,950.72
M4M Macro Metals Limited 0.0145 -15% 21% -40% 625% 21% $ 55,123,074.85
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