Pic: David Gray/Bloomberg via Getty Images
Ground Breakers: Whitehaven boss sees rocky times ahead for coal supply amid Russian invasion of Ukraine
Mining
share
- Whitehaven Coal achieves record pricing of $315/t after Russian invasion of Ukraine sparks price spike
- Boss Paul Flynn says Russian coal is being excluded from new tenders, raising questions over 110Mt of supply in the seaborne market
- Despite high prices labour shortages remain a handbrake on mine expansions
Whitehaven Coal (ASX:WHC) boss Paul Flynn has forecast that tight conditions in the seaborne coal market could persist as long-term contracts run up and customers exclude Russian suppliers from new contracts.
The head honcho at Whitehaven, a supplier to major Asian conglomerates like POSCO and Nippon Steel, says Korean customers had already begun to exclude Russia from tenders, with the same emerging from the Japanese market, two of the largest coal export markets outside China.
With as much as 110Mt of Russian coal needing to be replaced from the global coal market, that could see prices continue to remain strong as supply in the rest of the world struggles to match demand for both thermal and steelmaking products.
“How long does it last? We don’t know. Many of the customers seem to be taking their existing contractual commitments and fulfilling that, so no one seems to be turning off Russian coal right now, but obviously (they are excluding Russia from) new contracts,” Flynn said on a conference call.
“And that doesn’t take long before that signed up coal starts to get fed into blast furnaces and boilers. It will happen quite quickly.
“So what’s the longer term position? You can’t lose 110 million tonnes out of the seaborne trade without seeing any impacts. I think that’s just going to add further pressure to what we’re already seeing is a very, very tight market.”
Whitehaven sold 4.4Mt of coal, including 72% high CV thermal coal, 4% other thermal coal and 24% metallurgical coal, for a record average price of $315/t.
That was more than three times the $101/t Whitehaven fetched just 12 months earlier as GCoal Newcastle Index prices averaged a record US$264/t and JSM Quarterly semi-soft coking coal paying US$275/t, up from US$89 and US$92/t respectively in March 2021.
That came with a month lag in price realisation, with prices remaining extremely high since the end of the quarter after suggestions from the European Commission it would issue formal sanctions against Russian coal over its continued invasion of Ukraine.
Whitehaven Coal (ASX:WHC) share price today:
Whitehaven reverses Covid issues but still faces labour shortages
Whitehaven appears to have made it through the worst of its Covid absenteeism problems on the east coast and is on track to meet its guidance of 19-20.5Mt of ROM coal production and 17.2-17.8Mt of coal sales at costs of $79-84/t for FY22.
Run of mine production rose 62% on the December quarter to 5.2Mt, but was down 5% on the corresponding quarter in FY21.
The price spike in coal markets has seen Whitehaven and coal miners make short work of their once significant debt positions, with the company now in a $161m net cash position.
Asked about possible development opportunities to expand its operations and increase production in the current price environment, Flynn said labour shortages for skilled staff were the biggest handbrake on expansions.
“One of the biggest things at the moment which I think is probably the handbrake on all of this is people and I know everybody else has been talking about that but it’s been extraordinary to try and get the people we need,” he said.
“We’ve done really well I think in the quarter despite the COVID absenteeism and to anchor our people, because there’s a funny merry go round of staff going round from one mining company to the other as people struggle to have the necessary talent to man each of their operations.
“So we’re fighting a battle in that regard, which is not good.”
Whitehaven shares were up 1.82% at 12.55pm AEST, while most of the mining sector sunk after the release of Rio Tinto’s quarterly review and news the Chinese Government wants to reduce steel production in 2022.
