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Ground Breakers: Big bank says coal price chaos will remain for 2022 as forecasts revised up again
Mining
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- Westpac lifts end of year coal forecasts to US$425/t as price remains shockingly high
- Base metals expected to fall in 2022 before rebounding with a vengeance in 2023 & 2024 as green metals demand rises
- Coal miners and energy stocks lead gains on ASX
Coal prices are moving in a logical albeit senseless direction, trading in the US$450-460/t range as energy shortages continue to slug power providers with bills they can ill afford.
The price of keeping the lights on is expensive in 2022, and while some folks may think renewables, nuclear and battery storage may chip away at coal’s dominance in global power supply in preparation for a net zero world, coal miners will at least go out with a bang on the way.
Westpac IQ has upped its end of year coal forecast for around the umpteenth time in 2022 as prices continue to climb to new record highs.
Thermal coal prices have been knocked up 21.4% to US$425/t for the end of 2022 by the big bank’s research team. Bear in mind they had never been above US$194/t until September last year.
At those prices the sector is raking in billions in profit.
Met coal prices have also been revised upwards by 13.4% to US$240/t, still eating an unusual US$150+ discount to its typically cheaper cousin.
Longer term that may change, with Westpac tipping thermal coal prices will more than halve next year.
“The pressure on met coal is likely to remain due to tight supply conditions, hence the 4.5% upward revision to the end 2023 forecast as well (to US$212/t),” Westpac analysts said.
“Thermal coal is facing a more uncertain time give extended elevated prices, the potential lift in Australian supply to more normal levels and the ongoing significant discounts for South African and Indonesian coal – on balance we have revised down the end 2023 forecast by 14.3% to US$150/t.”
Newcastle 6000kcal thermal coal prices rose 12.3% over the past month to new records, while premium met coal (US$272/t) recovered 44% on tight supply and a ban on Russian coal in Europe after weaker demand from the steel sector saw it fall 58% to US$168/t over the two months to August 4.
What about the rest?
Westpac thinks global economic growth concerns, improved supply and monetary policy will have a negative impact on iron ore, revising its end 2022 target down 4.8% to US$100/t but keeping its 2023 target of US$90/t in tact.
Base metals prices have also been forecast down for 2022 after a recent sell-off related to China’s property market and economic woes, but underinvestment in ‘green metals’ and tightening supply is expected to lift the sector between 2023 and 2024 as demand recovers.
“Our end 2022 forecast for aluminium is revised down 10% (US$2,500/t), -8.5% for lead (US$2,050/t), -3.6% for nickel and just -1.3% for copper,” Westpac said.
“In 2023 our year end forecasts for nickel are now 6.1% higher (US$21,750/t), 5% higher for zinc (US$3,150) and 4.9% higher for copper (US$8,250) while they were revised down -3.8% for aluminium (US$2,600/t).”
And on the markets?
Investors still love stonkingly high coal prices.
Whitehaven Coal (ASX:WHC), New Hope Corp (ASX:NHC), Terracom (ASX:TER) and Bowen Coal (ASX:BCB) were all up more than 4%.
Coronado (ASX:CRN) was the standout performer, up 9.15% to $1.85.
It was a strong day in general for the market after Wednesday’s carnage, with energy stocks up 3.86% (Woodside (ASX:WDS), the sector’s largest component, was 4.24% higher). Materials gained 0.53%.
Lithium miners Pilbara Minerals (ASX:PLS) and Allkem (ASX:AKE) continued to delight as they climbed 3.92% and 2.9% respectively.
